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How to bid commercial accounts for real

Discussion in 'Business Operations' started by PROCUT1, Feb 22, 2011.

  1. PROCUT1

    PROCUT1 LawnSite Platinum Member
    from TN
    Posts: 4,909

    So you did a search and youre about to post a new thread.

    "Big commercial job, what do I bid"

    Youre going to post the info about the job, and sit back and wait for guys to give you a price to submit. You;re looking for "the going rate"

    Then PROCUT1 is going to post a "sarcastic" response to your thread saying something like.....,"Send me your last years tax return, a years worth of bank statements, an equipment list, a balance sheet, and itemized bills, then I can help you"

    "What a jerk, you think" Others will post....."He just wants to give you a hard time, and doesnt want to help"
    Well.....Let me tell you something.....If you get a price on here, and you submit that price......Youre on the road to failure.

    I know....Youre staring at this bid package right now....You want this job....The big boys that do the condo complexes have these new trucks, fleets of mowers......Theyre rolling in it.....You want to be them....

    All you need to do is get your foot in the door right? Wrong

    If only you knew what they were charging, you could just go a little less, and get the job....Once they see the quality you give them.....More jobs will follow...Wrong again

    Ill be ok as long as them Brickman or Valley Crest lowballers dont bid....
    Wrongamundo


    Nobody but nobody online can give you a price for that job.
    Only you can
    If youre a solo guy working out of your house mowing $30 lawns with no real business overhead. You may be profiting $25 on that lawn.
    How about if you had 10,000 in overhead expenses a month.
    Could you still charge $25 on that lawn?
    Suppose it costs you $35 in expense to cut that lawn.
    How does me telling you "The going rate is $25" going to help you.

    If youre asking for prices....Youre asking the wrong questions. Youre setting yourself up to fail. You will forever rely on "I heard thats a $15,000 property" to submit a bid, not knowing if youre making or losing money.

    Here are acceptable questions to start asking.

    - How do I measure a property to determine the acreage?
    - How do I determine how much mulch is on a property
    - I have a 61" ztr. What is the production rate for that machine?
    - How many feet per day should a weedwhacking man cover?
    - How long does it take to install mulch per yard? What is your technique?
    - How long would it take your crew to mow this property? What is the makeup of your crew and equipment?
    - How long does it take to edge these beds?

    Questions along those lines, are questions as a newbie, you need to ask.
    YOU CANT BID WITHOUT THOSE ANSWERS

    Not one of them has a price attached.

    NOW.....Here is where that info that I ask for comes into play.

    You need to take each one of those jobs, and put a time on them.

    3 guys 8 hours per week to mow
    3 guys a 40 hour week to mulch
    3 guys 24 hours to trim the bushes
    Dont forget drive time to and from your place

    Etc

    You need to add up all the manhours to complete the job.
    Lets say 1000 man hours for the season to round off numbers

    First.

    Add up what those employees cost you.
    Their salary, matching taxes, processing, workers comp.
    Now you have the number what each employee COSTS you per hour.
    Lets say you pay your guys $10 per hour that works out to $15 per hour with taxes etc.

    So you have 1000 man hours in labor including drive time.
    It costs you $15 per man hour.

    Your payroll expense....COST TO YOU....Will be $15,000 for the season.

    Now. Figure out your materials. The guys on lawnsite told you how to measure.

    You come up with 100 yards of mulch. You know your employee expenses already.

    Lets say you pay $25 per yard of mulch delivery included
    Your mulch expense will COST YOU $2,500

    So now your bid is up to $17,500

    Now you look and see what each machine and truck burns for fuel. You know how many mowing hours it will be now. You take that hourly number, multiply it by the mowing hours......then by a "high" pump price and that will give you your fuel......

    Lets say its $4000 for the season

    Now youre at $21,500

    Now. You need to add up all of your bills. Shop rent, electric, insurance,
    maintenance items, anything that you have to pay thats not a DIRECT cost of doing the job. Add those up for the year.

    Now. Figure out how many available working days you have total for the year. Figure out how many hours per day you plan to work. Take into account average number of rain days.

    Lets say you can work 150 days per year. 8 hours a day
    Thats 1200 regular hours or 3600 man hours for your crew

    Lets say your bills add up to $30,000 for the year
    Take that number, divide it by 3600

    Your overhead is $8 per man hour

    Now to figure that into your bid.
    You figured 1000 man hours to work this place.

    Your overhead will be $8,000


    Now your price is at $29,500

    THIS IS THE PRICE BEFORE PROFIT.

    You are covering employees, overhead, and fuel.

    NOW you figure in profit. Which is a number that YOU decide YOU want to make. This is what should be left over when the contract is done, free and clear just sitting in your bank account.

    Lets say 20% which is high. But possible, maybe.
    $5900

    So after the job is done. Everyone and everything is paid. At the end of the season you should have 6 grand sitting in the bank.

    YOUR BID IS $ 35,400.00 For this job.

    Now......You hear that the "going rate is $29,000"

    What do you do?
    Ill tell you what most would do......Bid it at $27,000......Just a little cheaper to get the job.....
    Do you see the problem here? It costs you 29,500......You cant possibly do the job for 27,000.


    So now what? You want the job.

    You have to go back to those items and see where you can adjust.

    Do you really want to take all the profit off the table? Work all season for nothing in the end?

    Maybe you can start with reducing the profit somewhat. You have that option as the owner.

    Next.....How can you get those man hours down? Can you figure out how to cut manhours out and get the job done?

    If you can, that reduces your bottom line price of $29,500

    Can you lower your overhead?
    Shop prices for insurance, phones, etc.....Can you save any money there?
    Can you locate the material any cheaper? Save some money there?

    Its the 29,500 that you have to reduce.

    NOW....POST YOUR INFO ON LAWN SITE..

    "Guys....My overhead is x per hour.......I calculated x man hours for this job......x amount of fuel......x materials......"
    "How can I reduce my expenses?

    NOW THATS A QUESTION THAT WILL HELP YOU.

    Guys will tell you how to get the job done faster, save money on materials, save man hours etc.......

    STILL NOONE GAVE YOU A PRICE

    Now you take their advice and apply it.

    Maybe between all those you figured out how to save $6,000 in expenses........

    Now your bottom line is $23,500 to break even.

    You wanted to bid it at $27,000

    That would give you $3,500 in profit
    8%

    Are you happy with 8%? I would be.....Brickman works on 3-4%
    Youre clearing double

    If you are.......You can bid it at $27,000 and youre making money.

    IF YOU CANT GET YOUR BASE EXPENSES LOWER YOU CANT DO THE JOB NO MATTER WHAT THE GOING RATE IS. PLAIN AND SIMPLE.

    Any questions?
     
  2. yeah yeah, that's all nice but just tell me how much to bid the damm job.
     
  3. PROCUT1

    PROCUT1 LawnSite Platinum Member
    from TN
    Posts: 4,909

    Now Lets say you want to buy another ztr for 10,000

    You should have the above numbers for all of your jobs....So now you can take each of those numbers and figure them weekly or yearly....all your jobs added up.

    Should you buy the mower?

    Well

    Remember, money for a new machine comes from one of two places.....Profit, and/or cost savings.

    Profit you can do anything you want with.....Thats why we;re in business.
    Buy whatever you want.
    Take a bigger paycheck
    Give your guys bonuses
    Whatever you want.

    You want another ztr

    Well You know the production times.

    Will that ZRT save you manhours?

    You figure that machine will save you an hour a day on the crew
    Thats 3 man hours a day or 15 man hours a week.

    That machine will save you $225 a week
    It will burn and depreciate, and require maintenance of lets say $125 a week.

    So that machine will save you $100 a week
    In 100 weeks it will have covered its cost

    30 mowing weeks a year

    In about 3 years, you will have saved enough time mowing that the machine will have paid for itself.

    So do you buy it?

    Well 3 years is about the lifespan of the machine. So to use cost savings as the reason, wont fly.

    Just want the machine anyway? Well if you have enough profit saved, by all means buy it. Thats your option being the owner.
    Just dont justify the machine as "saving you money" its not.

    Now....Those numbers can change.

    With that one hour per week of savings, you can add additional work.
    If you maintain the machine and keep it in great condition, you may get more than 3 years out of it.
    That 3 man hours a week in savings gets added to your "available total working hours" bringing down your $8 an hour overhead"

    That changes your overhead numbers on ALL your jobs.

    Lets say it saves you $1 per hour overhead.

    Well.....Now that machine actually saves you an additional $120 a week

    So now the machine is saving you 220 a week
    Or 45 mowing weeks to pay itself off.

    So in a year and a half in mowing, that machine will have paid for itself.

    Now you have at least another year and a half that machine, minus maintenance and repairs is pulling in pure profit.

    Does that make sense?

    In a year and a half that machine paid for itself.

    Now...You can keep running it at pure profit.
    You can trade it in on a new one.

    You can do whatever you want.
     
  4. PROCUT1

    PROCUT1 LawnSite Platinum Member
    from TN
    Posts: 4,909

    I hear the going rate is $23,000
     

  5. thanks,that's all I needed to know.


    edit: oh yeah that's good what you wrote, BUT they all want the easy way.
     
  6. MMADDUX

    MMADDUX LawnSite Member
    Posts: 227

    Good post!!! a lot of time goes in to figuring out your real cost to operate a biz.
    A very much needed post. Thanks
     
  7. TYCINC

    TYCINC LawnSite Member
    Posts: 145

    This is it. . Everything this man just posted is how you have to think/operate. The dumbasses thinking that if they make $100 a day theyre balling wont even read this or will and not get anything out of it. This biz is a giant numbers game- its alll about shuffling numbers crunching figures and being professional.
     
  8. BLC24

    BLC24 LawnSite Member
    Posts: 23

    This is the best post on lawnsite, period.

    Every competitive business is about crunching numbers and trying to be more efficient and produce better or at least equal quality service or goods.

    Going forward, I second the notation that topics about pricing jobs should shift to subjects about production times, cost cutting measures, equipment life, more efficient methods of operation, and etc.
     
  9. KS_Grasscutter

    KS_Grasscutter LawnSite Gold Member
    Posts: 3,331

    Lawnsite needs a facebook-style "like" button.

    This should be a mandatory post to read prior to being able to post on here.
     
  10. OmegaRed

    OmegaRed LawnSite Member
    from NE OHIO
    Posts: 191

    great post!
     

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