Monthly billing/Paying employees in the busy season takes most of the income.

Discussion in 'Lawn Mowing' started by privatelawn, Nov 9, 2007.

  1. privatelawn

    privatelawn LawnSite Senior Member
    Posts: 301

    I bill monthly same price for 12 months... Looking at my numbers... employees + there indirect cost in the 7 months that we cut weekly comes out to about 67% of the gross while in the 5 winter months only 25% goes towards employees. Now ive only been in business for 1 1/2 years and soon those numbers will come down some but how do you guys handle it? I pretty much see my entire years profit in the 5 months we mow biweekly and see almost no money in the other 7 months. Sometimes Id much rather charge per cut but monthly is the norm here
     
  2. tjsquickcuts

    tjsquickcuts LawnSite Senior Member
    from Atlanta
    Posts: 943

    Somewhere, you have a glitch in your operation plan. As a LCO owner, you should always turn a profit daily, even if that means cutting hours for the day. I am sort of puzzled at how you even let this type of thing happen. I gross a min of 45% daily from each crew. If I were you, I would go back to the drawing board and re-figure my numbers. JMO....
     
  3. privatelawn

    privatelawn LawnSite Senior Member
    Posts: 301

    Yes but doesnt your 45% change on the winter months if you charge same rate per month? I mean say you charge this house $100 a month year round, in the summer you need to pay employees to mow that house 4.3 times per month, in the winter only twice per month.

     
  4. Down2EarthLawns

    Down2EarthLawns LawnSite Member
    Posts: 191

    You are going to have a difference of payroll/profit in winter without question. But you have to get it where you profit well in the growing season. Then, the winter profit increase is just gravy. TJS is right, you should turn profit ALL the time. My guess is to take another look at your pricing.
     
  5. logical

    logical LawnSite Member
    Posts: 38

    If you look at it from the standpoint of a year starting in the spring when you are in weekly mode, after 7 months you have given them 30 of the 40 cuts (75%) and only collected 7/12ths (58%) of the money. You are giving them an interest free loan until later in the year when the scale tips your way again.

    You have to go in with a cash flow management plan. Some of that big profit in the 5 months in b-weekly mode has to be seen as either payments on those loans you've made to customers or if it's a customer you picked up in the winter, or a long time customer, seen as early pre-payment for the next year.
     
  6. privatelawn

    privatelawn LawnSite Senior Member
    Posts: 301

    I guess that would depend on how its looked at...
    if you look at it as a calender year Jan-December then customers are giving me a interest free loan from Jan-March... In the end It all just averages out as some customers start say in september and paying full price throughout the winter.

     
  7. logical

    logical LawnSite Member
    Posts: 38

    That's what I'm saying....errr, what I said. Let's say you get $100/month or $1200/year. And let's say that's 41 cuts (30 weeks cuttng every week, 22 weeks cutting every other week). So you get $29.27 per cut. That means that the $100 monthly payment is payment for 3.4 cuts. In a given winter month you are getting paid for 3.4 cuts and doing 2.1 cuts. Whether you consider it late payment for last summer or early payment for next summer....it's still payment that is out of sync with your service.

    Dealing with that "out of sync" payment situation is cash flow management. You aren't necessarily "more profitable" in the winter, you may just have better cash flow then.
     
  8. privatelawn

    privatelawn LawnSite Senior Member
    Posts: 301

    Yep thanks and sorry I understood your first post wrong.
    And like you said"cash flow management" I just need to quit looking at the monthly income as after 12 months its right were I want it to be.
    7 months out the year income is $12k pay is $8k
    5 months out the year income is $12k pay is $3k

    in the end I end up paying about 50% of gross to employees which I believe is on the high side but I would say its mainly due to not long enough in biz not because of the prices I charge.


     
  9. cpel2004

    cpel2004 LawnSite Bronze Member
    Posts: 1,415

    It means a couple of things. I'll chime in later.
     
  10. DuraCutter

    DuraCutter LawnSite Senior Member
    Posts: 806

    Ok, I'm going to explain what I experience with other lcos in my area. We've been in business about 25 years and only about 4 years ago did we decide to include lawncare in our list of services offered.

    While quoting for the last 4 years, I've known lawncare co's a lot longer. It's always been known around here, and probably the same wherever you may live, that lco's are notorious for taking on too much and charging too little. I always heard that from property managers as we only do condos and commercial. It's been a running gag in our company that cutting lawns is a poor mans business being that lcos as a rule aren't making much real profits. There is an exception to that if that lco also does landscaping, then it's "really very different in terms of profit". I even have echoing sentiments from my supplier who sat me down 4 years ago and said, Dan, don't just do lawncare or you'll have very poor profits, and he went on to explain about many of his accounts buying bobcats, etc... to landscape.

    We do lawns to service property managers and we also get the other services with them, so it's all good. We also charge almost exactly double...yes, double what the other lcos are charging. How do I know? I talk to the property managers and being on the level with them, they tell me. I do so much more for them, they don't see it as a negative to tell me the prices because ultimately the board makes the decision and the manager wants to keep using us for other services anyways. To make a long story short, those lco's are "BURNING" themselves out working so hard and seeing so little profit. We've taken over an account where we get $4,300/mth and the other lco was charging $2,200. They charged "CHEAP" prices to the very end until they cried uncle and quit. WHY? because I think it's in the blood of normal lcos. I don't understand it, is it an inferiority complex, is it the customers intimidating the lcos, the lcos not feeling like they should make money, wanting to serve people above and beyond their own obvious need for money...? I'lll let you judge that.

    I think 90% or more of lcos "DON'T CHARGE ENOUGH" and don't offer enough various services to really take the $ home.

    Like what you're experiencing, low profits. Diversify, that's all I can say.

    :)
     

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