$1 per minute????

Discussion in 'Bidding, Estimating and Pricing' started by Bo Bob, Sep 25, 2018.

  1. Ohio Landscaper

    Ohio Landscaper LawnSite Member
    Messages: 47

    Bingo! Well said. That's why I chose $95 as a base rate. Then $35 for the third, fourth, fifth, etc person on the job. Their experience doesn't matter. $35.00 covers what I need it to in order to "feed" the business since an additional person raises the hourly cost of operation.

    If I chose $47.50 per man hour, the third, fourth, fifth, man hour would be $47.50, which would make the hourly rate rack up faster and end up over-charging the client. Whereas I make my rate higher since I know I'll be on every job, so it ($60) and the first person ($35) covers the $95 that my business needs fed, including profit.

    Now that I have my expenses covered, I instead of charging $47.50, I can charge $35 for each additional man hour, $12.50 less, or $100 per guy per day. That $35 covers his wages, tax, benefits, and profit.

    So say you have a one day job that you and I bid on. Same exact job specs:

    Duration: 8 hours
    Number of people required: 4

    Using the math other's have mentioned, let's say both of us use $95/hour for two people as our base rate.

    You bid is at $47.50 per man hour, you get $190 per hour.
    I bid at my $95 base and $35/man/hour, I get $165 per hour.

    Your total job for 8 hours will cost $1,520.
    Mine will cost $1,320. Or $200 less.

    Now, you may think that I can use that $200 as additional profit. But because of the way everyone's ridiculing me for calculating my expenses, I know my hourly costs down to the penny which allows me to see where I can lower my expenses better, which I've done without ever cutting the quality of service. Because I've done that, I've saved that $200 that you charged the customer by having much lower operating expenses, so I can charge a little less without feeling it.

    That lets me get more jobs because other companies charge more for the same job with the same quality. Once word got out that my quality was the same or better, referrals happened and I became overbooked, which leads to expansion and all that great stuff. All from not averaging labor rates....and a few other things. :)

    There's 1,000 different factors to calculating costs, profits, etc. I use mine, which to me is very simple. To others that don't fully understand how it works, it looks weird, confusing, and wrong. I get that. But what I don't get, and you didn't do it, is set my ways to the frying pan because they don't understand it.

    It may work for one guy and not the other. In the end, I get more than enough jobs for good money, with low expenses, and without needing to gouge my client's wallets.
     
  2. Smithlawns86

    Smithlawns86 LawnSite Member
    Messages: 6

    So I’m a little lost. A lot of interesting arguments and I have my own thoughts on how and why I charge the way I do as well. To each their own lol.
    But trying to understand your 95.00 per hour. 60.00 for you? And 35.00 for everyone else? What happens if you charge 95.00 per hour and you fall and bust your tailbone and can’t sit on a mower or run a trimmer and have to sit it out and it’s a job you already quoted at 95.00 per hour? Does your rate go down to 70.00 per hour on a 2mancrew? Or are you charging 60.00 per hour randomly for the first man on the job whoever he may be?
     
    Mark Oomkes likes this.
  3. TPendagast

    TPendagast LawnSite Fanatic
    Male
    Messages: 14,359

    FWIW I think my lawyer charges $400 an hour and it’s not split between 4 different guys

    I think it’s his clerk doing the work and he puts his name on the billing statement
     
    Mark Oomkes and kemco like this.
  4. kemco

    kemco LawnSite Bronze Member
    Messages: 1,608

    In our operation we have 3 profit centers, only one of which is billed on a per man (person) hour labor rate (landscape maintenance which for us includes leaf removal). The other two are: mowing, and our spray apps. But within those last two you better believe there is still an aspect of $x per man hour it's just already priced in. So maybe that's sort of the thought process with the op?
     
    Mark Oomkes and Doc8406 like this.
  5. Mark Oomkes

    Mark Oomkes LawnSite Fanatic
    Messages: 16,690

    Or, years back my CPA was charging $125\hour (I think) for taxes, etc. A few years later he became a partner, his hourly rate went up to $200\hour (I think).

    I was getting the exact same reports, taxes filed, etc. But it was costing me more because he was partner. I fired him.
     
  6. Mark Oomkes

    Mark Oomkes LawnSite Fanatic
    Messages: 16,690

    No one is saying certain people in an organization aren't worth more and even some type of work is worth more. But when a laborer can do the same work for 42% less and that is how one is basing their hourly rates, it's doomed to fail.

    When a certain poster gets more than 1 employee and has them doing the work he was doing and 1 of those employees calls in sick but he based his pricing on say a laborer at $35\hour and a crew leader at $40\hour and then the owner has to step in but the company has to bill $60\hour to hit the projected numbers, the company is going to lose money.

    His numbers are all fine and dandy when he is half the crew and there is no one else involved. Well, kind of fine and dandy. But assuming he starts ramping up his business with more employees, he's going to be in for a rude awakening.
     
  7. Mdirrigation

    Mdirrigation LawnSite Platinum Member
    Messages: 4,156

    Back to billing at $1.00 a minute . So 8 hours a day is 480 minutes , so $480.00 . That doesnt take into consideration drive time , load time in the morning , lunch , time between jobs . So if you are lucky you are billing 6 hours , or $360.00 . Subtract fuel , insurance , wear and tear , depreciation ,and a wage for yourself ............................ You arent making much if any at all Dont forget taxes
     
    sehitchman likes this.
  8. TPendagast

    TPendagast LawnSite Fanatic
    Male
    Messages: 14,359

    Crew rates are generally based on an average pay per hour
    Typically $17

    If for example your hourly rate is $60/hr and bob gets $14/hr and Tom gets 20/hr , that’s an average of 17.

    You can also have Juan at 15 and Jose at 17.50 (an average of 16.25) ... doesn’t mean that crew bills out less than the first crew

    If the owner had to jump in to work that day, he should already be getting his pay as part of the overhead that figured that 60/hr in the first place.... so even tho his paycheck is more than his crew, he’s not destabilizing anything by filling in on that crew.

    If your crew average is over 17 (like your hardscape or irrigation crew) then you might charge more for that service (perhaps 72/hr) and now your average wage is 22/hr for that type of crew

    Lots of people (especially in maintenance) do this knee jerk reaction that they need to raise prices (often dramatically) because they are either not making money or feel they should be making more.
    But they don’t know where they are not making money at.

    It’s not a simple system of charge more to make more, due to the fact of market sensitivity to price.

    Put yourself in the customers shoes.
    A mower dealer wants to make more money... so he’s going to charge $22,000 for his ztr
    There!
    That should fix it! He’ll be vacationing in the Bahamas in no time, right?
    Except the way posters on here shop for machines that guy will never sell one!

    Well your lawn customer is going to do the same thing to you.

    Overhead is one of those things that is going to be constant
    If you don’t go to work at all today, overhead still needs to be paid
    If you work 12 crews today
    Overhead stats the same.
    So if you raise your prices so high your not making enough to cover simple overhead through lack of sales... what happens?
    You fail.
    If you do so much work your taking the whole city over because your prices are so cheap and you still can’t make any money , what happens?
    You fail.

    So the answer isn’t “I just got to charge more” or “I just got to do more work”
    It’s got to be both.
    It’s a balancing affect.

    It’s very hard to distinguish yourself from other services in a generic field like lawn cutting, when the bulk of the work is being done by a machine everyone can buy and is more or less the same performance.

    Every lawn hockey thinks he’s the best... poops on every other guy he sees out there and goes on about how inferior their quality is...but the customers point of view is what matters , and if they can’t see it or don’t value it.. you’re not getting any more money than the next guy.

    There isn’t a lot of “craft” in riding a nose around.
    This is why the more successful companies are doing more services and more often than not, the mowing is a loss leader.
    That means maybe the customer whom they do all these services for makes them 20% net profit, where the mowing alone loses 3%.
    But over all that customer is a win.

    Mowing has degenerated to thisvtype of tactic because there are simply too many lawn jockeys.
    Too many guys are quitting their jobs and getting excited by a new shiney mower and thinking they can make a lot of money... until they get out there and actually DO it.

    Suddenly reality sets in, there’s a lot of cost here...
    this is because these guys don’t understand business in the first place... they’ve always been an employee.

    The best thing to do, if you can’t make money mowing is to stop doing it, leave it to people who can.
    Charging 25% more than the competition for the same service on the principle that this should just be the way it is and the customers should just pay more isn’t going to lead to success.

    The law of supply and demand... if 3 guys will do it for $100 and you’re holding your breath at $125... you’re going to be the last guy to get a job and it’s only going to be when those guys can’t get to it or are too busy to call back,

    If there are less guys doing it, because it’s really not a profitable gig... and there’s one guy at $100 and you at $125
    You’ll probably do well.

    But the actual way of things in most markets are there’s 20 guys at 60, 15 at 70, 10 at 90, 4 at 100 and 1 at 125 ... and everyone charging 70 or more is using the same techniques and equipment.
    Time to either learn how to do it different or choose a different profession
     
  9. Smithlawns86

    Smithlawns86 LawnSite Member
    Messages: 6

    When doing a bid. I bid it at the rate of pace my crew members will get the job done. So i.e: a 2mancrew rate of 70.00 on a 8 man hour job is 280.00. However if I do the work myself I can usually do the same job in half the time. Now if I bid the job for 280 and finish it in 4 hours by myself I make 70.00 per hour on that job so I come out pretty good. However I’m still doing alright if my two crew members do the job because it was bid right and I’m still being productive somewhere else and earning my own keep. I’m the most valuable employee of my company but if I’m going to make 70.00 an hour it’s because I’m busting my tail and being extremely efficient based on my experience in the field. But that’s where bid work by the job trumps jobs by the hour. the customer is happy because your charging the going rate the same as your competitor would charge and your doing a good job too. But if your efficient you make out like high school kids on prom night!
     
  10. Mow-Daddy.com

    Mow-Daddy.com LawnSite Fanatic
    Messages: 5,073

    So if I'm understanding you correctly your billing at $35 per man hr?

    Seems mighty low.
     

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