How do you get to 15-20% margins in landscape maintenance?

CarolinaDawg1

LawnSite Member
Location
WNC
overtime, over an extended period of time can hurt. But there are still situations where it is the best option. The limiting factor that we all have is time, and we can not take a percentage to the bank. So if you take $1000 to the bank, that’s better than taking $999 to the bank. If your priced right OT might impact profit per hour, but you should still be profitable on those OT hours because your overheads (rent, insurance,...) should be covered in the first 40 hours, so they disappear.

there is a cost to roll a truck down the road, a labor cost to load that truck each morning. If working 9 hours per day rather than 8 results in a bottom line of $1 more, then it’s worth it.

if your demand seasonally changes, the cost of advertising alone to find a new employee, may cost more than a short term fee month period to just pay out OT.

the only way to really know is to run a business model test and run the hypothetical math. Simulate buying, plating and Insurance for another truck on the road, another cell phone, and paying another driver.

let’s say your crew is working 50 hour weeks, 3 guys making an average of $16 per hour. In one month they might have 120 hours of OT. We don’t care about the standard labor amount because you would pay that anyways. So all we really care about is the extra $8 per hour x 120 hours per month. This is $960 in overtime. $960 per month is going to be cheaper than putting another truck on the road, especially if it’s only for the spring season.
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Thanks, that makes sense, sometimes a separate set of eyes makes all the difference. Good point with the seasonal aspect of it too.

I think everyone that works in this industry accepts that overtime hours are going to be necessary, however there is a fine balance. I wouldnt get caught up in weekly or even monthly margins, we put more weight on quarterly reports, that way things have a chance to balance out.

Not to nick-pick but the example you gave would actually be $8 per hour PER CREW MEMBER (assuming they are all on overtime). So you are paying an extra $24 per hour x 120 hours per month = $2,880!! Thats a nice truck payment!!
 

grass man 11

LawnSite Senior Member
I think everyone that works in this industry accepts that overtime hours are going to be necessary, however there is a fine balance. I wouldnt get caught up in weekly or even monthly margins, we put more weight on quarterly reports, that way things have a chance to balance out.

Not to nick-pick but the example you gave would actually be $8 per hour PER CREW MEMBER (assuming they are all on overtime). So you are paying an extra $24 per hour x 120 hours per month = $2,880!! Thats a nice truck payment!!
50 hours per week is 10 hours of OT per week per guy. X 3 guys = 30 per week. X 4 weeks is 120 hours x $8 per hour is $960. So nope my math checks out.
 

SLSNursery

LawnSite Senior Member
Location
West Haven, CT
May need to raise your minimum prices to make the growth slow down and earn you some better margins. Any over time for extra mulch and plantings jobs
Lots of interesting points of view here.
Diversification is key, and you have to offer those services you are able to. For instance, don’t jump into grading, drainage and hardscaping on a whim. Make sure you, your staff, and your equipment can do the jobs.

I’m not a fan of working on simple jobs with overtime labor unless we are billing time and materials. That is, you don’t get paid x1.5 for contract work like mowing, trimming, or mulching on regular jobs. Why blow the labor estimates. We time track and review gps Logs, etc to check efficiency year over year. There’s no escaping facts. You can adjust for those facts by increasing your charges, but you won’t keep customers if you start trying to get a big bump to cover OT.

Our efforts are focused on doing regular maintenance contract work during the regular time portion of the week. Sometimes we use a swing truck to outfit an extra crew in order to get the work done without sending the regular crews into OT. This works well when you have part time help on deck. Next, we line up project work in addition to our regular project crews. We price it accordingly to be able to pay our lawn guys OT and still maintain good margins. They can even hop in to help on Construction jobs and if they have an aptitude you may be able to eventually move guys up into the higher paying crews.

This requires some discipline and good management. Need to invest in extra equipment and pay close attention to job costs, scheduling. Helps to have a variety of trucks also, which is expensive. A lot of companies in the green industry start up and operate on a shoestring rather than have a plan and invest adequate capital. Take the time to figure out your models and expected return. Getting paid to show up to work at your own business isn’t the same as getting a return on your investment.
 

Where the Pavement Ends

LawnSite Member
Location
Montgomery, AL
Ijustwantausername;

May I suggest reverse engineering? Start from where you want to be. Then, work out the numbers required in order to get you from where you are to where you want to be.

You may have already done this, but what is your next revenue goal? $500k? You have two, 2 man crews. So they have to be able to produce about $250k each, +/- ? If one crew of two men produce for 7 hours per day (8 hours less 1 hour estimated travel time), that's 14 man-hours per day. 70 man hours per week. If they produce at a rate of $50/ hour, then they should produce around $3500 per week in revenue, $14583 per month, and around $175,000 per year (using a 50 week model). So using the same numbers, two crews will only produce about $350,000. So, you either need to increase your revenue per man hour to $70.00, or you need to run 3 crews, achieving the same goals. The numbers will guide you. Remember, what ever your fixed expenses are, and let's say they're 30%, for every new dollar you capture, you're not paying that 30%.

Review your numbers every day, every week, every month. And then review each quarter, semester and year to see where you are. Understand industry and market standards. But in the end...it's your business and YOU determine how it is run. We've earned at least 30% each year in the (whopping) five years I've owned my business. I understand that probably is not normal. I was a COO for a healthcare company, so I have some understanding of discovering, developing and operating a profitable business. The most important thing you need after the right people, is the right processes. I have set metrics. We must achieve a labor rate of less that 30% (payroll/production revenue) each week. We must achieve a revenue per clock hour (start and stop at each job) per day, week, moth, etc.

Take the time to review your business, by tearing the numbers apart. What is my average revenue per invoice mailed? What is my revenue per hour, day, week, month, customer? What are my average expenses for the same? Do I have a budget? Do I follow that budget? What amount do I have to achieve per man-hour to be profitable? What percent is my labor rate? What percent is my Cost of Good Sold? Am I capturing the right data in the first place? Is one crew more profitable than the others? Why?

Again, you may have already done this, but. Helpful tools. If you don't have them, I would suggest that you consider establishing a plan to acquire these.
* A CSM software program that will provide these reports in a format you can understand and use. One that includes routing and tracking reports, revenue reports, revenue per hour, clock hour, manhour, materials expenses, etc. the numbers you need will be in here.
* An accounting software that will provide a Profit and Loss Report, Balance Sheet, Payroll Reports, Budget, etc. The numbers you need will be in here too.
* GPS in each truck. (It pays for itself).
* Excel Spreadsheet. I've created a "Dashboard" to display all of the metrics that I want to follow on a regular, even daily basis.
* Systems. Create systems for everything you can. Sometimes that is as simple as, "We do A, every time before we do B. We never do C, before we do B. And we never do B before we do A". And everyone from you to the newest employee has to know that.
* An attitude. That failure is not an option. That the only way this business will, survive, grow and be profitable is if I make it happen...and I will make it happen.
* As Ken Covey said in his 1980 book, The Seven Habits of Highly Effective People", Seek First to Understand. No one knows your business better than you. If you find someone who does, ask for their help!

Best wishes. Love to all!
 
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