why you have to know your costs

Discussion in 'Lawn Mowing' started by YardPro, Sep 1, 2006.

  1. YardPro

    YardPro LawnSite Gold Member
    Messages: 3,570

    i have a prime example of what a lot of the experienced guys here mean when they say " you need to know your costs"

    We maintain an upscale condo complex beside a nice housing subdivision with 52 waterfront homes. We just finished installing 52 12'-14' palm trees for the homeowners association for the housing area. We also take care of thier pool, and do other work for them.

    We were asked this year if we could take over the mowing of all the homes and common areas. They were unhappy with the company currently doing the maintenance. The company is in the last year of a 5 year contract and is going up $2,000.00 per year for the renewal....

    We were told the new ammount $10,500.00/year.
    we Have done the property years ago so we have some times for the work required....

    here's the issue...

    It would cost us $17,500.00 OUR COST to do the work!!!!!!! We are submitting a bid of $22,000.00. We kept going over the numbers today.....

    since we maintain a property next door, we have timed thier crews for several visits..... 20 man hours per visit (4 guys 5 hours), plus they come down from an hour away....

    looks like they are doing the job for about $16.00/hr.....
    they are slowls going bankrupt at that price..

    The moral of this post is that we were told flat out that they LOVE our work (the condo next door is a 2 acre property with a $35K.year landscape budget, so it looks really nice), and if we wanted we could just take over the contract at the old company's new price.... We really wanted this job becuase it ammounts to about 650 hours/year, and it is right beside another properyy that we do, so no travel time... it would have been very easy to have said sure we will match thier price...
    If we had done that we would be loosing $7K/year........OUCH
  2. firefightergw

    firefightergw LawnSite Gold Member
    from Texas
    Messages: 3,340

    Very good post!
  3. DuraCutter

    DuraCutter LawnSite Senior Member
    Messages: 806

    Yard Pro, you make a lot of sense. What you said is true and lots of lco's leave tons of money on the table cause they don't know what making real money is. An average lco will be happy making $35 an hour. It's all over the posts on this site.

    I say, you need $70 to $100 to make money and if you want to live a little with a good nest egg, you'll need $150... that's not too much if you're smart.

    But, the mentality is such that the residential guys beat each other with wet noodles to remain poor. That won't change... :hammerhead:
  4. Richard Martin

    Richard Martin LawnSite Fanatic
    Messages: 14,699

    It is extremely difficult to maintain an average of $70 to $150 per hour per man. If you have a high profile 1 acre lot that takes 2 guys 1 hour to service it would cost the customer $300 a cut. I know of no one who is willing to pay that.

    In any case, it is true. You must know your costs in order to maintain profitability.
  5. fulano

    fulano LawnSite Senior Member
    Messages: 319

    Good luck with getting over a 100% increase in what the other guy was getting.
  6. hoyboy

    hoyboy LawnSite Senior Member
    from Chicago
    Messages: 346

    This just isn't true. You can make money at $35/manhour. It all depends on how you are able to allocate your overhead dollars. The more volume you have, the more you can spread out those fixed costs.
  7. Tn Lawn Man

    Tn Lawn Man LawnSite Senior Member
    Messages: 479

    Sure you can "make money". The guy at Mickie D's making $7hr "makes" money.

    I want to make a living and have enough profit to grow the business.
  8. Pro-Scapes

    Pro-Scapes LawnSite Platinum Member
    Messages: 4,180

    I used to be happy with the 35 to 40 an hour. Now it seems like peanuts and a waste of time. There are several properties we mow for amanagment company in a close proximity. We are cheap on some while a little above average on others but all in all it runs out to 80 an hour for us in about 12 hours work for 2 guys. Thats not to bad for down here at all.

    While I dont compete with the low baller (anymore)it does drag the market down. We have lost several accts to lower bids. 1 hurt us pretty good (more emotionally I guess than financially) but they just couldnt afford the high end maint we were providing anymore.

    Great post yard pro. Just because joes lawn and handyman service can do it for "Y" doesnt mean you can. Im struggeling with that now on 2 accts who want me to service thier properties for what another company was. Told them only way I can is if you get me the nieghbors to jump in with ya.
  9. DLCS

    DLCS LawnSite Platinum Member
    Messages: 4,386

    Never believe the manager/owner when they tell you what they are currently paying. Many of them will lie to you, thinking you will say "I can beat their price".
  10. YardPro

    YardPro LawnSite Gold Member
    Messages: 3,570

    we do not expect to get the job


    That statement has merit, but no tin this case... We know these people, and The property manager that we work for next door has confirmed those figures (He may be taking over the property). We have done his properties for 20 years, all of which are no bid contracts.. we trust what he tells us 100%

    But what you are saying is true alot of times, which is why it is even more important to know your costs......

    I see a lot of people on this site use "dollars per hour" as thier pricing.....

    Once you have been in business for a while you will find that this in not a good way to figure pricing... on larger jobs. You should work on % profit..

    We know how much our workers cost up per hour with overhead, then figure how many hours the job will take. We then add our %profit to our cost on the job....

    If we get the job, gret, if not then it was not worth having....
    If we cannot make our minimum %profit then let someone else do it..

    We are currently at about 24% for the year on installs, but only at about 15% on the maintenance. This tells us that either our times for the job are over ( or we under estimated), or our overhead figures are wrong.

    This winter we will look back and see which it was.. underproductivity, or underpricing....

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