Hourly rate/cost to operate

Discussion in 'Starting a Lawn Care Business' started by magicmike, Mar 17, 2013.

  1. magicmike

    magicmike LawnSite Senior Member
    Messages: 266

    So I plan on a hourly rate of $60 per hour, I am wondering do I add in my cost of operation per hour ontop of this or do I just charge 60 per hour, and i pay my cost of operation out this rate charge?

    Hope this makes sense:hammerhead:
  2. 32vld

    32vld LawnSite Gold Member
    Messages: 3,983

    Hourly rate is what the customer is charged or better said as how you determine the price to charge the customer.

    People will go crazy when you tell them you charge $60 and hour to trim a hedge. When you price the job do not even say this hedge trimming job is 4 hours so it will cost you $240.

    You just state to trim those hedges is $240.

    Anyone can ask for any hourly rate they want. Customers will not hire you if you are to high and you will never get any where from low balling.

    $60 hourly rate is a good starting point. From there you have to figure your costs.

    Can you afford to live on $50,000 a year. Well charging $25 hr at 40 hr week will gross you$1,000 a week. Lawn care will be about 31 weeks for me this year. That's $31,000, then spring clean up, and fall clean up will add to the total. Then there is snow removal. Some people are busy enough to work 50 or 60 hours during the lawn season.

    60 - 25 = $35

    At first you will not be busy enough for a helper. When you do kiss another $10 goodbye.

    35 - 10 = $25

    LCO is going to have to pay for yearly costs: insurance, licenses, fuel, line, oil.

    Then you have to figure even if you have already have all of these things as if you will have to buy them say every 5 years: truck, trailer, larger mower 48-60", medium mower 36", small mower 21", line trimmer, stick edger, hedge trimmer, chain saw, back pack blower. All hand tools, pruner's, lopper's, shovels, rakes. Take that total cost then divide by your (31*40) 1240 season hours.

    Example $70,000 / 1240 = $56

    $60 hr gross - your salary, 1 helper salary, equipment costs = $4 profit.

    Now I left off maintenance and repairs. Some can do some can not. Though based on your abilities you have to figure in a main and rep cost per year and include that with the yearly costs.

    To make my example easy I just said everything has to be replaced every 5 years. In reality a truck and trailer can last you ten years. Some hand helds can be shot sooner.

    This is a good starting point. As you operate you will gather your real costs. This is why it is good to avoid credit. You may think you can afford the payments because you do not yet know your real costs. Also people tend to see the money coming in during the summer but forget most of the money will stop during the winter.

    Yes there are a lot of things I left out. Example keep a truck for 10 years it is going to need a new set of tires.

  3. clydebusa

    clydebusa Inactive
    Messages: 1,660

    ^^^What he said ^^^^^
  4. GreenUtah

    GreenUtah LawnSite Senior Member
    from SLC, UT
    Messages: 866

    Add to that knowing your local market.

    If everyone is equipped and more skilled, they will likely have lower costs to provide the same service. An example: let's say you have a financed 48" walkbehind and a 4 acre job asks you for a bid. Your time to do that job will be drastically different than a guy with a paid for, fully booked 72" rider.

    It's fine to have your target hourly, but if you are over or underpriced for your market (and your true costs), you'll either run in circles or sit home all day.

    Btw..any laborer that you add should always be separate billed man hours.
  5. magicmike

    magicmike LawnSite Senior Member
    Messages: 266

    Thats another question I had thanks for bringing it up... To start out with Ill be using a 21' honda most of the people around here use bigger walk behinds. I would love to get a toro/exmark 30 inch but its the first season they're out and I want to wait to see how they hold up. Should i charge based on how long it will take for a 36' mower to cut? I would love to get something bigger but Im working out of my pickup bed right now.
  6. dstifel

    dstifel LawnSite Senior Member
    Messages: 928

    I ran two years with a 21. The way I looked at it is I dropped my hourly rate knowing my cost was lower then someone with a 10k mower and that I would be less effective. Example takes 1 hour with a 36 would prly take two with a 21. So figure 30 hr rather then 60 either way your making same off that yard. But once again do not tell them your hourly rate give them a price. Then when you get the 36 you can mow it twice as fast for the same price. If that makes sense.
  7. 32vld

    32vld LawnSite Gold Member
    Messages: 3,983

    Toro 30" came out last year. People did not like it's cut quality.

    You do not bid a lawn based on the size mower you have. You bid it on your costs and profit that you need to make to stay in business.

    Example numbers are used for ease:

    Your need to charge $60 to stay in business.

    1 acre lawn goes for $60 in your market area.

    It takes a your competitor A with a 48" mower 1 hour to mow the lawn.

    Does competitor B with a 60" mower that can do the lawn in a half hour charge $30?

    No. A 1 acre lawn goes for $60. There is no reason because B can get it done faster he must charge less. His 60" mower cost double the money to buy and uses more gas.

    You have a 21" push and it will take you 2 hours to mow the lawn. Does that mean you charge $120?

    No. Because to ask that price double of what the market will bear you will not get any business. You charge $60 and save your money to buy a bigger mower.

  8. GreenUtah

    GreenUtah LawnSite Senior Member
    from SLC, UT
    Messages: 866

    I'll second not being a fan of Toro's cut going clear back to the introduction of the Recycler decks (which I foolishly bought a 52" hydro walkbehind w/ the T-Bar steering during the winter they came out without a demo..POS)

    While's it's critical to know what the market is supporting, it's even more so to NOT PRICE MATCH if you cannot complete service at a profit for that price. Not everyone pays the same general price and not everyone is satisfied with the general service.

    You have to weigh what you have versus potential competition and if you can't meet on price and efficiency, you can get there on service or other skills. Failure to adjust or know their profit points and competition is what kills lawn businesses by the bucketloads every single year. So it ALL has to go into the mix of not only what you charge, but what you offer and how you sell it.

    A for instance: We had a spray customer (just a typical residential) who was always calling us out for service calls. The lawn was always way too short, like a putting green, except with bluegrass, cut by a contractor. I offered to put him into a weekly rotation and cut it properly at a commercial price, as I had a crew making stops at banks just a few blocks away. He declined even though I knew it would be at a lower price than any residential offering and he was already coming to us for our turf expertise.

    I extended this offer twice during service calls and meeting with him. The third time out, I encountered his contractor working. An older Japanese fellow who was handling the full gardening on the property and he was literally on his knees on the turf with a pair of scissors taking down any missed pieces or high spots after he had just finished with a manual, push reel mower. No power anything. Broom, hand trimming, etc.

    He had to be paying a fortune more for service under these methods, even if the guy was working for less than minimum wage (unlikely), but something in the equation was more important to this customer.

    You'll need to look for that happy balance with customers (not the extreme, as in this example) to even the field where you have an equipment disadvantage. Start with asking what they would like it to be, what's bothered them about service in the past and mold your offering to fit.

    Perhaps they didn't like turf tears from heavier machines or full crews would just come too early in the day. Perhaps they just felt like people weren't working on the property for long enough for what they were paying (even though work is done to spec, this is common - the price of efficiency sometimes). The point is to find what you have to offer that takes you away from a strict price point comparison.

    Find your value.

    and yes, we discontinued the handcut customer :)
  9. clydebusa

    clydebusa Inactive
    Messages: 1,660

    Don't agree with 32vld.
    My experience in the last 20 years has been.

    1. 21" mower taking 30 minutes to do a yard. $35.00 Just say 2 yards hour. Gross $75.00

    2. Buy 32" go from 2 yards to 3 hour. Gross $105.00

    3. Competition comes in with a 32" and his goal is to make $75.00 an hour. He will do the 3 lawns for $25.00 each or somewhere in the price range. Or he might say $30.00 and he is making gross $90.00

    4. Next guy comes in with a 36" and he is getting 3.5 yards done an hour, and the cycle continues.
  10. 32vld

    32vld LawnSite Gold Member
    Messages: 3,983

    Do not agree with me?

    I clearly stated that the numbers used were for an example and to make the math easier.

    He wanted to know if he should charge IF he used a 36" mower (a mower that he does not own, use, or have access to) because he was using a 21" mower.

    His question was are prices are to be based on mower size and I pointed out that giving prices based on more size is not enough and showed how just using mower size alone can give prices too high and too low.

    No where did the OP ask about mower productivity rates.


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