Know your costs and bid it from there

Discussion in 'Lawn Mowing' started by DFW Area Landscaper, Mar 19, 2005.

  1. DFW Area Landscaper

    DFW Area Landscaper LawnSite Silver Member
    from DFW, TX
    Posts: 2,116

    I keep seeing people tell others who need help bidding that they should Know your costs and bid it appropriately.

    I'm here to tell you, I don't think anyone really knows what their cost is to mow a lawn. Let me explain:

    If you look at a lawn, and if you've got a lot of experience, you can probably come up with a fairly accurate estimate of the labor requirements. The labor is a guess. An $8/hr employee may take 50% longer to do the job with your equipment than an emloyee paid on commission or an owner. Then there is drive time. You can't control the drive time because you might have the account next door or you might have the account three stop lights away.

    Gasoline is another variable cost. I've been in the business for three years and I couldn't look at a lawn and estimate my fuel expenses for the mowers. I have no idea. I just know I fill the tanks when they're empty. The real expense for gasoline is the fuel burned by the truck. If your last stop was next door, there is no drive cost. If the last stop was three stop lights away, its more. Not to mention, the fluctuating gas prices. Will it go to $3/gallon? We simply don't know.

    With the exception of labor and fuel, all of our other costs are pretty much fixed. Take my storage bill, for example. I pay about $1,500 per year for storage. If I've got 20 customers, I need to recover $75 per year from each client.

    For the sake of keeping things simple, we'll assume that no customers ever want to skip a cut and no customers ever cancel service mid-season. Based on 32 cuts, that's $2.35 per cut. In my area, the going rate for a lawn is in the $20 to $25 range. That $2.35 is substantial.

    But here is where it gets real confusing real fast: What if the number of customers changes? If I grow my business to 60 customers by the end of the year, suddenly, I only need to recover $.78 per cut. If I manage to bump it to 120 customers, now I'm down to $.39.

    This is just one of the non-variable expenses out of many.

    I don't know of any LCO's who are booked solid and are turning away business. We all want more customers. We all anticipate ending the season with more clients than we started with. We are all going to spend money on advertising in one way or another and none of us can say with certainty how many customers we'll gain per advertising dollar spent.

    At the end of the day I'm guessing. I throw some numbers into a spread sheet and hope that at the end of the year I can turn a profit. I can't imagine anyone else is doing things very different.

    Does anyone really know their cost to mow a lawn?

    DFW Area Landscaper
  2. AL Inc

    AL Inc LawnSite Bronze Member
    Posts: 1,218

    That is why VanderKooi calls it "as close as she gets". It's not a perfect world, and nothing is 100% accurate. Do your best, and always include the fudge factor.
  3. tiedeman

    tiedeman LawnSite Fanatic
    from earth
    Posts: 8,745

    good post DFW
  4. Envy Lawn Service

    Envy Lawn Service LawnSite Fanatic
    Posts: 11,062

    The answer is no.

    In truth, everyone is using a best guesstimate.
    Those of us that are doing well take that and add a profit margin that can take a beating.

    That's about as good as it gets because there is too much fluctuation.
  5. YardPro

    YardPro LawnSite Gold Member
    Posts: 3,563

    it's a close guess, BUT
    you can very easially figure out how much fuel you're using.
    you should be keeping your fuel for your truck and equipment separate so you can get back the $.50/gallon highway tax.

    divide last year's total gallons used by the # of mowings. this will give you a per mowing average for your fuel.
  6. DFW Area Landscaper

    DFW Area Landscaper LawnSite Silver Member
    from DFW, TX
    Posts: 2,116

    I never realized we paid $.50 per gallon highway tax. Do you get this money back from the state or federal government.

    More info please.

    DFW Area Landscaper
  7. Precision

    Precision LawnSite Silver Member
    Posts: 2,995

    your accountant should be applying for the off road use rebate.(or something like that, not sure of the exact name) the theory is you shouldn't be paying for road maintenance with gas used in your mower.

    And no you can never know the costs of mowing a specific yard, but you can run averages. By doing this and adding a little fudge factor where you can, the easy ones will balance out the more difficult ones. 75 yards x 32 mows per year 2400 mows divided by your total costs and you have an overhead per lawn. or figure it by 1/4 acre parcel so you have an average by size so you can figure cost based on size. Or whatever.

    The trick is to use the law of large numbers and apply some common sense backed by experience to get a best guess. Sometimes you will still burn yourself, but the odds drop dramatically.

    My new clients are paying much more than my old clients. I learned I was giving away too much. Getting a solid idea of my costs helped justify my prices (even if in my own mind).
  8. ECS

    ECS LawnSite Bronze Member
    Posts: 1,733

    Excellent thread.
  9. bobbygedd

    bobbygedd LawnSite Fanatic
    from NJ
    Posts: 10,178

    i always laugh when i hear, "you have to bid depending on YOUR costs. so this means, if a guy just starting out has big overhead (all brand new stuff, etc) but not a very large client base (just starting out) he should bid much higher than everyone else, to cover his costs?
  10. HOOLIE

    HOOLIE LawnSite Gold Member
    Posts: 3,981

    Yeah, Bobby, in reality you have to charge somewhere within the going rate for your area, THEN figure out how to make your overhead stay under control. At least with mowing.

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