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  • Passing costs to clients

    When it comes to gasoline and other stuff, it's very easy to figure out how much the client should be charged.

    To do this, here is an example of this method.

    This is what John Smith spent on gas for the season, he provides weekly service for all '10' of his clients.

    May: $100
    Jun : $150
    Jul : $100
    Aug : $150
    Sept : $100
    Oct : $150

    100 + 150 + 100 + 150 + 100 + 150 = $750

    750 divided by 6 months = $125 (your average cost per month)

    125 divided by John's clients (10) = $12.50

    12.50 divided by the number of weeks per month (4) = $3.12

    -

    Each client must be charged $3.12 per visit in order to cover gas expenses.
    When it comes to something like a website, or a cellular phone, etc. What is the best way to add that expense to the customers bill?

    If you take the same method to have them pay for your website/phone, the cost is rather high unless you receive more clients to balance it out.
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    e.g. If your phone bill was $100 and you had only one client, that client cannot possibly/willingly pay for your phone bill ($25) every week along with other fees.

    What is the best method for adding this cost on to the clients bill?

  • #2
    " What is the best method for adding this cost on to the clients bill? "
    this would depend on how your bill's are written ,if they are done with a pen ,then use a damned pen ,if they are done with a printer ,then use your damned printer ,if they are written with cheese ,guess what ,just use a pen ,its a shame to waste cheese .

    Anyways ,I find its easier to hide everything in a bill thats not totally broken down ,That way ,you dont end up with a wanker arguing over every little piece of info on the bill .Less is more .The gas,cell phone,etc all get placed in the basic lawn price .

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    • #3
      " What is the best method for adding this cost on to the clients bill? "
      this would depend on how your bill's are written ,if they are done with a pen ,then use a damned pen ,if they are done with a printer ,then use your damned printer ,if they are written with cheese ,guess what ,just use a pen ,its a shame to waste cheese .

      Anyways ,I find its easier to hide everything in a bill thats not totally broken down ,That way ,you dont end up with a wanker arguing over every little piece of info on the bill .Less is more .The gas,cell phone,etc all get placed in the basic lawn price .

      NOOOOOOOOOOOOOOO

      I don't mean the actual bill I send out, my love.

      I mean figuring out which percentage of some of my costs should go towards the client, more complex and expensive things.

      For example, I can't see how dividing the cost of something very expensive among a tiny fraction of clients, it'd be too much for them to pay willingly. I could figure out a decent fixed amount, but I need some good ol' precision.


      Love Cheese


      ... ran out of beer again... happens every night.. god dammit.
      Last edited by CHEESE2009; 09-01-2012, 08:52 PM.

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      • #4
        John is in the business of selling apples.

        John buys apples for 40 cents.

        John sells apples for $2.

        John makes $1.60 profit.

        -

        Bill delivers flowers.

        Bill is financing a vehicle to get him around town.

        Bill is paying $500 per month for his vehicle.

        Bill sells flowers for $1.

        Bill has one customer.

        Bill charges his customer $501, for one flower......

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        • #5
          I see where your getting at. I have all my overhead tied into my hourly rate. At the end of the year I take my income, expenses, and hours worked. Then I use 2 yr average for everything. I only use the 2 year average because if you buy a lot of equipment 1 year it will seem like your expenses are higher then they really are

          example 1 yr
          Gross $50,000
          Phone $1200
          Labor $8,800
          etc expense $10,000
          Net $30,000
          divided by 1000 hours = $30 a hr profit
          $1.2 per hour goes to phone
          $8.8 per hour for employees
          $10 per hour all other expenses

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          • #6
            I figure My yearly expenses, living, business, payroll etc. then divide that number by the number of service weeks (my case its 46), divide that number by the number of billable hours per week (in my case 30) that is my hourly rate.

            Or you could use the same method that everyone uses in business- charge 60 dollars per hour.

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            • #7
              e.g. If your phone bill was $100 and you had only one client, that client cannot possibly/willingly pay for your phone bill ($25) every week along with other fees.

              What is the best method for adding this cost on to the clients bill?
              Scott,

              I think this would under the topic of 'economies of scale'

              economies of scale are the cost advantages that an enterprise obtains due to expansion. There are factors that cause a producerís average cost per unit to fall as the scale of output is increased

              So, up to a certain point, your costs to perform your services for each customer will fall as you add more customers.

              If you have 1 customer, and your cell phone bill is $100. That one customer will either have to cover the cost or you will have to eat the bill. But with 20 customers, each customer will only have to pay 1/20th of that bill.

              Up to a certain point, your over head costs per customer will decrease. But as you add more trucks, more crew members, more management, more buildings to house the management, your costs climb again to the point where it's becoming counter productive.

              Ideally there is a sweet spot for maximum profit you will have to find as you grow.

              Does this help?
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              • #8
                Just sharing

                With gasoline and maintenance alone, i'm losing one months pay from each client to service them for 6 months time. It's not that bad actually.

                The markup for our service is pretty high, but it could be better - if only I moved to a new location LOL.

                Our gross margin is about 82% for one month of lawn maint. - this is not counting employees, which would probably cause a noticeable decrease.

                Our leaf removal has a gross margin of 87.76%, but it doesn't sell well, I believe it shares the same fate as our winter service.

                -

                There is honestly is no money to be made in lawn maintenance, but it's amazing for consistent cash flow, and takes care of itself which is fantastic, and common in most areas. However, it'll always be better in other locations than where I am.

                Other services are what makes us a good profit, but sadly nothing else is selling well, so we continue to focus on mass clientele for lawn maint and hope for the best.

                We will have to focus on time a little more. If we can increase our gross margin, which is almost impossible, we may be able to get somewhere.

                In my city, we are already incredibly productive, it's scary to think this way. If any average lawn takes us longer than 8 minutes, it can effect us slightly.

                -

                I HOPE this field of business receives a little more recognition and respect, and that prices can increase to what they were many years ago. Rates are 60% lower than what they were all over.

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                • #9
                  Our gross margin is about 82% for one month of lawn maint. - this is not counting employees, which would probably cause a noticeable decrease.
                  Can you tell us what you mean by this? Are you saying that you are making an 82% profit on the amount you charge for lawn care?


                  from wikipedia - Gross margin (also called gross profit margin or gross profit rate) is the difference between revenue and cost before accounting for certain other costs. Generally, it is calculated as the selling price of an item, less the cost of goods sold (production or acquisition costs, essentially).

                  Some retailers use margins because you can easily calculate profits from a sales total. If your margin is 30%, then 30% of your sales total is profit.
                  - Subscribe to my Lawn Care Marketing Blog Feed and get daily tips sent to you. Free!
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