Ok, so i figured out how to put overhead cost into an estimate, now what about profit

Discussion in 'Landscape Architecture and Design' started by MJK, Sep 25, 2006.

  1. MJK

    MJK LawnSite Senior Member
    Posts: 356

    I put my overhead cost in my labor. So how do you put your profit in? Markup materials? Or just add a % onto the total? How do you guys do it? Thanks



    Marc
     
  2. YardPro

    YardPro LawnSite Gold Member
    Posts: 3,563

    you add a % to the total.

    example:

    the job will cost YOU $1000.00 to do. (all pay,including YOURS, and overhead)
    if you want a 25% profit, then the price will be $1250.00
     
  3. JimLewis

    JimLewis LawnSite Fanatic
    Posts: 6,842

    Profit is figured into the hourly rate. There are several common methods of bidding. For some examples, get the book "Landscape Construction" by Sauter. Killer book. And it has at least 4 or 5 common methods of doing this.

    In some methods, you just insert "profit" as one of your line items.

    My problem with that is 1) it let's my customers know what my profit margin is, which I don't like because then I have to justify it. and 2) It opens it up for negotiation. And I don't want that either. Rarely will someone question your hourly rate. But if you line-item profit, trust me, many are going to question that.

    Within the hourly rate that we charge for any given job, is enough money to make a profit. In addition to making a profit there, there are often "additional profits" that I make on other parts of my bid. For instance, we get our plants and trees at wholesale, which is about 50% of retail pricing. So I get to mark all of our plants and trees up 100% from what I paid for them. This is just an added bonus, on top of the profit I am already making from the hourly rate. Some items we don't get much of a discount on (e.g. sod, barkmulch, soil, gravel) and so on jobs where we're just dealing with those materials, we have to make a good enough profit just on our hourly rate. But on other jobs, we enjoy a significant discount from retail or "list" price. So those jobs are what I call "extra-profitable". These items include plants and trees, lighting, irrigation, and most rock.
     
  4. MarkintheGarden

    MarkintheGarden LawnSite Bronze Member
    Posts: 1,072

     
  5. JimLewis

    JimLewis LawnSite Fanatic
    Posts: 6,842

    Well, not Invoicing.... Estimating. That's covered in pretty good detail. It demonstrates several (at least 4 that I can remember) different ways to estimate or bid for jobs. And each way has a slightly different way of factoring in overhead and profit. Also, each way has a slightly different way of presenting it to the customer. Some of the methods show the customer all the details. Some show just a little. Some show just a price and that's it. Good book, though. My favorite book on landscaping.
     
  6. MarkintheGarden

    MarkintheGarden LawnSite Bronze Member
    Posts: 1,072

    It is a great book, I go to it for any kind of construction, even if I have done them before because the book helps me to think the job through.

    I agree with you about estimates, I do not think it is a good idea to show your profit in the estimate. To be sure when things go wrong or just take longer than anticipated the profit is the first thing to disapear. If we let the customer negotiate away the profit, then when things go wrong our income is the next thing to go. How can a tradesman grow his business or retire without profit? Our capital investments and reinvestment of profit entitles us to our profit margin, I will never let it get negotiated away again.
     
  7. Mike33

    Mike33 LawnSite Bronze Member
    Posts: 1,649

    Remember your customer really dont want you to make moey off of them. as i stated before i do new yard installs, srw, and misc bobcat work. On yards i dont mark up my top soil for example, we have around 5 different sources and they really sell to public for my price. When customer asks i tell them 250.00 per tandem load, many times they already now this and you can get there trust. On walls some times they ask what the block costs and i tell them around 6.00 plus. They can easily call and ask dealers. I had 1 estimate customer new the price of the block and was out raged at another contractor becuase he did a nice mark up. On most of my work i give a bottom line price and state what im going to do and mostly works. basicly now what you want to make add material and come up with price. Experience will help you, in my part of the country we are starting the wind down for the season. Now if you want my service you pay more now i bidded my sept and oct work even higher every one wants to beat the weather and does not want to wait un til spring. Guess what? you can make more money off of this situation and can pick your work, Elements of business.
    Mike
     
  8. MJK

    MJK LawnSite Senior Member
    Posts: 356

    Great post.
     
  9. JimLewis

    JimLewis LawnSite Fanatic
    Posts: 6,842

    Mike33 makes some good points.

    I am not sure that I agree that customers don't want you to make money off of them. I think in general our customers do expect us to make a profit and they even understand mark-ups to a certain degree. But they don't want to see stuff marked up to what they consider is unreasonable. I try never to let the customer know that we are marking anything up. And there are clever ways to do that.

    For instance, many of the places in our area sell 3-way blended topsoil mix for $220 per unit (1 unit = 7.5 yards). So if you charge your customer more than $220 per unit, some of them are going to resent that. But there is one little-known outfit out in the country who will deliver the same stuff for me at $150 per unit. So I charge the going rate ($220) and make $70 off every unit of soil we get delivered. The customer just assumes we paid the going rate and everything's groovy.

    With plants and trees, we buy wholesale. Our wholesale prices are about 50% of what the nice garden centers and retail nurseries sell for. So a 5 gallon Nandina 'Moyer's Red' goes for about $45 to $55 here retail. I can get it for $15-$25, depending on how far I want to travel. So we sell it for the going rate ($45 to $55) and enjoy the mark-up as additional profit. The customer is still getting the plants and trees at the same cost they would pay had they gone and bought them themselves. And so they don't feel ripped off.

    Irrigation is the same way. A good 50% mark-up usually. But we buy wholesale, where they can't.

    But there are some items in landscaping we aren't able to mark up. Barkmulch, for instance, goes for the same price for everyone. No wholesale prices available. So I can't buy barkmulch for $20 a yard and mark it up to $30 or $40 a yard. Most people would get pissed off. So we just have to sell it for the going rate and make nothing from mark-up.

    Sod also has almost no wholesale discount. So we have to sell that at about the going rate.

    The key is to figure out which materials you can find a way to get for wholesale and mark those up to retail whenever possible. And that's just additional profit.
     
  10. Mike33

    Mike33 LawnSite Bronze Member
    Posts: 1,649

    I might of been a little harsh on customers not wanting you to make money. I had a bad experience 3 years ago on a rental item. I had to rent a street saw with 30 some " blade to cut thick layers of black top customer agreed to pay for rental. I had to go and haul it in my dump trailer then un load and re-load with bobcat to return it. I marked it up a few dollars gave customer his bill he payed with no problem. The next day i get a voice mail he called rental store and asked the price, they told him the real price he than stop payment on the check and give me ****. I went down and worked it out giving some domb ass excuse of how i made a mistake on his bill. I learned my lesson on mark ups and control my profit margain else where.
    Mike
     

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