managerial analysis of mowing crews

Discussion in 'Business Operations' started by BradLewisLawnCare, Jun 12, 2012.

  1. SDLandscapes VT

    SDLandscapes VT LawnSite Senior Member
    Messages: 581

    Gross Profit = Gross Revenue-Direct Costs [Cost of Goods Sold aka direct labor and direct expense]
    Net Profit = Gross Profit-Indirect Costs [Indirect labor, insurance, licensure, rent, office salaries, OWNER'S SALARY, vehicle registrations etc]

    So you are telling me that a one man crew driving a truck with a trailer and two mowers Z and walkbehind and a string trimmer, an edger, and a backpack blower can make a higher gross profit in a day than my two guys driving the same truck using the same mowers--all you are doing with adding trucks and mowers is increasing overhead and the cost of doing business. Your overhead to revenue ratio is way off and your price will reflect it--Brickman and the big boys don't do it in volume they do it by keeping their overhead ratios in check and knowing to the penny what it costs to do business. This allows them to bid very competitively. You have to know what margins you need and then manipulate your setups for success.
  2. BradLewisLawnCare

    BradLewisLawnCare LawnSite Senior Member
    Messages: 279

    Not that it really matters, but gross is before fixed costs. so revenue minus cost of good sold. your insurance, registration, inspection, oil changes (albeit sometimes variable), and the like are after gross. net is the costs after both variable and fixed. the net is what you tell uncle sam about or in some cases even after that. either way taxes aren't a huge issue. They are the same regardless of the metric.

    More often than not to calculate gross in lawn cutting you take revenue minus labor, gas, depreciation on truck based on some metric (IRS uses about $.60/mile) and however you allocate the cost for repairs to your machines.

    Honestly it really doesn't matter what the definition is. It is simply a qualifier to the people writing.

    The object in the study is to maximize revenue per man hour, not worry about the highest gross profit margin (percentage of revenue after variable costs. key word percentage so the actual total dollars do matter, not the percentage.)

    when basing revenue against man hour, your man hours being the highest costs in your variable costs, you help to maximize the percentage of the dollars you are bringing in (the sum of these dollars are fixed unless you can create demand for your company in an instant) with the least cost to bring them in.

    BTW best impressions, you are the first one to give some guidance on how you would do the study(i think sry if i left someone out). My ideas are very similar to yours. Don't mean to drag you on definitions. They are stupid unless you really are trying to measure your business against another in the same insdustry.
  3. Duekster

    Duekster LawnSite Fanatic
    from DFW, TX
    Messages: 7,961

    Yuup. This pretty well sums it up in simple terms.

    My experiance is production is relatively flat between 1 and 2 mean crews on smaller jobs.

    IE - one man = 8 houses
    two mean = 16 houses
    three = 24 houses.

    For simple math we have an average cost per person @ 15.00 which includes burden ( taxes and insurance)

    8 hours X 15 = $120 daily cost per person.

    8 houses @ $30 = 240
    16 = $480
    24 = $720

    $240 - 120 = 120
    $480 - 240 = 240
    $720- 260 = 360

    To keep it simple we know you need more equipment with more guys but in reality it is pretty small if you have two guys on a whip / blower and one on a mower.

    The biggest savings comes from splitting the truck including fuel, maintenance, taxes, insurance, then have other overhead too.

    I would not consider sending out a single person crew on most jobs.

    On residentials two person crews are good but I will run 3 when growing a route then later spit the route back down to 2 people.

    Another example - lets say you have a commercial account that takes 30 man hours to complete. The drive is 30 minutes each way. You bid $35.00 per man hour.

    Do I send 1 guy 4 times?
    Do I send 2 guys 2 times?
    Do I send 3 guys a day and a quarter?
    Do I send 4 guys one time?

    Which one spends the least amount of fuel? Which one allows me to utilize the truck and equipment more? Which one is least likely to cause me to get my hat handed to me with traffic delays?
  4. BradLewisLawnCare

    BradLewisLawnCare LawnSite Senior Member
    Messages: 279

    Didn't read your post before my last. Sorry about that. To edit your post i will copy and caps my changes:

    So you are telling me that a one man crew driving a truck with a trailer and two mowers Z(ONE) and walk behind (IF NECESSARY) and a string trimmer, an edger, and a backpack blower (CAN BE HANDHELD) can make a higher gross profit in a day than my two guys driving the same truck(NO TWO GUYS TWO TRUCKS TWO SETS OF EQUIPMENT) using the same mowers--all you are doing with adding trucks and mowers is increasing overhead (ADDING MOWERS INCREASING INITAL OUTLAY, NOT OVERHEAD EXCEPT REGISTRATION AND INSPECTION) and the cost of doing business.


    So in your example I am saying in lamen's terms: Try taking one z mower off your trailer and maybe even the walk behind unless necessary. Buying a $5k truck and a $800 commercial push and a new string trimmer and handheld blower $500 and a trailer if you need $1500. Now you have two set ups with initial investment of $7800. Now you are eliminating windshield time. Can we fabricate number to say our $50 per man per hour with 2 guys together and increase it to $66 like in the hypothesis before. Now you are making $32 more per hour by separating your guys (also assume you are going to take more clients. This does not work the same if you don't take more clients or reduce your guys hours). That $32 an hour multiplied by the hours you mow a year (40 hpw *26 up here) is about 1000. That means that in this analysis if you can achieve it you could invest $7800 in a year and return $32,000 more. And guess what. you still have a trailer truck albeit used and handhelds. Now if you only get a slight increase next year, then yes it may not work out to making $25k more and would only make sense if you increased crew size, not crew numbers.

    After reading everyones posts i think that I have come to the conclusion that the problem is about interpretation of efficiency. Being efficient in scale. If you have a hard time attracting new clients, then i understand staying in your scale and scope. I landed 5 new customers this week. Not saying that is a lot, but it is $600/month more for me. If we are overwhelmed on day I can send a 2nd guy out with my main 2. I know it will help a little in getting the list done, but i don't expect them to be home in half the time. So My speculation is that it is efficient to send one guy out for the grass and increase crew size when you need to due to lack of experience, trust or maybe no license (I LOVE them guys). It is scope.. where your business is and where you want to take it.

    ONE guy won't have any bottleneck (google that if you don't know what i mean. Operations management term). Two guys may and often do.

    The other thing that people think is increased overhead. Now I want to say that I think if you own 2 pieces of equipment instead of 1 you are less likely to beat the sh!t out of your stuff as quick, if you alternate daily use. Or for instance instead of running your z turn 8 hours w one guy. You operate it 4 with that same guy, but he also uses the weed wackier and blower for the other 4. and another guy uses another z turn and ww and blower for 4 and 4 split. so you have 2 different mowers being used half the time. You made the investment and if you plan to grow, you can grow into using them 8 hours instead of 4 a day. in the growth stage your company does not need your total assets turnover (TAT a financial term, google it) to be so high. most growth companies have higher costs than a really narrowed down one. That being said, in our industry having a higher TAT means more breakdowns and higher depreciation.

    Also, can everyone try to be civil. we are having an industry discussion, not trying to put each other down. haha. this should be fun.
  5. BradLewisLawnCare

    BradLewisLawnCare LawnSite Senior Member
    Messages: 279

    Production is flat with a tendency toward negative slope or positive slope?? How close your accounts are are very important, i think. even though not put into the original parameters of the idea. with higher drive times, they larger crews become less efficient I speculate, your question, so you can answer??
  6. Duekster

    Duekster LawnSite Fanatic
    from DFW, TX
    Messages: 7,961

    You lost me at 5K truck.
  7. BradLewisLawnCare

    BradLewisLawnCare LawnSite Senior Member
    Messages: 279

    Thats ok. I have no hard feelings. :drink up: I've been doing too much:drinkup::drinkup:
  8. BradLewisLawnCare

    BradLewisLawnCare LawnSite Senior Member
    Messages: 279

    I'm not trying to sell $5k trucks to you, Just trying to get across a point that they could run the 26 weeks necessary in the example. buying a newer more expensive one would be pretty much leaping into a full fledge crew. That sounds better to me, but that is the biggest problem. We are not analyzing assuming we could put another crew out there. most are analyzing assuming they don't want to invest into another crew, i think...
  9. Duekster

    Duekster LawnSite Fanatic
    from DFW, TX
    Messages: 7,961

    I know drive time and lost time in traffic is a killer. There is no way to quantify that varible. You can allocate for it.

    My truck burns more fuel with a trailer and it likely goes up some with 4 people versus 1 too. Fuel cost does not drop 25% for each person in it.

    Lets say it gets 15 MPG with a trailer and drops 1 MPG ( over kill) per person).... I save money not going twice vs 1 with more guys.

    We leave early to beat traffic, we start at 6:30 and arrive by 7 and leave early around 3 to also beat traffic.

    There is no question the business is hard but the economy of scale is still there.
  10. Duekster

    Duekster LawnSite Fanatic
    from DFW, TX
    Messages: 7,961

    Just getting started :drinkup: Happy Friday.

    I like to think I keep plenty of fluff in my numbers. In fact I keep too much fluff that I often feel I am losing money on residentials. Hence the reason this thread is of interest to me.

    I still think however a good crew of 3 is productive as 1 and I recover my overhead better.

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