This has got to be one of the most insightful business posts I have seen in a while on the Gopher Lawn Care Business Forum. You can join in by visiting that link.
Barry wrote us and said he was looking into buying a lawn care business. After spending a week with the lawn care business, he found that many of the lawn care accounts were actually losing money.
I think two very important lessons come from this.
- First, know your costs of operation before you bid on any job. You need to know how much it costs you per hour to operate and then tack on a % of profit to that amount.
- Second, do the very best you can to keep your expenses as low as possible. Don’t buy equipment you don’t need. It will sink you.
Barry: “I have been looking into taking over a lawn care business, and after a week
of riding with the crew doing the maintance and keeping very detailed notes and time lines. I have found that this company’s over head is significantly higher than what is being charged for maintance contracts. There is a total of 66 accounts 3 of which are commercial accounts. One of the residential accounts is charged $159.08 per/mo $1,908.96 annually for the following services, spring/fall seeding/airating, 4 season fertilizing, weekly cutting, (40 cuts a year), edging, weed eating, round-up sprayed weekly if needed, blowing off walkways etc….
My evaluation of this property is that it takes 13 minutes travel time to get to the property in a Dodge 2500 diesel pulling a enclosed trailer, ~ 13mpg.
The job takes 3 men 21minutes total to finish the job from pulling up to the house to pulling away from the house, the hourly rate for each is $11, 11, $10which of course isnt any tax stuff f/f/s.
Im evaluating this job as a total time of 34 minutes 21 of work and 13 minutes of travel.
After keeping detailed notes and time, I have figured out that the 48inch Zmower only gets used 29% of the over all time, the edger/weedeater 36%, blower 20%, and backpack sprayer w/round-up 10%. The other missing 5% went to standing around, push mowing, small walk behinds, trash pick-up.
- $8500 zmower + $1520 in gas + $960 maintance = $10,980 / (.29%)(2000working/hours) = $18.93 per/hr
- $300 Edger + $190 gas + $60 edge it + $50 maintance + $10 string = $630 / (.36)(2000 w/h) = $.85 per/hr
- $400 Blower + 190 gas + 100 maintance = $690 / (.20%)(2000 w/h) = $1.73 per/hr
- $6720 Truck & Trailer(annual payments) 2006 truck/trailer + $650 taxes + $70 tags + $1800 insurance + $1200 maintance + $12,000 fuel (not sure if this should be here) = $22,440 / (2000w/h) = $11.22 per/hr
The companys over head for building rent, office manager, phones, workers comp insurance, professional licences, computers, internet, etc… breaks down to $25 per/hr or $50,000 per/year.
All overhead above = $64.73per/hr + $25per/hr admin = $89.73per/hr (to show up)
Now what Im seeing (and please correct me if Im wrong) is that without taking into account airating/seeding/fertilizing/employee taxes this account is lossing money hand over fist… 34minutes/60minutes = .56% x $89.73 = $50.25 to break even on this job.
At 40 cuts annually this contract is bringing in $47.72 per/cut or losing $2.53per/cut not to mention it’s actually much more factoring in all other cost and potential profit for the company.
Can someone explain to me why lawn care companies basically break even or even loss money throughout the majority of the year to only realize a proof in the 2-3 months that they collect monthly money but don’t actually do any work???”