Your Overhead

Discussion in 'Lawn Mowing' started by environment, Dec 9, 2004.

  1. environment

    environment LawnSite Member
    Posts: 146

    ok, I dont mean to be nosy, but I have been working on my overhead costs all day long today, and I must be too high, something must be wrong, I am coming up with $87.68 per hour in total, that includes profit margin. Now it would be pretty tough to push that, I mean it breaks down to $1.46 a minute, now if a lawn takes a half hour thats $43.80

    What kind of numbers do you guys have if you wouldnt mind sharing
  2. YardPro

    YardPro LawnSite Gold Member
    Posts: 3,563

    the numbers are always shocking.
    most people do not reazize thier actual overhead (it includes all non billable labor, etc.) is.
    what is just your overhead recovery per hour?
  3. environment

    environment LawnSite Member
    Posts: 146

    well i broke it into sections
    Maintenance division
    maintenance equipment $22.18 per hour

    office (computer, advertising, parking, etc.) $35.36 per hour

    Employees $30.14 per hour

    Total for Maintenance $87.68 per hour
    $ 1.46 per minute

    Construction division
    Construction Equipment $34.02 per hour

    Office $35.36 per hour

    Employees $37.69 per hour

    Total for Construction $107.07 per hour
    $ 1.78 per minute

    equipment $ 7.91 per hour

    office $ 35.36 per hour

    employees $ 30.14 per hour

    total $ 73.41 per hour
    $ 1.22 per minute

    complete business overhead $ 197.44 per hour
    $ 3.29 per minute
  4. Fantasy Lawns

    Fantasy Lawns LawnSite Bronze Member
    Posts: 1,913

    First lets make sure that we are comparing "apples to apples"

    DIRECT COST: costs of doing business are those expenses that happen because labor was applied, equipment and vehicles were put into action, materials were used and work was done.

    Direct costs are usually easy to document and predict when you know how much time a project will take and what equipment and materials will be needed.

    INDIRECT COST: costs that follow with direct labor
    · Payroll taxes
    · Employee benefits & Insurance
    · Fuel consumption
    · Depreciation
    · Repairs and other on-the-job costs.

    Payroll taxes, benefits and insurance can be easily estimated
    Indirect costs related to equipment are tougher to predict.
    Fuel consumption can vary greatly
    Repairs are often unexpected.

    OVERHEAD COST: expenses that support the operation of a business.
    · Rent for facilities, utilities, advertising, property taxes, storage, insurance on buildings, office expenses and other "behind the scenes" costs that in some cases take place simply because time went by.
    · Take place even when no work was done.

    Direct costs happen when work is done and labor is applied. The workers come in to work, and as soon as they turn the key in the ignition, direct costs and indirect costs follow them and stay with them all day.

    Overhead items of expense that support the operation.

    ANALYZING JOB COSTS. Labor and indirect costs represent the bulk of expense for most contractors and dwarf true overhead costs by comparison.

    Can we agree on the above statements ??
  5. environment

    environment LawnSite Member
    Posts: 146

    not in those exact orders but ya
    in my labor costs i have employee expenses such as employee benefits, insurance, taxes

    office has parking, advertising, computer equipment, phones

    and when i say construction or maintenance equipment that is where i fit the rest, vehicles, machinery etc. and of course all there wear and tear costs, fuel, operation, etc.
  6. Fantasy Lawns

    Fantasy Lawns LawnSite Bronze Member
    Posts: 1,913

    So .. with this in mind ... Direct n In-Direct cost relate .... DIRECTLY to Labor ... ... While Over- Head .... which has a reflection with in the "business' it's self ... ie say I rent a building (over head) which cost me 10k per year n I have a yearly gross of $100k .... rent .... my overhead is 10% of yearly related to that gross ..... say my yearly gross was $200k ....well already I cut that percentage to 5%

    It is gonna be real .... hit n miss ... to determine one's "over head" cost with out some "history" to compare to

    Another sample .... say your yellow page ad is $130 per month or $1560 year .... this is a cost which I must pay .... EVEN if I do NO business .... this is true Over Head .... cost which occur EVEN WITHOUT business (income) occurs

    So in this sample that $1560 is 1.5% ... base on a gross of $100k or .75% if my gross was $200k

    THIS is the true HIDDEN PROFIT which LCO's whom grow into multiple crew .... dream on .... for it is Over Head Cost which decline as a business Increase it's Gross ... n Yes True .... As one grows they will spend more on over head cost .... BUT it will not OR sould not be a greater percentage

    Again ie .....advo n such budgets should increase as one grows .... BUT the greater GROSS alllows them to lower the percentages .... so give greater Profit

    THIS is Why Larger LCO's can do a job at a lower cost .... they gain "Scales of Economy" .... Granted there will be waste .... fore those whom don't "Run" the numbers .... don't get Me wrong .... ##'s crunching is the Start ... It begins to show One the Way

    Employee benfiets n such are ==> In Direct Cost
  7. Fantasy Lawns

    Fantasy Lawns LawnSite Bronze Member
    Posts: 1,913

    Remember TRUE Over Head Occurs EVEN thou NO BUSINESS has happen or You did not or your employees did NOTHING .... Over Head happens when you are sitting at home .... RIGHT NOW .... at 1am Your True Over Head Cost are still going On ... Unless you work 24/7/365 ..... There MUST be Some time when workers ...."Sit Idle" .... Cost which Occur During this time is .... Over Head
  8. environment

    environment LawnSite Member
    Posts: 146

    ya but will people pay $43 for a half hour of work, keep in mind I am 21 years old, I have been working in this field sice I was 6, and I have a degree in Horticulture, but its difficult getting credibility with brand new clients. Would I sound insane asking that much

    I mean for a site that takes an hour thats $87
  9. Fantasy Lawns

    Fantasy Lawns LawnSite Bronze Member
    Posts: 1,913

    NO ... this is gonna sound OLD but the only STUBID Question is the One NOT Asked ..... gonna find >>>LOTS of Opinion on the Board ... BUT Your are Curious N asking what most should ask them selve .... Each Week ..... Month n Year ....

    So GOOD fore You to try n see where you are heading ... How Can I Cut Cost is something I ask My Self Every Week
  10. Richard Martin

    Richard Martin LawnSite Fanatic
    Posts: 14,700

    It all depends on how many employees you are talking about. If the numbers are for 10 employees then it is not out of line. If the numbers are for 1 employee then you have a problem.


    I used to manage a gas station for Southern Maryland Oil company. The company headquarters were in a large multi-level buiding. They had people all over the place doing this and doing that. They had a large computer room with huge banks of computers. A wild guess would be that it cost them $1,000,000 (probably much more) a year to pay the employees, maintenance, mortgage etc..

    Now if my station had to pay those office expenses by itself then it would have gone out of business. But it didn't. The expenses were shared with 23 other stations, a tanker fleet, fuel oil deliveries etc.

    I was charged (on paper) $12,000 a year in administrative costs. We were open 18 hours a day, 364 days a year. That breaks down to $1.83 an hour.

    I think you need to break your numbers down a little farther and see what the per employee costs are.

    I also have trouble seeing $35 an hour of office expense for every hour an employee works in the field.

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