Looking for help formulating business hourly costs

Discussion in 'Lawn Mowing' started by JimLewis, Oct 19, 2004.

  1. JimLewis

    JimLewis LawnSite Fanatic
    Posts: 6,842

    Hey all,

    I am looking for a way to totally break down my business costs on a per-hour basis. That is, how much do I need to charge - per hour - to just break even. I want to create a spreadsheet formula that includes everything; wages, taxes, office supplies, insurance, shop lease, dumping fees, fuel, etc. etc. etc. I think the way I do it currently is not sufficient. I want to really break down each and every cost and factor them all in.

    I know there have been dozens of threads here on lawnsite regarding this topic. But I can't find them. I am probably not using the right search terms.

    What I am hoping to find is someone who has already created such a spreadsheet who wouldn't mind sharing theirs with me so that I could use it as a starting point. Obviously, my business costs are different from everyone else's. But it would at least give me a place to start and I could modify it to fit my own needs.

    I know some of you guys are all over this kind of stuff. Let me know if you can help. Thanks.
     
  2. tiedeman

    tiedeman LawnSite Fanatic
    from earth
    Posts: 8,745

    a very broad way to do it is just take your total hours worked during the year divided by your expenses. For example if you work 1440 hours a year, and expenses are approx $30,000 for the year, you know that it costs you $20.83 per hour to do business
     
  3. Lawn-Scapes

    Lawn-Scapes LawnSite Silver Member
    Posts: 2,810

    I'm with ya on this Jim. I don't know what my hourly break down is or how to go about calculating it. I know I'm making money because my bottom line says so. I'd be interested to know what my break even point is. So whoever can help... include me too please. :)
     
  4. JimLewis

    JimLewis LawnSite Fanatic
    Posts: 6,842

    Yah, but I want something more accurate than that.

    One of the problems with that method is that it doesn't allow you to make changes as you find cheaper insurance, your tax rate changes, your dumping costs go down, fuel costs change, etc. With a spreadsheet, I can just change one amount and it changes the whole formula automatically for me.

    The other problem I have with that method is that the hour to dollar ratio can change from year to year. I am not convinced that method is very accurate. I want something that is extremely accurate and that I can fine tune periodically.
     
  5. tiedeman

    tiedeman LawnSite Fanatic
    from earth
    Posts: 8,745

    yup that is the downfall. That is one of the methods that I usually use to budget for next year, but I have not found a great formula yet either. It will be interesting what this thread will turn out
     
  6. syzer

    syzer LawnSite Bronze Member
    Posts: 1,266

    I too would love to have a spread sheet like this one. One thing I have always had trouble doing is calculating cost of operating.
     
  7. tx_angler

    tx_angler LawnSite Senior Member
    Posts: 278

    How about a labor cost template and an equipment cost template?

    Labor Cost Template

    Machine Cost Estimate

    After you have these numbers you'll need to calculate your fixed overhead on an hourly basis. (MonthlyCost*12/HoursWorkedPerYear)


    Examples:

    1. Your rent is $1300/month and you work a total of 2600 hours a year. Your overhead for rent is $6.00 per hour.

    2. Your telephone is $125/ month and you work 2600 hours a year. Your telephone overhead is $.57/hour
     
  8. NCL

    NCL LawnSite Member
    from NJ
    Posts: 132

    I'm reading this book now very informativeand goes into detail about this -Pricing for the Green Industry by Frank H. Ross you can get it from the ALCA 18003952522
     
  9. Flex-Deck

    Flex-Deck LawnSite Silver Member
    Posts: 2,846

    Jim - I am sure there are a lot of people on this site that are way more experienced and can give you a better answer, but here is my way
    You have fixed costs and variable costs.
    1. Fixed costs.
    a. Insurance - I am solo, so Workmans comp is not one of them) - Liability - Theft of equipment - Health - Mowing Liability - Truck-trailer insurance - House insurance -Life insurance.
    b. Equipment payments.
    2. Variable costs-
    a. Depreciation of equipment - hourly costs (I use the jd formula of .01% of the cost of the machine as and hourly cost of running it. That means that if I bought a machine for $10,000 it will cost me $10 per hr. That $10 will cover depreciation - repairs - fuel - etc. That means that the 314 hrs on my new 595 this year should have prompted me to put away $3140 to cover its costs, but in reality, the .01% is probably high, but it is better to over estimate costs than underestimate them.
    b. Fuel - transportation - How close are your yards - how much windshield time do you have? - I figure $.75 per mile - that may be high, but better to over estimate costs. $.75 should cover fuel - repairs - depreciation.
    Thanks Brad
     
  10. Precision

    Precision LawnSite Silver Member
    Posts: 2,995

    Hey Jim,

    I had that almost set up and crashed out my computer/hard drive. So I have to start over. I am waiting now until I go to EOW mowing. But if you are still interested in Late November Early Dec PM me and I will send you over what I have put together in excel.
     

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