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what is this...."profit" thing?

Discussion in 'Lawn Mowing' started by bobbygedd, Mar 28, 2006.

  1. bobbygedd

    bobbygedd LawnSite Fanatic
    from NJ
    Posts: 10,178

    the most common statement made on lawnsite, by the "pros" is :" you need to know your costs. once you know your costs, you price your services enough to make "a profit." this word "profit" is very broud, and misleading. what is meant by this word "profit". and why do you think, that if everyone were on the same level "playing field" carrying all the right licensing, and paying all the right taxes, that this would make our pricing more of a standard, from lco to lco, than a roller coaster?
  2. CutInEdge Lawn Care

    CutInEdge Lawn Care LawnSite Senior Member
    Posts: 677

    I do not believe there is a level playing field. I know LCO's that are paying anywhere from $700-2000 more for just insurance. I buy SCAG, they buy MTD or something that may or may not be cheaper. I bought my house eight yrs ago for $75,000 now appraised at $228,000. I am 36 yrs old they are 22 (not yet recieved the over 25 and married discount). There business might be wife owned. They might recieve tax credits that I or others may not even know exist. I have heard that in some parts here in florida the sub divisions or parks charge you anywhere from $5 to $10 everytime you drive thru there gates ( they even charge your friends $5 just to visit you! There way of keeping the home owner association fees down, I guess.

    My best guess would be that not one single LCO is on or even close to anothers playing field. Just my .o2stupids
  3. geogunn

    geogunn LawnSite Gold Member
    from TN
    Posts: 3,010

    I don't believe it would result in more standard prices...because you are always going to have lowballers even if licensed, insured, and paying taxed.

    my neighborhood has $35-$40 dollar lots. I got a door hanger the other day that said "licensed/bonded/insured--full weekly service, $18.00. I just might call him because I can't cut my own yard for $18.00.

    GEO :dizzy:
  4. PROCUT1

    PROCUT1 LawnSite Platinum Member
    from TN
    Posts: 4,909

    How about the guys "most lawnboys" that don't have a clue about their numbers......

    Thats why I got out of commercial and most other mowing.....

    There is no way regardless of overhead that bids should range from
    $25,000 to $300,000 on a property for the same work.

    You see on this board everyday at least 1 guy without a clue asking "How can I get commercial jobs"........They don't even know who to contact let alone how to price the job.....And personally I don't think they care, they're only concern is to get the "commercial job" so they can feel like a real landscaper. Its not about the money to them.

    I was the same way until I almost couldn't pay the bills.....Then it became about the money real fast.
  5. AL Inc

    AL Inc LawnSite Bronze Member
    Posts: 1,218

    I would say it definitely would improve things...I don't know if there would be a standard though. In the meantime, the illegal companies are becoming more common here, and I have lost several accounts already to them, because my prices aren't "competitive" with contractors who aren't properly licensed and insured. Duh.:hammerhead:
  6. rodfather

    rodfather LawnSite Fanatic
    Posts: 9,501

    I'm not so sure you can know all your costs anymore..fixed yes, variable, no. Therefore, "profit" will flucuate.
  7. AintNoFun

    AintNoFun LawnSite Bronze Member
    Posts: 1,807

    aint that the truth!!

  8. bobbygedd

    bobbygedd LawnSite Fanatic
    from NJ
    Posts: 10,178

    you're missing the point. this is a common statement, "i base my prices on my operating costs. i know what it costs me to run my business, therefor i price my work so that it covers these costs and i can make a "profit."
  9. PGA

    PGA LawnSite Senior Member
    Posts: 710

    I know a guy who takes care of over 500 residential accounts on a weekly basis that would disagree with you.
  10. Precision

    Precision LawnSite Silver Member
    Posts: 2,995


    the point is if you have a working knowledge of your operating costs
    last years numbers, current expenses however you want to do it

    Then you can extrapolate what you need to cover them. Then you can price so that you cover that with some margin room and price in a percent for profit.

    say last year you maintained 100 mow and blow properties. $25 each 36 cuts
    gross revenue was $90K
    say total expenses (less payroll) was $35K
    payroll was $50K

    you have $5K profit.

    So this year you plan to advertise a little bit and figure to net out 15 extra yards and you know gas will probably be higher.

    lets just take one expense gas

    say it was $5k and you expect the price will be going up over the year
    $5k / 3600 cuts $1.40 in gas per cut.
    you expect a 20% increase in gas prices
    so your $1.40 per cut goes to $1.68
    so you need to at least raise prices by $.30 per cut
    so you go up $1 and now charge $26 per cut

    So this year you plan to advertise a little bit and figure to net out 15 extra yards and you know gas will probably be higher. Assuming that all expenses will go up 15% with the addition of 15% more workload and the 20% price hike in gas.

    now you gross $107640
    your expenses were $41400 including the gas increase
    payroll was $57500

    Now you profited $8740

    last year 5.6% net net profit
    this year 8.11% net net profit

    of course there can be any number of pitfalls and accounting tricks to skew that any way you want, but that is the basics of the concept.

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