Don't know how to estimate? Look HERE.

Discussion in 'Business Operations' started by tlc1994, Mar 17, 2011.

  1. tlc1994

    tlc1994 LawnSite Senior Member
    Messages: 290

    All over this forum, there are guys asking how to bid: "Is my price to high? Too low? How do I bid on this? How do I bid on that?" I understand everybody's situation is different, but we should all be comfortable making estimates that will make us money and give us work. Here you will find a guide to help create a general outline of how to bid on a job. There are a few things: 1) I am only taking residential properties into consideration. 2) I am absolutely no professional on estimating properties, but have a solid system of considerations that makes me comfortable with each estimate I make, most of it being common sense. You can interpret this info any way, or try different methods to see what works best for you. This may include combining all of them, leaving others out, etc. Before I start, I would encourage people to correct me or add another helpful tip that I didn't include.

    It all depends on the MARKET:
    Common sense you would think, right? The market fluctuates constantly; obviously the nationwide consensus is miserable, but the local market is what will most affect your pricing. The best way to first establish a general "ballpark" price is to determine the average price from all other local companies that provide similar services (preferably companies of a similar size to you- this is because you may share a similar profit margin as them). This may mean going in the phonebook and getting estimates for your own lawn. Now, after several estimates you will find a general trend developing in price. By the way, if they know you are in lawn care yourself, they will not only be very suspicious, but probably charge your way more- just be aware. By doing this, I in no way endorse stealing customers from other companies, rather price competitively. Besides, if you plan on low-balling based on the competition, you will be overworked and miserable, not to mention completely unprofessional.

    Determine your profit margin:
    Those who have been doing this for a long time know how much they need to make to survive. They also know how long it will take to do a certain job when they pull up to do an estimate- but why is this important? Determining your hourly wage is why. This is easy to do:
    1) Calculate your overhead that your spend in a year. Consider ALL of your personal expenses (that's for your to decide) and business expenses (maintenance, gas, marketing, insurance, etc.).
    2) Divide your overhead by 52 weeks to determine your weekly margins.
    3) Add in your desired weekly profit margin. Remember: if you don't see your competition driving brand new trucks and blowing their noses will money, you can't expect to either. Take time to determine a proper profit margin.
    4)Divide the sum by the number of hours you work in a week. This is where knowing how long a job will take comes into play.
    Let's do an example: perhaps my expenses are $45,000 a year. Divide this by 52 weeks and that averages to $833.33 a week in expenses, just to pay the bills. I'll say that I want to profit $450 a week (just for kicks), making the total desired income $1283.33 a week. Divide this by how many hours per week you work- how 'bout 40 hours? The quotient leaves me with about $32.00- that's how much I need to make per hour. Let's apply this to real life: I do an estimate for a 1/2 acre yard that I know I can blow through in about 45 minutes, and it only requires mowing and some trimming. I would charge about $30, meaning I'm making $30 on this lawn, but since it only took 45 minutes, my hourly wage for the lawn would be $36.25. Just remember: this may seem low to some or high to others, but the local market must be taken into consideration.

    Location and Travel Time:
    You still have to be on the clock driving to a job, especially with the current price of gas. Simply put, based on how much money in gas I'm wasting is about how much more I will charge. If I charge $30 a week for a lawn one mile away from me, I may charge $35 for a lawn 15 miles away that cost $5 in gas to get to. While on your way to do an estimate that is a significant distance away, measure how much gas you waste to find out the travel cost, and keep that considered when you name your price.

    Quality vs. Quantity:
    Hopefully we all take pride in what we do, but it's obvious that some lawn companies offer superior service to others. You may or may not realize that most of your customers (or potential customers) are:
    a) blow and go accounts that are in and out really quick.
    b) one-up customers that will pay extra to have the best lawn in the neighborhood.
    It's fine if you plan to find a niche in lawn care: you may be very quick and able to do a dozen accounts a day by yourself, or you may aim to give the best service to select customers. Here are a few things you may want to consider when estimating a lawn for a customer:
    -Based on their home your should be able to tell if they want the cheapest service they can find, or an immaculate lawn for big bucks.
    -Ask what they are looking for from your services. Again, if it's very general, it's a quick job; if they are specific and demanding, there will be more money involved.
    -For a cheaper job that's close, sway a little lower on your hourly wage, since you won't need to work that hard and probably won't even need to park your truck. For a nicer home, shoot sky high but really try to impress the hell out of the homeowner, telling them what you can do to make their lawn perfect.
    Keep in mind that if your just starting out with some ugly equipment, you are more likely to get the cheap homes to start out, because people who have money and know what they want in a lawn care provider will only want the best. If you don't have a fertilizing license, aerator, and shiny truck to take to the estate homes like the other guy, then you shouldn't be charging as much as him.

    Well, there you go. This is not perfect and may be very general but if it helped you out then I guess it was worth the hour. Think realistically about what you're worth and stick to your guns. Good luck out there.
  2. SkinnyVinny

    SkinnyVinny LawnSite Senior Member
    Messages: 262

    look at this guy! 95 posts and going for a sticky! haha good info mann:clapping:
  3. Zackster

    Zackster LawnSite Member
    Messages: 35

    Very well put!
  4. JimLewis

    JimLewis LawnSite Fanatic
    Messages: 6,872

    Very well done, TLC. (I wish you'd identify yourself better. Most of us have no idea who you are or what company you're with. It just adds to your credibility to know a little more...)

    There are a few things I would take issue with. But these are relatively minor. Overall, I think this is great advice. Great thread!

    First, I would NEVER get an estimate at my own house. Aside from the fact that most people in my area know who I am and a lot of them know where my house is, it still can come back and bit you in the a$$ later, when they DO see your company rig in the driveway and think back, "Hey! Didn't I give that guy a bid a few months back??? He's an LCO??? What a jerk!" Then, next thing you know your water feature is getting soaped or your lawn is getting cassaron bombs thrown on it. You can't afford to piss other LCOs off. So if you're going to fish for bids (which I believe is a good idea. We do that occasionally) you really need to do it at someone else's property. Not yours. And if you have any sense, you'll have someone ELSE do it for you instead of doing it yourself. What happens when you see that guy at a local supplier the next week and he realizes who you are? It's best to always do this stuff anonymously via a friend or relative whose willing to help.

    Second, I think you put a little too much emphasis on trying to make sure your rates are competitive. I am not quite as inclined to think that way. I don't worry too much that we are higher priced (and we are for almost everything we do when compared to our competitors). I do want to know how MUCH higher priced we are. Not many people aren't going to hire us if I'm 200% of everyone else's bidding at. But at the same token, I don't need to match the going rate on anything we do. I'm selling our company, our experience, our reliability, our reputation, our warranty, our artistic design. I'm not selling just a commodity. I'm selling something more. So I don't have to compete on price as much as all the other pikers around town do. I hate that game. You can't win that game.

    Third, your second topic about figuring profit is flawed, too, in my opinion. I mean, on the surface that works fine. But it's flawed in the sense that what if I am a newby and I don't have a shop, I have an old crappy $1,000 truck and $200 trailer. I store it in my garage and my neighbors are not too happy about that. My equipment is all used and breaking down about as fast as I can repair it. I don't have any lettering on my trucks. I don't have any uniforms. I don't have anyone to answer phones for me when I'm out. I don't even have an office. So let's say I'm that guy. To figure out my profit, I just need to list my minuscule costs and divide them by 52 weeks and add a little profit (let's say 20% profit to be genereous)? Sure, I mean that works. If you just want to stay that way forEVER. But what if I want to grow? What if I want to better myself? How am I ever going to afford a shop, a nicer truck, nicer equipment, an office manager, professional lettering, a nicer trailer, a real shop, utilities for that shop, an office, the list goes on. On my small profit, I'm NEVER going to be able to afford to grow very much or very quickly. Your profit margin calculator only allows you to stay exactly where you are and make a little profit. If you want to grow at all, you end up making no profit, or going backwards.

    So I say; PRICE AS IF! Price your bids AS IF you had those expenses. AS IF you had a shop. AS IF you had a nicer truck (payment). AS IF you had nicer equipment. Etc. Take into account the expenses you SHOULD have. Not just the ones you have now. But the things you would need in order to have a real business. THEN you're pricing accordingly - and competitively. And if you base your rates off THAT price, soon you'll be able to start to afford all those things.
    Last edited: Mar 17, 2011
  5. ncknaklawns

    ncknaklawns LawnSite Senior Member
    from NY
    Messages: 379

    You can always say I going to charge the most I can, what the market will bear. This will net you the most profit. But there are issues that come up with this type of business plan. Especially as the competition in increasing. You may be willing to accept these risks. or You may say to yourself I'd rather worry less. In a perfect world with limitless amounts of great people to hire you could open a new business every year. You might not even need any knowledge about the business, cause the guy you hire that can't financially start his own or isn't smart enough can do the job. Just depends what you want to gain and pay for it.
  6. clean_cut

    clean_cut LawnSite Bronze Member
    Messages: 1,327

    This thread has some good info :)
  7. VO Landscape Design

    VO Landscape Design LawnSite Senior Member
    Male, from Mt. Pleasant Ia.
    Messages: 365

    Almost Always charge What If. That was 1 of the biggest things our instructor told us. If your equipment breaks down you need the money to pay for a new/used one or have the cash or means to fix it. If you haven't been charging what if you will not have the capital to do replace the broken equipment.
  8. PROCUT1

    PROCUT1 LawnSite Platinum Member
    from TN
    Messages: 4,891

    Good post. Jim Lewis added some vital information.

    There is always a descrepency when it comes to discussion about profits on here.

    A small operation should be running high double digit profits. And that will drop as you grow.

    Whereas a 5% margin is considered great for a very large company, it should be 10 times that for a small owner operator.
  9. PrecipSolutions

    PrecipSolutions LawnSite Member
    Messages: 4

    This great advice. For the last 2 years, I have been working in project management handling small-large projects for Exxon. When I get bids in from contractors, there is always a "Contingency" section with a price for uncalculated costs that may arise. That way if something breaks or they under bid something, they don't "take a bath" on the project. I would just divide this number up into your quote.
    As for the Quote itself, this is my advice and the best advice that I've heard so far, "If your going to sale Cadillacs, sale Cadillacs. If your going to sale Fords, sale fords. There is no dealership that will sell both." If you are high all of the time and you believe your service is worth that price, give something extra. Give a free flowerbed with every 1 year of service, an extra 18 month warrenty on an irrigation system. People want that extra sense of security with their purchase. The worst thing you can do is go up and down with your prices. People will get wind of this and beat you up on your prices and that is a game that you, as a businessman, will not win. I see this all of the time with companies big and small. It's sad but that is the way the world is.

    Hope this helps. :cool2:
  10. grassmasterswilson

    grassmasterswilson LawnSite Platinum Member
    from nc
    Messages: 4,906

    nice thread. I'm solo most of the time. I have my fixed and variable cost. I'm trying to figure out what to pay my self. high hourly rate but less profit or low hourly rate and high profit. I've never paid myself, just took money out when I needed it. Both ways are the same. If I took a higher profit I would have money for equipment purchases and upgrades.


Share This Page