Lawn Care Business Forum Lawn Care Business Book Lawn Care Business Blog Lawn Care Software
Home Forum Contract & Flyer Templates Blog Software Videos Podcast Calculators / Estimators Store Mower Review Design It Yourself Lawn Business School

Go Back   GopherHaul Landscaping & Lawn Care Business Marketing Forum > Business > General Business Discussions

General Business Discussions A place to talk about general business discussions.

knowing your cost?


General Business Discussions

A place to talk about general business discussions.
Reply
 
Thread Tools Search this Thread
  #1  
Old 01-12-2012, 01:38 PM
gwoodcutter gwoodcutter is offline
new member
 
Join Date: Dec 2011
Posts: 24
Rep Power: 0
gwoodcutter is on a distinguished road
Default knowing your cost?

Steve asked that i post my question to try and get some help from the forum. Thanks for any response.


Hello Steve,
>
> I am wondering if you could help me out. I have been laid off from another
> job, the 3rd in as many years. I am gearing toward another stint in the lawn
> service. I have done this since i was 15. But i have never been successful
> from the business side of it. Just a lawn boy really. I have been able to
> utilize some of the files you have for free and they have come in handy. My
> problem is that i don't know enough about the business side of things. When
> guys talk about knowing your cost, i understand how important this is, but
> don't understand how to calculate it. For instance, how do you figure your
> personal needs, mortgage, car note, into your cost? I honestly don't
> understand this part of it. I know you have some kind of package thing, but
> having been laid off, things are very tight. Is there any one tool you can
> point me to to help me understand this? Thanks for your website, tools, and
> your time. I will forward your site info. to 2 guys i know!
>
> Scott
>
Reply With Quote

Stop guess-timating. Learn how to estimate and make money! $$$
Mow Time Estimator Lawn Care Price Estimator Mulch and Topsoil Calculator Snow Plow Estimate Calculator


  #2  
Old 01-13-2012, 02:30 PM
Steve's Avatar
Steve Steve is offline
Administrator
 
Join Date: May 2003
Posts: 36,537
Rep Power: 10
Steve has disabled reputation
Default

Lawn care business tipsLawn Care Business Book
Quote:
But i have never been successful from the business side of it.
Why do you think this is the case?

Quote:
My problem is that i don't know enough about the business side of things. When guys talk about knowing your cost, i understand how important this is, but don't understand how to calculate it.
Here is my view on knowing your costs.

The first thing you want to do is figure out how many billable hours you will work in a year.

You could calculate that by saying you will work 40 billable hours in a week for 50 weeks of the year. Now obviously this will vary depending on a lot of variables.

But say we go with 2,000 billable hours each year.

Now you want to take all your expenses both personal and business and divide them by 2000.

So as an example,
$400 monthly car payment
$800 monthly house payment
$400 monthly gas
$200 monthly insurance
$250 monthly equipment
$700 monthly tax payments
______

total = $2750

Now take that figure and multiply it by 12 months.

$2750 x 12 months = $33,000

Ok, now let's divide that by your annual billable hours.

$33,000 / 2,000 hrs = $16.50 per hour.

So we now know that you must make at least $16.50 per hour to cover your expenses. If you want to make a 15% profit on that you would then say.

$16.50 x 1.15 = $18.97 per hour would include your expenses plus a 15% profit.

______________________________________________

That is a very simple basic view of knowing your costs. If you want to get into it even further, you can break down each piece of equipment and know what you need to charge per hour per piece of equipment.

How do you do that?

Take a mower you purchased.

Say it's $1,000 and it is designed to last 1,000 hours. With that in mind, you will want to figure it will need to be replaced after a 1,000 so you will want to use the following calculation to figure it's cost per hour of usage.

$1,000 / 1,000 hours = $1 per hour to use.

Now what about blades, oil, gas? You can figure out how often you change the oil. How often you change the blades. How often it burns through gas.

ex.

oil is changed every 20 hours for a cost of $4.00.
It burns 1 gallon every 2 hours for a cost of $3.00.
blades are sharpened every 20 hours for a cost of $5.00.

over that 1,000 hour lifespan how much will these additional expenses cost?

(1,000 mower life span hrs) / (change oil every 20 hrs) = 50 oil changes over the life span of the mower

(1,000 mower life span hrs) / (needs gas every 2 hours) = 500 gallons of gas over it's life span

(1,000 mower life span hrs) / (20 hrs per blade sharpenings) = 50 blade sharpenings

50 oil changes x $4.00 per change = $200
500 gallons of gas x $3.00 per gallon = $1,500
50 blade sharpenings x $5.00 per sharpen = $2,500

Now let's total it all up.

That $1,000 mower over it's 1,000 hour lifetime will cost you...

$1000 mower + $200 in oil + $1,500 in gas + $2,500 in blade sharpening = $5,200.

$5,200 / 1000 hrs = $5.2 per hour.

So every time you use that mower, you have to include in your expenses an additional $5.2 an hour.

You can do this for all of your equipment. Your truck, trailer, mowers, trimmers, etc etc. And then you will know how much your costs truly are per hour.

Does this help.

This is still all basic in it's explanation and we can get into the topic more if needed. I am just trying to not make it too complex and crazy for the first post.
__________________
- Subscribe to my Lawn Care Marketing Blog Feed and get daily tips sent to you. Free!
Download your Free trial of Gopher Lawn Care Software.
Reply With Quote
  #3  
Old 01-13-2012, 04:23 PM
ringahding1's Avatar
ringahding1 ringahding1 is online now
Senior Member
 
Join Date: Mar 2010
Location: Stillwater, MN
Posts: 298
Rep Power: 5
ringahding1 is on a distinguished road
Default

Most LCO's forget to pay theirself, usually an hourly rate per man, covers all of our costs.
$50/hr is not of the question, some charge even more than that. As Steve has pointed out you have a lot of things or over-head to consider in your cost scenario.
Really consider an hourly rate you are worth. Do you think your service is as good as some companies in your area? What do you think their costs are?

The same if not greater than yours, so you must know they have a calculated process like Steve has described.

I know companies that charge $85/hr per man, so don't sell yourself short or you will not make any money.
__________________
08 F250 Ext Cab/04 Chevy 3500
05 F350/04 F350 Diesel/12 Ram 4500 Dump
4 -60 Toro Zmaster/Lesco 48
3 -8'2" Boss V-Plows
1- Hiniker 9'6" V-Plow
20' Enclosed trailer
18' Skid & 16' Open Trailer
2012 - S185 Bobcat


Reply With Quote
  #4  
Old 01-16-2012, 12:42 PM
Steve's Avatar
Steve Steve is offline
Administrator
 
Join Date: May 2003
Posts: 36,537
Rep Power: 10
Steve has disabled reputation
Default

Once you start playing around with these calculations, you may potentially see your actual cost to operate per hour appear to be pretty high.

This is when you begin to have a true appreciation for keeping your overhead low.

Your hourly cost can ultimately be enormous but if you want to be competitive in your local market, your goal is to keep your expenses down so you can make a profit where other competitors may not be able to, due to their operating costs. Or at the very least you should want to maximize your profit potential by keeping your costs down.
__________________
- Subscribe to my Lawn Care Marketing Blog Feed and get daily tips sent to you. Free!
Download your Free trial of Gopher Lawn Care Software.
Reply With Quote
  #5  
Old 02-09-2012, 02:19 PM
gwoodcutter gwoodcutter is offline
new member
 
Join Date: Dec 2011
Posts: 24
Rep Power: 0
gwoodcutter is on a distinguished road
Default

Thanks for the responses you 2. Steve, in your example, you break down even further the lawn mower, weed eater usage. Would you have to do this or can you just set an hourly rate based on over head, both personal and business? Do those smaller items have to be broken down?
Secondly, ringading said to make sure you pay yourself. Isn't that what the 15% profit is for? Thanks.

Scott
Reply With Quote
  #6  
Old 02-10-2012, 04:31 AM
USA Lawn Care USA Lawn Care is offline
Member
 
Join Date: Jan 2011
Posts: 62
Rep Power: 4
USA Lawn Care is on a distinguished road
Default

Not everyone is good at every aspect of running a business when it comes to figuring out the #'s. However, they are good at doing the work and running things when they know what $$ number they are shooting for and need to achieve. When that is the case surround yourself with people (or at least 1 person), preferably a CPA that you know or comes recommended. Just like with your job, you know how much money you need to make each week to live your life. Copy and print the detailed list that Steve gave so your CPA can at least see 'possible' expenses. Just for easy math, if you made $15/hr or $600/wk ($31,200) gross pay at your job, you would need to create at least $31,200 plus whatever your work related expenses are to operate (fuel, equipment, money set aside to replace equipment, insurance, taxes, etc). Now....pulling a number out of thin air.....let's say your work related expenses are $10,000. You need to generate $41,200 in work.....and do it in 30 weeks instead of 52. You would need to make $1373 / week for 30 weeks mowing if you live in Southern Ohio.
Make sure your CPA asks you a million questions about what you think your operating costs will be and let a true #'s person come up with the magic $$ number you need to gross each week. It's amazing how quickly you can spend money when you start your day filling up at the gas pump, grabbing a roll of trimmer line from a local dealer, eating lunch, etc. There's a big difference in the $600/week from a regular job and $1373/wk.
I'm pretty sure the average lawn mowing $$ per hour across the country was around $45/hr. I try to charge $60/hr so make sure you keep your rates up near everyone else so you can be profitable. If you're going to be just starting out, the way to keep the income as 'weekly income' is to have customers 'pay as you go'. As you get established, you can look at customers pre-paying also.
Hope that helps a bit......I tried to keep it simple by comparing it to a regular job with a regular paycheck.
Reply With Quote
  #7  
Old 02-10-2012, 02:02 PM
Steve's Avatar
Steve Steve is offline
Administrator
 
Join Date: May 2003
Posts: 36,537
Rep Power: 10
Steve has disabled reputation
Default

Quote:
Steve, in your example, you break down even further the lawn mower, weed eater usage. Would you have to do this or can you just set an hourly rate based on over head, both personal and business? Do those smaller items have to be broken down?
It really all depends on what you want to do. Ultimately though, if you are going to be profitable, you really need to see everything for what it is. By this I mean, you really need to know how much you are spending on everything, right down to how much gas your trimmer is using per hour.

If you don't know these things, will you account for them with your pricing? Probably not. Then what happens is you look at your books at the end of the year and wonder, where all the money you made went. Money can just disappear like that and you will have no clue what happened.


Quote:
Secondly, ringading said to make sure you pay yourself. Isn't that what the 15% profit is for?
That can be it, but we have also seen others on the forum that pay themselves and make sure their business is making a profit too. That money is then saved to allow for business growth in the future.

Does this help?
__________________
- Subscribe to my Lawn Care Marketing Blog Feed and get daily tips sent to you. Free!
Download your Free trial of Gopher Lawn Care Software.
Reply With Quote
  #8  
Old 02-10-2012, 11:39 PM
gwoodcutter gwoodcutter is offline
new member
 
Join Date: Dec 2011
Posts: 24
Rep Power: 0
gwoodcutter is on a distinguished road
Default

Hey,

Thanks Steve and USA. Both your advice is helping me get my business head on straight. Steve, i did the numbers like you said with numbers my wife gave me. Honestly right now. beside household expenses, i don't have a lot of over head. I own everything except the truck i'm paying on. Doing that basic formula i came to a $25.00/hr. cost. I know that sounds ridiculous, but i figure i can charge $40.00/hr or so and use the extra to put back into the biz. But, if did go deeper into the cost to run each piece of equipment i might find i would closer to $30.00-$40.00/hr.
Is it the case that as i buy more equipment, or create more overhead, that i have to rework my numbers to find my new cost of operation? Thanks again for being willing to answer my questions!

Scott
Reply With Quote
  #9  
Old 02-13-2012, 01:35 PM
Steve's Avatar
Steve Steve is offline
Administrator
 
Join Date: May 2003
Posts: 36,537
Rep Power: 10
Steve has disabled reputation
Default

Quote:
Is it the case that as i buy more equipment, or create more overhead, that i have to rework my numbers to find my new cost of operation?
Absolutely. Each new piece of equipment is going to cost you up front and over time as it is operated.

By playing with these figures and seeing how they effect your bottom line, you won't be shocked when the bills come in and you find you have little left in the bank.

Keep us posted on how all this goes.
__________________
- Subscribe to my Lawn Care Marketing Blog Feed and get daily tips sent to you. Free!
Download your Free trial of Gopher Lawn Care Software.
Reply With Quote
  #10  
Old 04-13-2012, 11:24 PM
gwoodcutter gwoodcutter is offline
new member
 
Join Date: Dec 2011
Posts: 24
Rep Power: 0
gwoodcutter is on a distinguished road
Default sorry been awhile since i replied

I have been busy thankfully with new business! I have near 30 yards and recently a new opportunity has come available which brings me to a new set of questions. Some background;
A townhouse community has come up for bid and i have been asked to bid. This happened today so i haven't even looked at it. Will probably drive through tomorrow. But i kind of know there is going to be a lot of edging, weed eating, mowing with something like a 36" or even smaller for some areas. At the moment it is just me. I have already put out feelers for hiring someone and have gotten some great experienced responses. But here are a few things i don't understand:
1.How do you calculate man hours? I don't think we talked about this in our earlier discussions. If i hire someone and it is just the 2 of us, how do i know how much time it is going to take for the 2 of us to do x amount of townhouse space?!!
2. How do you go about estimating total space, when in a townhouse community there is all these little patches of grass, not a solid section of grass that you can say, 'i can cut that in 30 minutes, that'll be x amount.'
3. On jobs such as trimming hedges, flower beds, etc., how do you price that out? Will this one be answered by the answers from # 1 and 2? I'd really like to get this and i feel like i would be getting "there" if i had this.
4. One other thing. I am seriously considering purchasing the Gopher Billing & Scheduling software for my business! It looks like what i need at this point, (basic) and is really affordable.
5. Can you customize the invoices in the software? Are there templates to choose from? Thanks.
Anyway, thanks again for all you guys support and help!

Scott
Reply With Quote
Reply

Bookmarks

Thread Tools Search this Thread
Search this Thread:

Advanced Search

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is On
Forum Jump

Similar Threads
Thread Thread Starter Forum Replies Last Post
You'd think these would cost a whole lot more mark123 General Talk 8 09-07-2011 04:29 PM
Knowing People CHEESE2009 General Talk 4 01-27-2010 07:21 PM
What's gas cost near you? Steve General Business Discussions 10 04-22-2008 11:07 PM
Knowing yourself helps you deal with customers Steve Show Off - Picture Post - Photo Gallery 1 06-11-2007 01:13 AM
Does knowing alot of people help? kc2006 General Business Discussions 10 06-10-2006 12:20 AM

» Recent Threads
  RatingTitle, Username, & Date Last Post Replies Views
Lawn Care business...
crieg122
10-23-2014 01:23 PM
Today 05:54 AM
by ringahding1
16 714
Business Name
sanchez5
10-28-2014 11:55 PM
Today 05:51 AM
by ringahding1
10 267
"Price...
Mr. Mow
Yesterday 03:21 PM
Today 05:48 AM
by ringahding1
3 116
Help a brother...
tbtigers03
09-28-2014 11:41 AM
Today 05:41 AM
by ringahding1
15 1,927
Client won't pay...
WesleySnips
Yesterday 02:53 PM
Yesterday 08:21 PM
by SGlawncare
6 136
Hi Steve From West...
Mr. Mow
10-21-2014 01:59 PM
Yesterday 03:09 PM
by Mr. Mow
4 551
Pavers
crieg122
10-28-2014 02:49 PM
Yesterday 02:09 PM
by Steve
5 232
Difference between lawn...
sanchez5
10-29-2014 04:20 PM
Yesterday 02:08 PM
by Steve
2 171
Gie-review / What's new...
ExtremeLawncareServices
10-25-2014 09:19 AM
Yesterday 02:04 PM
by Steve
6 442
My Newest Toy (B.P....
Dan Tanner
10-23-2014 05:50 PM
10-29-2014 12:26 PM
by Steve
6 529
West cost lawn prices
SGlawncare
10-09-2014 09:51 PM
10-28-2014 11:08 PM
by SGlawncare
4 885
Say Hello !!!
Steve
03-19-2007 11:18 AM
10-28-2014 02:51 PM
by Steve
1,193 341,072
Business Cards
crieg122
10-25-2014 12:03 PM
10-28-2014 02:37 PM
by crieg122
4 399
So how do you guys...
Mr. Mow
10-26-2014 07:55 AM
10-28-2014 04:56 AM
by Billy Goat
2 341
Pressure Washing Like a...
TNTurf
08-01-2014 11:47 PM
10-27-2014 10:36 PM
by SGlawncare
12 1,255
new to the forum
madmedic8575
10-24-2014 02:52 PM
10-27-2014 12:14 PM
by Steve
1 351
Dealing With Gas Can...
Mr. Mow
10-21-2014 01:41 PM
10-26-2014 10:59 AM
by stevef1201
13 720
Leaf removal
madmedic8575
10-24-2014 04:14 PM
10-26-2014 07:45 AM
by Mr. Mow
5 483
raking leaves ?
robert8509
10-22-2014 09:19 PM
10-25-2014 12:09 PM
by biglee
10 625
Leaf Box & Loader Set...
ringahding1
10-21-2014 06:20 AM
10-25-2014 11:46 AM
by crieg122
6 620
hey everyone
robert8509
10-22-2014 08:16 PM
10-24-2014 11:07 PM
by robert8509
7 521
12 Years in Business!
Chilehead
10-23-2014 08:07 AM
10-23-2014 11:08 PM
by Chilehead
2 440
Cheapskate Landlord...
Mr. Mow
10-20-2014 06:33 AM
10-23-2014 05:55 PM
by biglee
13 773
Hi from SoCal
Jmoney
10-23-2014 11:29 AM
10-23-2014 12:51 PM
by Steve
1 401
Workmans compensation...
CDLAWNCARE
10-15-2014 08:05 AM
10-23-2014 12:33 PM
by Steve
5 870
Pda
stevef1201
10-18-2014 02:05 PM
10-23-2014 06:12 AM
by ringahding1
4 698
Hello, from TEXAS
sanchez5
10-17-2014 09:56 PM
10-22-2014 01:27 PM
by Steve
6 760
Organic Lawn Care...
NHray
10-17-2014 06:05 PM
10-22-2014 01:23 PM
by Steve
3 727
first year update
cmdlawncare
08-12-2014 05:41 PM
10-22-2014 07:47 AM
by ringahding1
4 1,718
What parts do you carry...
Just for Cuts
10-17-2014 09:08 AM
10-21-2014 01:36 PM
by Mr. Mow
16 1,008
Jungle to Beautiful
stevef1201
10-17-2014 09:54 AM
10-21-2014 01:26 PM
by stevef1201
11 868
These are the days on...
ExtremeLawncareServices
03-22-2014 09:12 AM
10-21-2014 01:19 PM
by ExtremeLawncareServices
158 11,986
Sunny Beach Tennis...
SGL1
10-19-2014 11:24 PM
10-21-2014 01:04 PM
by SGL1
4 597
Have you ever had to...
SouthernRootsLawnCare
07-26-2014 02:41 PM
10-20-2014 08:34 PM
by biglee
10 2,192
Look out Bob Villa -...
Mr Dave
09-30-2014 10:06 AM
10-20-2014 05:42 PM
by SGL1
7 1,685
how to fi d commercial...
mchampion319
10-19-2014 09:50 PM
10-20-2014 04:41 PM
by Steve
1 568
Hello From Tennessee
mrmann901
10-17-2014 10:02 PM
10-20-2014 04:24 PM
by Steve
1 635
questions on order to...
jack2048
10-13-2014 11:15 AM
10-20-2014 03:27 PM
by Mr. Mow
15 1,090
This sucks...
Matther777
09-18-2014 04:56 PM
10-20-2014 02:14 PM
by Steve
14 2,623
Cement mixer
KevinsLawns
10-15-2014 08:03 PM
10-20-2014 02:11 PM
by Steve
7 820
Hello ! New guy Rob here
RWorthley1
10-17-2014 04:05 PM
10-20-2014 02:09 PM
by Steve
1 668
Snow Blowing
gwilson98
10-12-2014 02:21 PM
10-17-2014 02:51 PM
by Steve
6 1,011
Spreading Weeds?
WesleySnips
07-27-2014 09:46 PM
10-17-2014 07:49 AM
by SGL1
6 1,309
Grasswhoopins.com Anyone...
GRASS WHOOPINS
06-21-2011 11:38 PM
10-16-2014 01:30 PM
by ExtremeLawncareServices
42 9,718
I Want to buy old...
ExtremeLawncareServices
10-10-2014 10:04 PM
10-15-2014 09:12 PM
by ExtremeLawncareServices
6 1,026
Do you find weed eating...
chuck2s
10-15-2014 02:10 PM
10-15-2014 02:10 PM
by chuck2s
0 749
Incorporating &...
WesleySnips
10-01-2014 09:39 PM
10-15-2014 01:37 PM
by kslawn
20 1,884
Falling into business
stellarmowing
09-28-2014 04:35 PM
10-15-2014 05:57 AM
by ringahding1
8 1,871
Apartment Complex and...
lxarth
06-22-2011 01:10 PM
10-14-2014 06:25 PM
by jrs.landscaping
42 10,008
I LOVE hedge trimming
stevef1201
10-13-2014 09:05 AM
10-14-2014 01:06 PM
by Steve
5 884
» Popular Tags
2wd 4x4 apartment complex auger bark bob villa care charge collections commercial demonstration edging exmark ferris four wheel drive gopherhaul grass gravely hardscapes hills holiday how much to charge how to bid john deere quik trac kawasaki labor cost landscape services lawn lawn care lawn care busines plan lawn care business book lawn care business podcast lawn care business seo lawn care business show lawn care business website lawn care business website seo lawn care seo lawn care website lighting lighting brass outdoor lights managing a lawn care business mowing mulch mulch estimate new buisness past due patio install podcast property management company pto push versus ride redmax scag scripts seo shell sprayer starting a business starting a lawn care business stihl sulky theft top dresser toro toro grand stand trailer mate pro tree turfgrass consulting walk behind walker
Powered by vBadvanced CMPS v3.1.0

All times are GMT -5. The time now is 06:16 AM.


(C) 2011 Riggs Publications - Terms of use & Privacy Policy

All times are GMT -5. The time now is 06:16 AM.

(C) 2011 Riggs Publications - Terms of use & Privacy Policy