the right way to figure cost

Discussion in 'Starting a Lawn Care Business' started by DiSantolandscaping, Oct 16, 2011.

  1. DiSantolandscaping

    DiSantolandscaping LawnSite Senior Member
    from Maine
    Posts: 346

    whats the right way to figure your cost when just starting out? Is it better to do it monthly or yearley? and how do you estimate total hours youll be working in a year if you dont know for sure? and besides rent insurance and stuff what do you figure in to this cost?
     
  2. DiSantolandscaping

    DiSantolandscaping LawnSite Senior Member
    from Maine
    Posts: 346

    ok so i took my rent cell cable insurances gas food added some to vehicle repairs ad some for new equipment. came out with 26916 per year divided that by 2080 hours per year thats 40 hours a week for 52 weeks. i dont work that much yet but i figured its a start, and i came out with 13 bucks an hour for over head. does that sound about right toyou guys? or did i do it wrong?
     
  3. Kelly's Landscaping

    Kelly's Landscaping LawnSite Platinum Member
    Posts: 4,280

    Food is personal not business so that doesn't belong in there and is the rent a shop or your home? So you need a personal budget and a business one now as for the business do it monthly. Don't get to concerned about the per hour as you said your starting out so the term feast or famine is going to become more clear to you. Your do well in spring probably hit 50 hours plus a week then the mulch and seeding jobs will drop off and being so new your not going to have a ton of pruning so by summer your going to be starving. By fall it will pick up and your have another wave of to much work and then your be starving again come winter. What matters is knowing what you need to have to make it through each month so you may have a decent amount of cash on hand after the spring but need to hold onto it cause the bills don't stop coming in when things get lean so knowing what the monthly bills are will help you have 3 months on hand.

    Then there are all the little things guys forget licenses registrations property taxes P.O box rent Bank fees stamps and office supplys. There are plenty I just forgot about I am still hit to this day with ones they just invent to nickle and dime us to death some more. I'll give you this your brave Id hate to be starting in year 4 of the Obama recession but if you survive your be ready to expand when hes gone.
     
  4. ernieknows

    ernieknows LawnSite Member
    Posts: 69

    you will have to separate your personal expenses from your business expenses. . Cable and food are personal, so NO. Equipment maintenance is business. With your truck insurance and fuel are business only to the extent of your proportional use in the business. . Say your records show that you drive 14,821 miles in a year, 6,782 are recorded as business use.
    6 782 / 14 821 = 0.457593955 About 46 percent of your carefully recorded expenses for the truck are deductible.
    Your truck, like your expensive ztr, will last more than one year. These fall into capital asset classes that will depreciate on a declining value. And to make it more difficult if the above numbers are true you can only write off about 46 percent of that truck depreciation.

    sound like fun? this a business owners responsibility
    1 Set up a separate bank account
    2 Keep daily records
    3 IF YOU HAVE NO RECEIPTS YOU HAVE NO DEDUCTIONS.

    Use an invoice book(s) with sequentially numbering to keep records of your business income
     
    Last edited: Oct 16, 2011
  5. DiSantolandscaping

    DiSantolandscaping LawnSite Senior Member
    from Maine
    Posts: 346

    ok thanks guys, so most of the stuff ill be buying next year starting in jan or feb so ill save every single recipt starting jan 1 because i know that thats when the new tax period begins. What ill do is keep track of my mileage by doing a start and stop for every job i travel to and from, as well as estimates i go do to and from. and if i need to go get supplys for a job. Just for the hell of it i added in hiring one guy at 12 per hr and added 30% to that per hr for taxes, wc, and so on. So that made my overhead 30 per hour so if i charge 40 per hr with two guys i can still make 50 per hr. thanks again.
     
  6. Kelly's Landscaping

    Kelly's Landscaping LawnSite Platinum Member
    Posts: 4,280

    Mileage is one way and I do not use it the other is to record all repairs and expenses on the truck or trucks the reason I opted not to use it is because its one or the other and if you have an older dump truck like I do that sees use for fall its better to claim the real repairs then the 2000 miles a year it drives. Now as for the equipment that's not and expense those are assets you need to at least find an account to help you understand the difference and how he wants them recorded. Anything under 500 my accountant doesn't care about they can be an expense which makes sense I only get one or 2 seasons out of trimmers these days. But big ticket items have depreciation schedules like my new $60,000 ram 4500. Much to learn and figure out such as what your business is going to be set up as and that makes a huge difference.
     
  7. lawncuttinfoo

    lawncuttinfoo LawnSite Bronze Member
    Posts: 1,010

    It's the 'wrong' way to do it but just get like 5 quotes and take the average and go from there. Fast way to start, but could be dangerous, thier costs may be a lot less than yours. If you get lucky and don't lose your pants, you just skipped a lot of hard work, well at least postponed it till later since sooner or later if you want a real business you have to know your costs.
     
  8. 32vld

    32vld LawnSite Gold Member
    Posts: 3,984

    I don't know who is willing to pay $80 to have their lawn mowed that only takes one hour.

    You have to start doing estimates of costs. Example, gas, guess how much gas you will use a week. Say two tanks, $50 a tank@$100 week / 40 hours = $ 2.50 an hour for gas. Break everything down into weekly then hourly costs.

    Also need to factor in an hourly replacement costs for all equip, trailers, and trucks. Example, a new truck. If you think your truck will last ten years, and a new truck will cost $35,000 then you need to take the number of weeks worked per year. Now some LCO are able to do work 50 weeks a year some 40. We'll use 50 weeks.

    10 years = 500 wks, $35,000 / 500 = $70 a wk / 40 hr = $1.75 hr


    Payroll. You don't take all the profit as salary. You and your employess have to have a salary cost figured. Then you have to figure your personal costs to determine how much salary you will need to be paid.

    Profit is what is left after all costs have been paid. Profits are for business growth and expansion and employee bonus'.
     
  9. guitarman2420

    guitarman2420 LawnSite Senior Member
    Posts: 284

    The most important thing is try and find out what it is actually costing to have yourself or any employee out there doing work. There is a temptation to think that your costs are minimal, just because it's you doing the work. I started a thread over in the business management section about this very issue because its hard to come up with an actual cost of doing business - gas - taxes - permits - commercial pesticide license -business license - vehicle costs - debt - the list goes on and on of what it actually costs to run a business on a per hour basis. I don't think you can look at it on a monthly or annual basis. The closer you break it down into smaller parts - what does it actually cost you to drive your vehicle down the road and drop the trailer gate in someone's yard. If you don't know the answer, you don't have all the information you need to survive. I guarantee that some of your competition knows EXACTLY what they can do their service for and make $.
     
  10. White Gardens

    White Gardens LawnSite Fanatic
    Posts: 6,776

    In your first year you should really be more concerned with making money and gaining accounts.

    Yes you need to have a basic idea of your over-head, but everyone's situation and business model is different. What it comes down to is you need to really keep track of your expenses for the year and that will give you an idea of what it cost per hour.

    Ultimately it will take you multiple years to get a good average of what it takes to operate per hour.

    ,,,
     

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