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figureing profit

Discussion in 'Business Operations' started by smarino21, Apr 27, 2006.

  1. smarino21

    smarino21 LawnSite Senior Member
    Messages: 345

    i was wondering let say i figured a job to cost me 2000 with labor materials and everything. So do i quote it at 4000? 5000? I figure 50% is that nuts or not enough/ I dont knwo im new
  2. bullethead

    bullethead LawnSite Senior Member
    from Texas
    Messages: 273

    If you want to run a business, you should have a basic understanding of accounting - too many people DON'T, then they wonder how they went of business - take a financial accounting class in the evening at a community college or at least get a basic accounting book and read it. It will benefit you the rest of your life - regardless of where you are working. Not trying to be a smart arse, just really think you will benefit from this knowledge.
  3. walker-talker

    walker-talker LawnSite Platinum Member
    from Midwest
    Messages: 4,771

    I would suggest the same. I don't remember the name of the book, but it's a basic accounting book that sets up and uses a lemonade stand as examples. It's pretty basic, but very good. Also, here is a small but helpful book http://www.landcarenetwork.org/do/productView?id=1342 It's kind of expensive, but it's pretty good also. I just got it in the mail yesterday and haven't been able to spend much time with it.
  4. drmiller100

    drmiller100 LawnSite Senior Member
    Messages: 562

    the price you put on your product should have NOTHING to do with your costs.

    it should be based upon the value to your potential customers.

    Then look at your total costs, look at your price times number of customers, and see if you can make a living.

    many business models should be shut down. People walking around following mowers IMO is a loser.
    people standing on mowers or sitting on them are winners.
  5. GlennZ

    GlennZ LawnSite Member
    Messages: 56

    You first start with your costs. Take all the material out of the equation. This ex cerise takes some time but you must do it if you want to stay in business for years to come. Most costs are in 3 categories. Labor, equipment and Overhead. You need to figure what each of these are going to cost you per year. This is your break even point. Now add profit in. Take the total number on production hours that you can sell during the year and divide this into the yearly number. This gives you what you need to charge and make per hour. Now the things you have to do is: sell the number of hours that you budgeted for, make sure the work gets done in the time budgeted for it and keep your expenses in line with what you budgeted for.

    If you can do all this you will make a lot of money. If you don't you will work your butt off and not make any profit.

    Let me know if you need any additional information. I have spread sheets that can figure this all out for you.
  6. topsites

    topsites LawnSite Fanatic
    Messages: 21,653

    There is no one formula that works everytime either, thou ...

    I never took an accounting class, so I learned the hard way LOL
    MOST customers are not stupid, they will NOT pay too much but if the price is right or even below, they will say yes.
    This means you will work underpriced more than over until such time you learn to hit the nail on the head.

    Take mulch for example:
    5 yards of it costs me 60 dollars for the mulch, I charge 225.
    That's cost x 3.75

    Now take fertilizer:
    A bag costs me 9 dollars, I charge 30
    Now we're at cost x 3.33

    You could say a good, all around formula is cost x 3-to-4, while 3 is marginal, 4 is pricey and borderline ripoff, but still this doesn't work in all scenarios and there is a big difference between cost x 3 and cost x 4, even in between, say 3.25 and 3.5 there exist differences of between 20 and 40 and even 60-100 dollars, all of a sudden you're again either short or over, even if just slightly.

    Take the earlier mulch vs. fertilizer cases. What if I priced mulch x 3.33, we'd come out to 200 which cuts me out of the delivery fee, just lost 25 dollars. Then if I price fert x 3.75, I come out 5 bucks ahead and time-wise the fert takes a LOT less time so it adds out but the prices are off, more customers will say YES to the mulch at 200 than the fert at 35 so I will bust out more of the cheaper stuff arrrrrgggg...

    But natural selection helps, again most customers won't pay too much, a few will but most won't.
    So, work for free until you learn is the way I did it because education is not free.
    You either pay for the accounting class, or you pay with your bones and muscles, that is entirely up to you but learn you will, I dare say you'll learn faster if it busts your tail lol so the accounting class might go easier on you, but I dunno ...
  7. topsites

    topsites LawnSite Fanatic
    Messages: 21,653

    I would have to say the strongest tool for me was to do the same things over and over and over until such time I HAD to get it right for the only reason that practice makes perfect. The more you do ONE thing, the better you get, that is the secret.

    It is for this reason I decided to specialize in mulch, grass-cutting, core aeration (seed / fert), and hedge trimming <- That is ALL I do, I don't install fish ponds, I don't put flowerbeds in, I don't do french drains or irrigation systems, and I don't do anything except what I just listed. I can do it but I won't because I don't know what I am doing! No, I would rather refer you to someone who knows what they are doing because if it's not something I normally do, someone is going to lose money and it's either me or the customer and neither idea excites me because it's not pretty (nevermind the job may not even turn out in the end).

    The thing is, after I did a LOT of all of that I listed, I got pretty good at pricing (and doing) those things, so I am a specialist in those things and you will find it hard to beat my prices and my quality because when all you do is a FEW things, you get really good at those things while at the same time you carve yourself out that little corner or niche that only you fit in. And only customers who want one or more of those services I list call me, and they call someone else for the other stuff so it works out.

    Far as what you should specialize in, best I can tell you is try various different jobs and as you do all those things, stick to those you like doing and throw the rest away, that's what I did because if you like the work, I find the other parts come easier as well.
  8. GlennZ

    GlennZ LawnSite Member
    Messages: 56

    I agree that being good a few things is a real key to being successful. We specialize in mowing small/medium size residential houses, because of this 2 guys can do 34 houses everyday. We can beat just about anybodies price but I am making moire money then my competition.

    Taking the parts out of the equation makes it easier to bid. You need to mark your parts up some but labor is where you get the bulk of your profit from. All the industry consultants agree on this. Your costs are what they are so you must collect enough hours to make the $ per hour goal. Your guys need to know the budgeted time and have some type of pay system that is tied to the time.
  9. Rob Spread & Spray

    Rob Spread & Spray LawnSite Member
    Messages: 205

    I would be interested in seeing the excel sheets. WIll they work with Chem Care too?

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