How To Calculate True Lawn Cost

One of the biggest questions in the lawn care industry is, “What should I charge to do the job?” Whether you have one truck or 50, understanding how to calculate your true costs will not only help you plan properly but, most importantly, gain profits. Check out these key takeaways from the webinar How To Calculate True Cost: Demystifying Bids And Contracts, hosted by Wayne Volz, President of Profits Unlimited.

Know The Difference Between Cost, Mark-Up, & Profit 

As a business owner, this may sound like basic, fundamental math, but let’s just start at the beginning before we move on to more complicated stuff. Here’s a quick example for reference: 

COST = $35.00 

SELL PRICE = $45.00 

PROFIT = $10.00 

But how much mark-up is that? Your profit divided by your cost is going to be your mark-up. So in this scenario, your mark-up is going to be 29%. 

PROFIT $10.00/COST $35.00 = 29% 

But wait, there’s more! How much profit is that? Take your profit divided by your selling price, and you get 22%. 

PROFIT $10.00/SELLING $45.00 = 22%

When Calculating Your Cost Per Hour Of Operation, Include Every Expense 

When calculating your cost per hour, don’t forget to include all costs. For example, think about your fixed costs, such as your equipment cost, financing, insurance, and license fees. These are costs that aren’t going to change. Then, you need to include your indirect costs like your fuel, oil, grease, repairs, and maintenance. Lastly, you have your additional overhead costs such as rent, phone, advertising, administration, electricity, etc. For an example of calculating cost per hour, refer to the sample worksheet provided. 

Know Your Workers’ Compensation Classification 

There are my types of landscape insurance policies, from general liability to workers’ compensation to equipment policies. Insurance companies may not understand your business and will misclassify it at a higher rate. Ensuring that you’re using the classification code “Parks 9102” will save you valuable dollars on your payroll.

Don’t Target Every Customer — Target The Right Customer 

When it comes to the lawn care industry, it may seem like anyone with a yard would be a great prospect, right? Not necessarily. You can’t be all things to all people, and your marketing cost will get out of control if you don’t figure out your target audience. The FieldRoutesTM Compass marketing portal has everything you need to track every dollar spent on marketing. You can track key metrics such as your cost per lead (CPL) and your customer acquisition cost in real-time.

Don’t Be Afraid Of Change 

When was the last time you actually changed something in your business? Doing the same thing the same way with the same result is going to cost you. Whether it’s looking for new vendors or implementing software to create efficiencies that save you time and money, knowing when to pivot is key to staying ahead of your competitors. 

You may think you have all your expenses in your head, but it doesn’t hurt to put it down on paper to get a visual. To calculate your cost per hour for your equipment, it may look something like what we have on the following page:

Cost Category

1. Purchase Cost/Replacement Cost -   $13,200.00

2. Salvage Value (10% of purchase price or enter your own amount) -   $3,500.00

3. Cost To Be Recovered -   $9,700.00

4. Estimated Years Of Life -   3

5. Estimated Annual Use In Hours (Number of weeks of service X Hours per week used) -   450

• Example: 28 weeks of service X 25 hours of use per week = 700 hours per year

Fixed Cost

6. Amount Financed -   $13,200.00

• Interest Rate From Loan (Ex. For 3% enter 3) -   0.00%

• Enter Length Of Loan In Years -   4

7. Financed Amount To Be Recovered Annually -   $3,300.00

• Non-Financed Amount To Be Recovered Annually -   $0.00

8. Insurance, Taxes, etc. (Line 1 multipled by 5% if unknown) -   $135.00

9. License Fees -   $0.00

10. Other Direct Cost -   $0.00

11. Total Fixed Cost -   $3,435.00

12. Total Fixed Cost Per Hour -   $7.63

Variable Cost

Fuel Cost Per Year Is Determined Below: 

         13. Hours Of Use Year From Line 5 -   450

Enter Fuel Consumption In Gallons Per Hour -   1

Total Gallons Required For The Year -   $450.00

Enter Cost Per Gallon (Ex. $4.50 = 4.50) -   $4.25

Total Annual Fuel Cost -   $1,912.50

14. Oil, Grease, Anti-Freeze, 2-cycle Mix, Etc -   $200.00

15. Repairs (Including service labor, tires, belts, hoses, etc.) -   $400.00

16. Total Variable Cost -   $2,512.50

17. Total Variable Cost Per Hour -   $5.58 

18. Total Annual Equipment Cost -   $5,947.50 

19. Total Cost Per Hour -   $13.22

In the end, if you’re not capturing all your expenses, you’re probably spending far more than you realize. Not only does FieldRoutes integrate with QuickBooks® Online to help with your everyday costs, but our automation tools and Cloud-based technology are the time-saving solutions to help you grow like never before.

Don’t forget to check out our webinar presented by Wayne Volz of Profits Unlimited, How To Calculate True Cost: Demystifying Bids And Contracts, for detailed information.