How Well Did You Bid?

Discussion in 'General Industry Discussions' started by Sean Adams, Jan 15, 2013.

  1. Sean Adams

    Sean Adams LawnSite Gold Member
    Messages: 3,597

    Matthew - no problem at all. I will do my best to crudely show some numbers so it makes sense.

    I know that early on in a busines it is difficult to create a budget and to put in stone what certain things will cost. As a few years pass you will become more and more accurate because you can look at trends and clearly "guess" what your variable expenses will be.

    That being said, here is some quick math....

    1.) If you have 250 working days a year and you have 9 billable hours per day to sell that means you have a total of 2,250 billable hours to sell PER MAN.

    * Please understand that the definition of a billable hour is time on the client's property - not drive time, lunch time, nonsense/inefficient time which you pay out in labor often times....

    2.) So let's say that you look at all of your expenses - accounting, legal, advertising, fuel, maintenance, materials, insurance, labor, etc.... (there are more than this obviously, but I am just stating a few) and you determine that you are going to spend $150,000... that means

    3.) You take that $150,000 and you divide it by the total number of billable hours you have which is 2,250. Doing that math you determine that you need to charge clients NO LESS than $66.67 per hour.

    4.) Now if you have 2 people doing the work in the field, you divide the $66.67 by the 2 guys and now you arrive at $33.33 per hour per man that you need to charge your clients per hour JUST TO COVER COSTS

    5.) Now let's assume you want to make a 25% profit margin on each billable man hour - that means you would need to take $33.33 multiplied by 25% which gives you a billable hourly rate of $41.66 per man.

    The beauty of this math is that you should be able to be very close to determining the gross revenue you can generate for the year by taking 2,250 hours and multiplying that by $83.32 (two men at $41.66 per hour), which would then total $187,470 in gross sales, which leaves you with a pre-tax profit of $37,470, which does not include your salary which is already accounted for in the expenses.

    Please keep in mind this is very crude math. There are a lot of ways to determine and break down your expenses and how to recover them.

    The process is this:

    1.) Make a budget for the year to determine your projected expenses
    2.) Determine how you will recover the costs/expenses
    3.) Estimate accordingly (expense + profit)
    4.) Go back and track estimates to make sure they are being done in the amount of time you projected the work to take
    5.) Always tweak until you get it right
  2. TriCityLawnCareLLC

    TriCityLawnCareLLC LawnSite Bronze Member
    from Ohio
    Messages: 1,025

  3. Whitley

    Whitley LawnSite Member
    Messages: 14

    Very good article!
    Posted via Mobile Device
  4. Procut lawn expert

    Procut lawn expert LawnSite Member
    Messages: 67

    That's good.but even better I have a a spread sheet that would go with this. And I don't know how to post it so could I email it to you and you post it cause I would love for these guys to have it. It's setup to track the Jody backwards when you finish .it breaks it down to net profit and what you make per billable man HR. I thought I was doing good by looking at net profit but when I broke it all down backwards after the job all the way down to what I ended up making and what I made per hour for the whole crew. Yea I have nothing else to say because jobs with less .profit. Can still come out with more money per hour than a job with big profit if it toke you longer than estimated hours. All I can say is after I did this spread sheet I didn't leave were I was sitting for over 9 hours the first time .I made this in a financial class and just coming out with this information paid for the 3,000 class.
    Posted via Mobile Device
  5. alldayrj

    alldayrj LawnSite Gold Member
    Messages: 3,793

  6. JR's Lawn Service

    JR's Lawn Service LawnSite Member
    Messages: 48

  7. TriCityLawnCareLLC

    TriCityLawnCareLLC LawnSite Bronze Member
    from Ohio
    Messages: 1,025

  8. cpllawncare

    cpllawncare LawnSite Silver Member
    Messages: 2,659

  9. memphis.landscape

    memphis.landscape LawnSite Member
    Messages: 141

    Johnny@ I would like to check it out as well if you don't mind
    Posted via Mobile Device
  10. JContracting

    JContracting LawnSite Bronze Member
    Messages: 1,878

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