1. Missed the live Ask the Expert event?
    Catch up on the conversation with Ken Hutcheson, President of U.S. Lawns, in the Franchising forum.

    Dismiss Notice

Operating Cost Formula

Discussion in 'Business Operations' started by louisianalawncare, Jan 20, 2005.

  1. louisianalawncare

    louisianalawncare LawnSite Member
    Messages: 27

    POLL-What formula do you guys use for operating cost when bidding jobs

    Do you go simple or do you get into it and hash out all the numbers

    have fun with this one
  2. mastercare

    mastercare LawnSite Senior Member
    Messages: 289

    The biggest factor I use when pricing a job is time. Most of your expenses in this business are sunk costs: i.e. insurance, truck, equipment, advertising. Once this money has been spent, it can't be recovered and is relatively the same whether you service 10 accounts or 100.

    So, the biggest factor for me is time. I have an hourly rate I'd like to make, and price the lawn to cover my hourly rate plus all variable costs (such as gas, repairs, trimmer line, etc).

    No magic formula here. But, at the end of each year, I track how long each job took me, and my average hourly profit. If any lawns are being charged too little for the time it took me, I raise the price to make me hit the average.

    Of course, an average means that roughly 50% of your lawns are below this number. so, this is what I use to justify price increases. If you continue to raise your below average customers, your average will be higher, and you'll repeat the process every year. This does two things: It weeds out the time wasted on cheap lawns, and it gives me a system to raise prices without hitting everyone at once. (I only raise prices on those that are abnormally below the average. Next year = higher average, more people to bump up!

    Repeating this process annually will slowly raise prices and technically you could eventually get all prices to be equal (for the amount of time you spend).
  3. Smithers

    Smithers LawnSite Silver Member
    Messages: 2,265

    dan, you should go the the michigan section of the Networking Forum. we are planning a lunch/get together with a few of the guys pretty soon. the details will be there. sorry to butt in the post, guys.

Share This Page