what are average business costs?

Discussion in 'Starting a Lawn Care Business' started by rb3771, Sep 6, 2005.

  1. rb3771

    rb3771 LawnSite Member
    Posts: 12

    During my site searches i've noticed that a lot of the experienced guys calculate their bid by adding up cost of materials plus tax, business costs, labor and profit. What are your average business costs for basic lawncare? Are they generally the same as landscaping? Is it based on how much equipment you have or how many employees? I've seen 30% business costs posted a couple of times. Is that a good ballpark figure? Thanks in advance.
  2. GreenUtah

    GreenUtah LawnSite Senior Member
    from SLC, UT
    Posts: 866

    Well, let's see. You must take the equipment you have/will use on the job(mainteneance & replacement) + labor and the administrative burden(they won't be hiring, paying their taxes and managing themselves), distance to the jobsite(unproductive travel time), fuel, insurance, overhead(you do want the lights, phone and office, right?) materials, collections, advertising, licensing, profit, etc. et al. Since every single contractor will approach each of these costs in a different way, there will be no "average" anywhere, only a known cost for the individual contractor. Guessing at what others are doing to make your pricing without knowing your own true costs is what kills companies each and every day.
  3. rb3771

    rb3771 LawnSite Member
    Posts: 12

    I would like to re-word my question. When you are estimating a job and you add up the materials, labor and profit, do you add on a certain percentage for business expenses (gas, travel time, etc.)? Or does this amount change from job to job. Everyone on this site says you should know your daily, monthly, yearly operating expenses for your business so i would think that there must be a percentage added to every job to cover these expenses. Adding 25% or 30% to every estimate seems a lot more efficient than figuring travel time and gas used on that particular job. I realize every business is different but i just wanted to know what all you pro's do when estimating. I guess my question applies more towards a landscaping project rather than mowing.
  4. bohiaa

    bohiaa LawnSite Fanatic
    Posts: 5,220

    That's a tough one,

    In my experance, you will have some cusomers that you just like to cut there grass, "whatever the reason" they may b across town and your only customer on that side of town. So it takes more time and fuel getting there and back to yur next job.

    Sometimes you can get 3 to 4 jobs on the same street and your cost is reduced 100% as far as driving time and fuel getting there.

    If you have 3 in a roll then your time is increased 300%
    It would be unfair to "tack on" a percentage for all customers to pay for Traveling time,

    as far as Landscaping jobs, You will have to learn how to bid.
    Sometimes you will eat crow,

    if you bid a job and expect to have it completed in 1 day, then something happens and it takes 3 days. your sunk
    I have seen guys have to run to the store "or supply house" several times on 1 job, and I was thinking WOW there goes all there production.

    I think your Question falls more on a bidding issue than anything else.
  5. GreenUtah

    GreenUtah LawnSite Senior Member
    from SLC, UT
    Posts: 866

    Every job IS different and it will be different based on the contractor who does it. Your expenses should not be based on a percentage of the job, but as what they really are. As bohiaa said, if they are across the world from your office or previous job, fuel and windshield time grows, adding to your costs, that are not represented as a percentage, but as a true cost. You CAN do estimates based on your worst case scenarios(as they will surely crop up) and make your final bids using percentages, but in reverse. For example, if you decide that Fuel, insurance and labor will not represent more than 50% of any job that you do, then you need to try to forecast the actual cost of that individual job and make your final bid reflect that number being less than 50% of the total cost to the customer. You cannot make actual costs become a floating percentage of your final number, as an example, saying that contractors in my area mow a lawn for $30 and I want my fuel to be only 5% of that cost and so therefore, regardless of what happens, my fuel only costs my 5% of $30(1.50). That's a recipe for failure.
  6. topsites

    topsites LawnSite Fanatic
    Posts: 21,653

    I myself use:
    1/3rd cost
    1/3rd taxes
    1/3rd labor

    So 30% is a good ballpark figure for most ANY business, yes.
  7. GreenUtah

    GreenUtah LawnSite Senior Member
    from SLC, UT
    Posts: 866

    leaving a 10% profit margin?!!!!!
  8. rb3771

    rb3771 LawnSite Member
    Posts: 12

    that's excellent information. thanks. i'm still learning a little bit more everyday.
  9. HeartOfTexas

    HeartOfTexas LawnSite Member
    Posts: 56

    In general, I don't agree with using formulas in calculating the price for mowing a lawn. I believe that it should based upon what the market will bear. For example, what if the result of a formula (based on gas, equipment use, profit, etc.) tells you that your price estimate should be $35 but other people in your local market are charging $40 for a similar lawn. You would leave $5 on the table every time you mow. Or maybe most of your competitors would charge $32 for a similar lawn. Your prices would always be higher so you would need to show your customers that your services are worth more.

    That being said, I think that there can be great benefit in using formulas to kwow when your business will break even, determing your profit margin, knowing the true costs of equipment and employees, etc. These are things that I don't know now. I'm thinking of taking a non-credit business financial class at a local community college to find out. Or maybe I'll just buy a book.

    Take care,

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