lawrence stone
Banned
All lawn maintenance contractors who do not have any formal<br>or OJT business and marketing training should go and<br>buy as many of Phils books as one can afford.<p>For what I seen in this forum many of your are lets<br>say challenged when it comes to real world economics.<p>The first thing you need to know is to figure out your actual<br>cost of doing business. Then you need to learn how to figure<br>out how to calculate gross profit margin.<p>If you cannot answer the following question correctly you<br>are not long for this or any other business and if you done<br>educate yourself you will be back to working for wages shortly.<p>If your costs for a particular job are $29 and you want to make<br>35% gross profit margin what is the selling price?<p>If your are in the mowing maintenance business you need to<br>be able to control your equipment costs. The demise of many <br>starts with the purchase of your first new ZTR commercial riding mower.<br>This starts a chain reaction that leads to a big crash.<br>The weight and cost of transport from job to job is a factor that<br>is not discussed in the forum. <p>Two ZTR machines weigh in at about 2000 lbs. So you will need a<br>tandem axle trailer with brakes. Plus you cant leave those machines<br>out side in the rain and thus have to buy a new enclosed trailer for $3800.<p>Now that your trailer and equipment weight is 5000lbs.+ you need<br>to buy a one ton dual wheel whatever with a big block V8 (8 mpg) to pull<br>this traveling side show. Now your setup is so big it wont fit into a residential<br>customers driveway and you are forced to work low margin commercial jobs.<p>One the other hand a smart contractor in touch with the reality of the mowing<br>maintenance business will go out and buy one new gear drive walk behind for<br>$2k to use as a front line unit and will buy used but not abused walk behinds<br>for spare machines. He adds aftermarket sulkies and his production rates are<br>very close to the ZTR machines in a residential setting. His two machines weight<br>in at about 1000 lbs. and he uses a 6x12 open landscapers trailer he bought used<br>for $500 and uses a 10 year old ½ ton pickup (V6 15mpg) that he paid $3k.<p>Now lets compare the hard facts of doing business comparing these two<br>schools of thought as I have outlined above. To simplify the example<br>let us say that we have two contractors working as owner operators in<br>lawn mowing maintenance in the same market.<p>Let us call the first contractor Mike. Mike went out and bought a new 52<br>Toro ztr with the liquid cooled Kawa with a $1.5 vac system paid sales tax<br>on the unit and financed it for 48 months at 13%. When you add up<br>the initial cost of the machine, fuel costs (1 ½ gal/hr), maint. costs<br>(you have to go thru the dealer for replacement parts on new equipment<br>just released on the market), inland marine insurance, etc your costs per<br>hour to operate this machine is $7.36 per hour over 3000 hours.<p>Now lets call the second contractor in our comparison larry.<br>He buys a 13 year old Toro gear drive walk behind with a 52 deck<br>(same deck as the ZTR above) with a Toro bagging kit and about<br>500 hours on the clock for $500. He rehabs the unit for $200 and<br>adds a $300 sulky for a total cost of $1000.Now we take the initial<br>cost of the unit plus fuel (1 gal/hr), cost of maintenance is low for<br>aftermarket replacement parts are obtainable for a total cost per<br>hour of $2.18 over 3000 hours usage.<p>Now we are bidding on the same residential one acre job. Our<br>production rates are the same. Our labor costs are the same.<br>Mikes equipment cost is $7.36/hr add $15.00 labor cost for<br>a total cost of $22.36. He adds 35% GPM for a total sell price<br>of $34.40 leaving him with $12.04 in gross profit.<p>Now larrys equipment cost is $2.18 plus $15.00 labor cost for<br>a total cost of $17.18. He adds 41% GPM to the costs for a<br>selling price of $29.22 with the same $12.04 in gross profit.<p>To eliminate Mike from the local market larry can go <br>one step further if need be. Since he has a pesticide license<br>(and makes 50%+ GPM on pesticide apps) and he mandates the customer buy a complete lawn care<br>package he can make his mowing a loss leader to<br>attract mikes existing customer base. Larry only adds<br>20% GPM to his mowing costs for a sell price of $21.47.<p>The hard cold facts are there are a LOT more K-mart customers<br>than there are Lord and Taylor customers. <p>Would YOU buy the exact same item from store A at $34.40<br>or at store B at $21.47? <br>