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Route's full. Need to expand.

Discussion in 'General Industry Discussions' started by zechstoker, Apr 24, 2012.

  1. coolluv

    coolluv LawnSite Platinum Member
    from Atlanta
    Messages: 4,228

    At $25 an hour you are barely making any money if any money at all. Thats the problem with this business. Too many don't understand the cost involved. You see it all the time on here. Guys growing like crazy picking up accounts left and right. Then when they get to the point of needing to hire help and add more equipment they do so thinking they are making money.

    They don't usually figure it out for a while because all they see are the checks they are cashing and they think I must be making money. They later realize that they are just squeaking by or losing money. Newbies see threads titled "Routes full need to hire help" and "picking up clients left and right".... and think Wow this must be an easy business.

    I have a bunch of lawns around me and I bet I can get rich like the guys on Lawnsite. Your working for peanuts and buying work. Why don't you ask your brother how he came up with the hourly wage you are working for. Ask your brother how much it cost to do business per hour. Ask him what the break even cost per hour is.

    I'll bet he has no idea. I'll bet he pulled that number out of his @$$ because that is what the going rate is. If you think you are going to raise prices on those accounts later on you can forget that idea. They will drop you like a bad habit and find the next newbie without a clue to buy work from them.

    The guys working for those types of wages are the ones not playing by the rules. That is the only way they can make what little money they are making. When you run a legit outfit there is no way you can make money at those rates. After you pay your expenses and taxes you made nothing or lost money.

    Illegals that live 6 to 10 to a house and split expenses can make enough to survive on and are happy to do it. The pest control owner is right. Problem is it sounds like your area is full of illegals just like most of the country is getting. But hey....your a sanctuary state.... Hell the country is now a sanctuary country. Those that don't have the illegals to worry about for the time being can make some decent money....but that won't last. Thats another topic for another day.

    Why do you think that this business is full of failure? Because most think that because they are cashing checks they are making money. Its not until they reach the point where they are forced to hire and upgrade equipment that they soon realize they are working for free. Once your brother figures this out it will either be too late or he will figure it out and realize that the LCO business is not the goldmine everyone thinks it is.

    Good luck..... your going to need it.

  2. yardguy28

    yardguy28 LawnSite Platinum Member
    Messages: 4,463

    another surprise to me. in my market push mowing (assuming you mean 21 incher) pays more in a lot of senarios.

    like you said though the market is all diff in all locations. so a question then for coolluv then. knowing the market is diff everywhere how can you tell him he's not making money at $25 an hour. maybe in his market he is. you I see are from Atlanta, he's in CA.

    in this business there is NO national average number. $25 in one area might be chump change and good money in another.
    Last edited: Apr 28, 2012
  3. Duekster

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

    I would have a hard time thinking Modesto is cheaper than Atlanta but it is hard to say.

    Could be more farm workers driving down the cost of General Labor.

    Nonetheless, even in Texas known for low wages, $25.00 / MH sounds real low. We do not know what rent / equipment storage area cost.

    I suspect gas is higher than the national average.

    I have no idea what SUTA and what ever Cali adds to the pay roll cost out there.

    I really have a hard time believing your can pay a living wage and cover your taxes, insurance and overhead at 25.00 per hour even running a 3 man crew ( which should lower overhead % )
  4. coolluv

    coolluv LawnSite Platinum Member
    from Atlanta
    Messages: 4,228

    Quote: At $25 an hour you are barely making any money if any money at all.

    Didn't say he wasn't making any money and he might not be...but if he is he would be better off working for someone.

    I won't go into all the details because I don't want to write a novel here. But on average you can bet most Legit operations are running somewhere around $20 to $25 an hour for break even.

    And no I don't want to get into a pissing match with others who say that their not at that or whatever. You have to price your work for future growth. Maybe you are at $18 an hour break even right now...But when you reach the point of needing help and more equipment then you might be at $23 an hour and then as more work and on and on and on..... at $25 an hour break even.

    I'll bet that most are near $25 an hour break even. So if you build your business at $25 an hour your pissing in the wind. You will not be able to raise prices later on because the cheap @$$es that hired you won't pay it. Bi-weekly scumbags. No fertilizer or weed control scumbags... you get the point.

    Then what?

    Back to you......

  5. Duekster

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

    I agree, everyone is going to be different but these are good bench marks without going in to details.

    The price of gas at the pump is based on what the next load of gas is going to cost, not the cost of the one in the ground.

    Contractors have to charge for the next truck, not the one that is paid for...
    I admit, it is hard for me to always get my desired bill rate but if I shot at lower numbers, then I would never recover from those unexpected cost over runs that always happen.

    At the same time, I can not charge for every little contingency either. You have to live within what the market allows but not get in the mud and compete with people that do not understand their cost.
  6. coolluv

    coolluv LawnSite Platinum Member
    from Atlanta
    Messages: 4,228

    I don't get a lot of the quotes I give and that's fine with me. I don't want to be everything to everyone. Your gas analogy is right on. I don't need to have a large corporation but I do want to hire help and get out of the field. Ive busted my @$$ since I was 15 years old and I'm 46 now and I still bust my @$$ 6 days a week.

    My body can't take much more and I'm always sore and tired. I don't want to work like this forever. I want to manage the business and let the young guys do the work. But I can't get there if I don't price my work like I'm there already.

    I made the mistake of trying to get every customer and that is not the way to do things. I have a certain customer I target now. Not super rich or poor, but the ones that know what good work cost and understand that I'm in business to make money but at the same time not rip them off.

    Some people just want everything for nothing and those are not the customers I target. Once you start to target the right customers and not worry about the others you start to see a change for the better. Every day you waste on a bad cheap customer your energy and time is wasted that could go towards getting and maintaining good paying customers.

    Don't get me wrong I still have a few that Ive had from the get go that are not my target customer but I only keep those because they were with me from the get go and I could still use the business. But all new customers either sign an agreement or they can go somewhere else.

    The good customers are the ones you take care of and make sure you keep. They are the ones that refer you to other good paying customers. You cant build a solid business on cheap @$$es.

    I'm glad to see that you get it Duekster. Not many on here do.
  7. coolluv

    coolluv LawnSite Platinum Member
    from Atlanta
    Messages: 4,228

    Another great point by Duekster. Quote:Contractors have to charge for the next truck, not the one that is paid for...

    The stupidest comment you see all the time is " I have no overhead or very little overhead because everything I have is paid for".

    I want the magic truck and equipment that last forever. You can always tell who knows there @$$ from their elbow just by the comments they make. I have a landscape estimate book called "How to price landscape & irrigation projects". By James R. Huston. Its a good book that everyone on here should read.

    I won't go into the long details but in a nut shell whether you have new or old trucks and equipment you should figure your overhead or cost of replacement as buying new. You either pay the bank or the mechanic but it all comes out the same in the end. The book also goes into industry averages for what the average cost per hour to run hand held equipment is and a Z and so on.

    So you newbies...instead of coming on here and trying to learn from fools...buy this book and do some reading...it will be better time spent. Here I will make it easy for you guys. http://www.amazon.com/Landscape-Irrigation-Projects-Greenback-Series/dp/0962852147 Best money you will ever spend.

    BTW which mower is the best?

  8. zechstoker

    zechstoker LawnSite Senior Member
    Messages: 975

    To vinnieobrien, cpllawncare, j-ville native, yardguy28, coolluv, and Duekster...

    Thank you, from the bottom of my heart, for the reality check. After reading all your feedback and crunching the numbers I have in front of me, I see the definite problem much more clearly. To coolluv, I'll definitely be checking out that book you mentioned. Thanks again.

    As for the inevitable price increase, how would you guys go about transitioning to that? While I was working with my brother yesterday, he was talking about how he's giving higher quotes now for new jobs. It's not a big increase, but he's saying $35/hr rates as opposed to the former $25/hr rate. Looking at our profit margin, it's going to be quite a while before we're out of the red and into the black.
  9. Duekster

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

    What I try to do is job costing. People ( workers ) get a little upset when you ask them how long a job takes for various reasons. Again not going into details as there are a lot of dynamics.

    You need to identify the sucky jobs. You do keep them until you can replace them with a better job. You chase new work at your target, and eliminate off the bottom of your list. You then raise those jobs or lose those jobs and either is fine.

    Why? Because you either have to hire or pay overtime to complete those jobs. Do you move them to a top teir paying job, maybe not if the client is an otherwise good client. You may just try to get them off the bottom of the list.

    Group I like is http://www.vanderkooi.com/

    If you can hear him speak. I bought his basic business book and his production book early on. I look those two books often. http://www.vanderkooi.com/books.htm#complete_estimating
  10. zechstoker

    zechstoker LawnSite Senior Member
    Messages: 975

    I'll have to check into those two references as well. As for the rest of the quoted above, that's an idea I've been thinking about too. At one point a couple months ago, I mentioned something like that to my boss, but at the time, he wasn't on board with it (just yet) as it wasn't the right time. Nowadays, it's becoming more of a necessity to follow through with a course of action like that.

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