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learned costing. prices too low!

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  • learned costing. prices too low!

    Ok s I after a ton of research I learned how to cost out all my equipment and other expenses and guess what I came up short. For the most part I break even I can increase my bottom line believe it or bit by upgrading to better equipment. (Cost more but last alot longer). Ecen with that I am barely making min wage. Do I increase my fees mid season? I only mowing PT right now and have 10 lawns. This is only my second year. I can recover If I loose them all I know that. But I wont work for nothing! How do I handle this with my customers? Do I explain this to them? I guess worse case they all drop me and I start over. Its better to have one jib that pays then 10 that dont! I just dont know how to explane the increase.thanks for any help.

  • #2
    How much are you charging for your services and what does each service include?

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    • #3
      Well it looks like im loosing $1.38/ hr. (Mis calc earlier) It comes out to $$25.70/hr is what I have been charging. Costing everything out to cost per hour that I use it comes out to $27.08. I hqve nothing figured in for me. Looks like at a minimum I want $20/hr for myself soI should be at $47.08/hr. If I did the costing right. Please look this over and see if it looks right.

      Total cost of piece of equip expected lifetime hrs x # of expected work hrs per year + yearly fuel and maint # of expected work hrs per year = hourly cost of machine.

      Sound right??

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      • #4
        Well it looks like im loosing $1.38/ hr. (Mis calc earlier) It comes out to $$25.70/hr is what I have been charging. Costing everything out to cost per hour that I use it comes out to $27.08. I hqve nothing figured in for me. Looks like at a minimum I want $20/hr for myself soI should be at $47.08/hr. If I did the costing right. Please look this over and see if it looks right.

        Total cost of piece of equip expected lifetime hrs x # of expected work hrs per year + yearly fuel and maint # of expected work hrs per year = hourly cost of machine.

        Sound right??
        This is how I figured my costs up.

        I took the average price it would be to buy equipment, 15,000 for a truck, 6,000 for a mower, advertising $600 for a new blower and string trimmer, misc cost, insurance if you have it and so on and so fourth.

        Me being only part time it is safe to say that my equipment would last longer than if I did it full time. I estimated I could get probably 5 years of of my truck and mower.

        So I took the total cost of that equipment and broke it down into a 5 year cost. I then took the yearly cost and divided it by the average week in a season, which is 32.

        In my case 15,000 for a truck came out to $93.75 a week for me. You can even break it down further, I then divided the weekly cost by 5 day a week to come up with $18.75. So I would need to make atleast $18.75 a day just to cover my truck cost, that is for a 5 day period, so the weekend doesn't count towards it.

        I prefer to go by a weekly cost and monthly cost. Just look at how many jobs you have a week and how much they pay you and compare that to how much you have to pay out a week.

        For trimmer and blowers I based that off of 3 years of part time use.
        Advertisement, insurance, maintenance and misc charges are all based off a year.
        Mower and truck $131.25
        Trimmer and blower $6.25
        Yearly costs $137.50
        Total cost a week $275

        So just for equipment, advertisement, maintenance and other costs I would need to make $275 a week to cover the bills. Then you have to factor in the cost of gas and labor.

        I work on average 10 hours a week part time for mowing, so my hourly cost would be $27.50+gas and labor.

        The way I set mine up was for the mowing season and mowing jobs only. I figure as long as I can make enough money to cover my expenses for mowing, by mowing jobs only, then I can safely figure in that any other job(landscaping, cleanup, etc.) would be all profit except for gas and labor.

        I didn't include a trailer in this, if you buy a trailer and take good care of it, it could probably last you a lifetime.

        Basically what I did was took the cost of the equipment and then estimated how long it would last based off of how many hours I work a week. I hope this cleared things up for you.
        sigpic
        Carlisle Lawn Care

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        • #5
          Here s a good rule of thumb **50 bucks per hour! if you add manpower to a point, you can pay them and still make good money in that your help should take on about 40 percent of the work (I know if one takes 1 hour 2 guys should be able to do in half hour. It doesn't work that way)
          Bare minimum is 50 per hour. Using your figures you can see why

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          • #6
            Andrew and steve thanks. I had thought for sure I was covering everything! I can now plug in diff equipment and see what it does for me with just a couple of calculations. Costing confused me so I kept putting it off till I started looking at serious equipment and needed some way of convincing the wife that I knew what I was talking about. Well thats still hard but getting better.

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            • #7
              Here s a good rule of thumb **50 bucks per hour! if you add manpower to a point, you can pay them and still make good money in that your help should take on about 40 percent of the work (I know if one takes 1 hour 2 guys should be able to do in half hour. It doesn't work that way)
              Bare minimum is 50 per hour. Using your figures you can see why
              Theres a reason people use the $50 a hour as a min. The people that dont are the ones that say I have no cost so I can do it for $25-$30. Then the transmission in the truck goes and there out of business.

              Any newbie in the business should use the $50 a hour as a guide. Youll find out why sooner or later. Then you can adjust it to your needs.

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              • #8
                Theres a reason people use the $50 a hour as a min. The people that dont are the ones that say I have no cost so I can do it for $25-$30. Then the transmission in the truck goes and there out of business.

                Any newbie in the business should use the $50 a hour as a guide. Youll find out why sooner or later. Then you can adjust it to your needs.
                Sounds like good advice. I just started about 2 weeks ago. I probably won't have any BIG landscape jobs for a while (new subdivision), but this suggestion will surely help.

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                • #9
                  I started out using the $60 an hour minimum and so far so good. I don't stick to this rule all the time. If i have a lawn that takes 30 min and i believe I can get the customer to pay $40 for it then that's what I try to get. Even with me living by the $60 minimum I usually get somewhere around $65-$70 an hour. Even though this is my 2nd year I badly underbid a customer that had houses (kids & their families) all in one block in the country. The place was very large. I estimated that we could do it in 3 hrs and quoted her $200. Boy was I wrong. It took my son & I 5 hrs to finish the job. I have never been on a mower that for that long in my life. I called the customer and explained to her that I had underbid and I wanted to give her a chance to find someone else if she didn't want to use me any more. I told her that I would have to increase my price to $300 to be able to keep doing her lawns. I have't heard back from her and probably won't. As a reference we can cut, weed eat & blow off a 300' drive way at a 5 acre property in an hour and fifteen minutes. So this place was HUGE!!Go back to your customers and explain to them that you underbid and you will have to adjust your pricing to be able to remain in business. Some will understand and some won't. But at least you're setting your self up for success so you can stay in business.

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                  • #10
                    Thanks. I will take care of this this week.

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                    • #11
                      For the most part I break even
                      Can you tell us a little about how you had come up with your prices initially?
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                      • #12
                        I went back and looked at some of my post from last year and in those I knew I had to get $50/ hr but what It looks like I did was under estimate how long they would take me. Some of them by quite a bit. On the spot quotes and guessing at the size looks like it was my weak spot. I also tried to break it down to cost/sqft that came out to $53/acre. Again guessing at size is where I think it took a wrong turn.

                        Things are coming together for me. I need to stop giving an on the spot quote if I can. I started using a punch clock app that has helped me learn my timing better. Learning how to breakdown equipment and costing it out correctly was a big help.

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                        • #13
                          Have you thought about getting a surveyor's wheel to measure property before you bid? Would that help?

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                          Download your Free trial of Gopher Lawn Care Software.

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                          • #14
                            I havnt yet but its going to have to happen. I also just started measuring from satalite view. But not all can be found on that. It is remarkably accurate though.

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                            • #15
                              If you can get your hands on google earth pro, you can actually measure properties and it will tell you square footage and perimeter footage. Pretty accurate too.
                              sigpic
                              Carlisle Lawn Care

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