overhead costs on pricing estimates

Discussion in 'Starting a Lawn Care Business' started by barefeetny, Jan 7, 2008.

  1. barefeetny

    barefeetny LawnSite Senior Member
    Posts: 533

    Hello everyone, i have a question that i havn't really seen handled on here.

    i don't wish for this to become a flame war but i was wondering if the small solo lco is not so much undercutting/lowballing the Big lcos and the inefficent lcos.

    for example I run out of a 18 year old box truck that is set up nicely, have 2 commercial walkbehinds that are fully paid for...The toro is a 1986 model and works as nice as some newer models.

    I have lawn maintenance accounts that are close together, no workers comp or equitment payments to worry about. I pay for advertizing, insurance, gas, parts just like the big guys, but i imagine my overhead is low compared to them

    they obviously must do alot more accounts to pay for the brand new trucks and mowers, workers comp, wages and more fuel ect ect. That being said is it that outragous that I am 5 and 10 dollars cheaper in the same neighborhood.

    I don't think i am lowballing anyone, just don't belive were really bidding by the same set of rules, on a huge property and cleanups i am usually higher priced then them due to working alone.

    any comments on this subject would be appriciated as i don't really want to cut anyones throat, and am quite happy with my current price schedule


    Nate
    Barefeet Landscaping
     
  2. hackitdown

    hackitdown LawnSite Silver Member
    Posts: 2,501

    It sounds like you are priced to be competitive. Keeping expenses low is a worthy goal which I share.

    One question you need to ask yourself: If you are consistantly $5 or $10 cheaper per cut, aren't you leaving money on the table? If you have 50 lawns, that is between $250 to $500 per week that you are intentionally trying to not earn. That is $1000 to $2000 per month wasted.

    Unless you are using price to sign up new customers, you may want to consider raising prices to equal the competition, regardless of overhead.
     
  3. lawnscapesLLC

    lawnscapesLLC LawnSite Member
    Posts: 113

    I was in the same boat for awhile. I found out that i was consistantly $10 cheaper per average sized lawn in my neighborhood compared to a few of the larger lco's in my area, so I raised my normal cutting price by $5. I'm happy cause I make more money and the customer is happy cause they are getting a less expensive price and the same if not better serivce. Having almost no overhead is a great thing :)
     
  4. Paradise Landscapes

    Paradise Landscapes LawnSite Senior Member
    Posts: 960

    Now, Back to your post heading: Overhead cost on pricing estimates. Am I reading this wrong? Please Correct me.

    Your overhead expenses per month example, say 300.00 Divided by 30 days/ daily to make( 30/300 = 10.00/day you need to make to cover overhead.)

    Or are you asking what is the cost of giving estimates?
    = How much time are you using?
    How much gas are you using to get there?
     
  5. barefeetny

    barefeetny LawnSite Senior Member
    Posts: 533

    the subject is my overhead costs influincing my pricing estimates...

    this mostly started with an argument between me and another lco that i happen to be freindly with.

    For example i have 1 89 f350 non powerstroke desiel. i have 30 accounts. it costs me 100 dollars to plow them all in fuel costs, and a mininumal amount in insurance. for arguments sake lets call them 40 dollars each.

    40x30=1200
    1200-100- 100 for incidentals each storm= 1000 back into the buisness

    he has 3 f350s thats hes making payments on, carring full insurance on, 2 employees that hes paying a wage plus workers comp and social security, 3 x the fuel costs, and probably a bunch more i'm not even thinking of.

    lets say he has 150 accounts at 50 dollars each 150x 50 =7500
    7500- all his expenses =? no clue

    but i know if he serviced 90 accounts at 40dollars they would repo his truck..

    I was hoping to show the diffrence to him and a lot of big lcos who naturaly think that if your price is lower then theirs, your a low-balling throat cutter.

    I also was hoping to find out if i was a low balling, throat cutter or if neutral parties could see the point.

    some may have forgotten being small, or maybe never were. I plan on staying small for some time, its just easier.
     
  6. Busa_bill

    Busa_bill LawnSite Member
    Posts: 179

    Interesting to see both sides of the perspective. Lower overhead giving the ability to offer a better price vs. higher overhead needing to charge more to pay the ++ of having employees and current equipment. At the end of the day, both show comparative net numbers.

    Clearly, the solo has the price point advantage and can take on as much business as he can handle. The moderately large to big LCO depends on fair market value and suffers a reduced customer base at the hands of discounted solo pricing.

    As I begin to enter the business myself, I can appreciate both sides. Funny how this is a reversal from most industries where the larger corporation swings the "big stick".
     
  7. supercuts

    supercuts LawnSite Silver Member
    Posts: 2,784

    yes your happy with the money, but as you fill up your schedual, think about how much happier you will be with an extra $10/cut per lawn. 20 lawns, 4x a month, thats $800 a month, $1600/month for 40 lawns. and thats just for underpricing!! once you fill up you will think why did i ever do the work for so little. at $1600/month, thats why some of us have brand new equiptment and trucks. your lowballing could simply be paying for new stuff.
     
  8. barefeetny

    barefeetny LawnSite Senior Member
    Posts: 533

    i do see the point in how the extra 10 dollars adds up in a hurry.
    i have to jack the price big time just to make up for the loss in fuel this year.

    if i had the extra money... lol i would probably just buy a whole feet of old trucks and mowers.... i'm rough on them,to me a truck is a tool, plus i love the fact that if you roll the whole truck down and embankment and destroy everything....

    i'm out about 3 or 4 grand tops.... i have seen ztr mowers come off trailers that cost more then it would to replace my entire line....

    plus its like a sin to see someone fithly sitting on leather seats......
    however i would like one of those heated and cooled seats.....like i just saw in an excursion.
     
  9. barefeetny

    barefeetny LawnSite Senior Member
    Posts: 533

    little peice of info i forgot that sort of fits this story

    about 10 years ago i worked with a guy who ran with ex state trucks...

    his vis yellow, ny state blue and tons of rust , junkyard mowers that were peiced together

    his accounts were primarly bedroom community summer homes.

    mostly wensday thursday and friday mows.

    he had a customer for 4 years and never had met them face to face, they were extremly happy with the service and even sent him a holiday tip every year.

    they let him go the first time they showed up early on friday and saw him mowing. multi million dollar house.

    they hired someone with a brand new truck and new trailier and he folded after 3 years.... he took them back after he raised their prices by a hundred

    he always refered to it as his truck payment and he bought a new powerstroke to tow the trailer
     
  10. muddstopper

    muddstopper LawnSite Silver Member
    Posts: 2,342

    Actually, you are not figureing in your overhead. While it may be true that your truck and mowers are paid for, they wont last forever. Someone could give you a brand new truck and brand new mowers and in 4 or 5 years, even with you takeing excellent care of this equipment, you could be out of business if you dont factor in replacement cost (overhead) into your priceing. While you might be making good money at your current pricing, what about when your truck or mowers need replcement. If you havent planned for this, your standard of living could quickly go down as soon as you purchase a replacement tool. Even if you saved the cash for the replacements, you have still lowered the amount of money you have been able to retain from your business in the previous years. Just because a piece of equipment is paid for or given to you doesnt mean it doesnt have to factored into your overhead.

    Nothing says you have to have new equipment to run a business, but you do need to know present value versus future value of any equipment you already own or decide to purchase and reflect these numbers into your pricing structure.
     

Share This Page