What is your Magic Number?

Discussion in 'Business Operations' started by Steiner, Jun 1, 2009.

  1. Steiner

    Steiner LawnSite Senior Member
    Messages: 409

    I was reading a long detailed thread the other day (guys you know who you are), and the main poster who seems to be very good at the business aspect talked about the "Magic Number."

    The magic number can be roughly defined as: Your daily/hourly operating cost, without ever leaving the shop. Some contractors build this into the labor costs and others add it as a line item such as "cost of doing business."

    I wondered how many people on LS have actually figured this number and I decided to recheck mine. I like to break mine down hourly so that I can look at my labor charges and see what I am actually making.

    So here is a basic template for anyone wishing to compute their magic number: (simply copy and paste to see what your costs are and divide by the number of hours you work in a typical year). For equipment simply add up the cost of ownership and divide by the number of reasonable years of life that equipment can have.

    Here is a basic list to get us started!

    Costs (per year)

    Truck payments
    Heavy equipment payment
    Small motorized tools
    Truck Maintenance
    Licensing, fees, training

    Shop/Building costs

    Hand tools
    Workers Compensation
  2. CrystalCreek

    CrystalCreek LawnSite Bronze Member
    Messages: 1,734

    Small items, but dont forget safety gear, work clothing, boots, gloves, First aid stuff. Also a bigger item that seems other over looked would be tires for turcks and trailers. I seem to go through a lot of those every year. Also dont forget office operating costs. Paper, pens, ink, computers and servicing them, faxes, stamps, and those fancy desk lamps add up quickly. All needs to be figured in if you really want to know if your making money or losing it. I am sure I forgot things, so keep the ideas coming.
  3. bohiaa

    bohiaa LawnSite Fanatic
    Messages: 5,220

    Funny you posted this topic..

    as of last week " Friday " I went to visit my Business consultant... " it's the Government " the Government has many prograns to help small business, so I took advantage of it. it's a FREE program. Even though I took several Business classes in college, The landscaping business is some what diffrent.

    and YES there is a " MAGIC NUMBER " everyone's should be diffrent. I'm reluctant to post mine here. however. untill a company knows there's. there is NO way they can move forward.

    I also would encourage everyone to seek out the Government programs. they also help with loans and such.

    Bust of luck
  4. mikey.hill

    mikey.hill LawnSite Member
    Messages: 145

    The answer is 42
  5. lawncuttinfoo

    lawncuttinfoo LawnSite Bronze Member
    Messages: 1,010

    $20,000 per 50 customers per season.
  6. borwicks

    borwicks LawnSite Senior Member
    Messages: 615

    Ive got my numbers somewhere I will find the file and post,.
  7. Mowing By The Numbers

    Mowing By The Numbers LawnSite Member
    Messages: 37

    Well the average lawn maintenance companies break even is about $34 per hour but that includes labor. Take out $18 for labor and all expenses associated with labor. that leaves an average company with $16 per hour for overhead.

    But every company should do this with real numbers.

    The next step is to figure out what your man hour rating was and then what it should be. A simple way to get a rough estimate. Take last yearÂ’s gross sales- materials. Divide that by the number of payroll hours of production employees. This gives you what you did last year.

    The best way it start from the bottom up. Figure out all your costs per hour then you know for sure what you are charging the customer is correct. Not just some made up $ per hour that everyone else is charging.

    Once you have all this information all you need to do is sell the hours for each week. I can tell you how much profit I am going to make at the beginning of the season. It is all just math and following the plan.

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