how to figure your costs

Discussion in 'Business Operations' started by YardPro, Sep 2, 2006.

  1. YardPro

    YardPro LawnSite Gold Member
    Posts: 3,563

    i see a lot of people saying things on this site that leads be to beileve that they don't know thier cost of thier work.

    If you are not one of them then this post is not for you.

    First let me start by saying that lawncare/landscaping is exactly like any other business. You sell a product for a profit...Your product is a service.
    In order for you to determine your price you need to knoe how much the service cost you to perform (what a store pays to stock an item). You then add your desired %profit and there you go... simple

    Where we have a challenge is determining what our product cost is a simple way to figure it out.

    First you must add all your fixed expenses (truck payment, insurance, rent, utilities,owners salary, office employee's etc...).
    This is your general overhead

    Next you need to find out how many non billable hours you have per year. If you have been in business for a few years use an average for the past few years. if you are new guess, but look at it each week/month to see if you are close, and adjust as necessary. Multiply this times your average hourly wage.

    these two numbers are necessary.

    last thing is to add those two numbers together and divide them by the number of hours you BILL PER YEAR....

    this is your per hour overhead.... bet t will be higher than you think....

    Add this to your average wage figure and that is what you have to charge to break even....

    then work profit from there....
  2. Az Gardener

    Az Gardener LawnSite Gold Member
    Posts: 3,899

    Its a good start, and I don't claim to be an accountant, but you also have to figure in some equipment replacement costs and a whole slew of other things too. More than I have time to explain thats for sure.
  3. Firefly Lighting

    Firefly Lighting LawnSite Member
    Posts: 98

    My suggestion would be to bring in a green industry consultant, I did and it has made the last few years a lot greener.
  4. YardPro

    YardPro LawnSite Gold Member
    Posts: 3,563

    i guess i should have elaborated more on the costs.. i was including that in my cost figure... After reading what i posted, i guess i should have added to the costs side for clarity sake...but as you said there is a lot of stuf to specify, and as with you i did not have the time to go into every detail.

    i just wanted go get the basics out there for any here that think they are really making money charging $25-$30.00 PMH.
  5. dylan

    dylan Member
    from Ontario
    Posts: 273

    Thank you for posting this topic. It should be required reading.

    Way too many people base their prices on what "the last guy charged"
    Chances are .... he no longer does it because he went out of business.

    Hire an account or bookkeeper. It will change your life.
  6. AAELI

    AAELI LawnSite Senior Member
    Posts: 362

    Married one! It did change my life, business, home, sleep patterns, etc.:laugh: :laugh: :laugh:

    Got the business going "by the numbers" and on the way to profitability.

    Good post Yard Pro. It may change the way some of the new guys do business and help them become profitable. Or it may get some into another line of work.
  7. rodfather

    rodfather LawnSite Fanatic
    Posts: 9,501

    I look are our numbers constantly...IMO ya have to.
  8. YardPro

    YardPro LawnSite Gold Member
    Posts: 3,563

    you're absolutely right.
    we do monthly P&L's and all our department heads (3) meet and go over the numbers. It is not an atmosphere of blame, just being focused on building the business. We look at what when right, and what went wrong...

    With construction we do a per job p&L on any significant job.
  9. rodfather

    rodfather LawnSite Fanatic
    Posts: 9,501

    Smart business philosophy involvement and brainstorming, pointing fingers does nothing IMO.
  10. YardPro

    YardPro LawnSite Gold Member
    Posts: 3,563

    i agree 100%
    finger pointing only makes people less forthcoming when they have bad news. It will also make them try and fudge numbers, etc....
    good news can wait, but the bad news needs to get dealt with asap.

    glad we're on a 1st name basis now. :)

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