[rbriggs]

Originally posted by georgiehopper
* Yes we have a business plan.

Wow, this is a big part of your problem. You are flying by the seat of your pants. When I frist started in business, I did the same thing. Heck, I think most of us did.

* Laid out a budget: No

Creating a budget is so very important. The second most important step iis to follow that budget and make changes where necessary. It took me a long time to learn this.

* How many hours do we need to sell? We have never gone by hours so can't answer that.

It's time to find this number. You are ultimately selling hours. As a service business, this is your product. It needs to be measured. How else do you know if you are profitable, charging enough, or charging too little.

* What is our available production capacity? Not sure I know that answer to that one either. Do you mean labor or equipment?

You have to view your service company as a production line. Efficiency is key. the more jobs y ou can fit on a days' schedule and ultimately in the 40 billable weeks, means more $$ in your pocket. You may have to experiment with your schedules to determne the best approach here.

* Weeks a year to produce income: probably around 40

* Employees to start in the spring. 2 plus ourselves.

[Rick Carver]

Georgiehopper

I am not a real big believer of most business plans. I do think that an OPERATIONAL PLAN is the single biggest mistake NOT to have. You are in desperate need of understanding your operational numbers and your companies economy. It is not hard I swear to you. If I can understand these things and have them work for me,,,,,,,, anyone can!!!!!!

I will try and give an example. I hope others pitch in here.

A company with 3 in the field employees. 4 employees but one is on the overhead back because they do not produce billable time.
Sooo,,, 3 guys working a 40hr week will give you 120hrs production to bill out. Take the 120hrs PROJECTED weekly production/billable hours times your proposed 40 week season and you have 4,800 hrs to bill out this season. Your production capacity is 4,800 hrs.
If you have a company billable rate of say,,, $45.00hr then your projected gross from LABOR for the season is $216,000.
If you give me some more info I can help you find your Labor rate,,,,,overhead,,,, and afordable net. Maybe privately?
I am not really sure, but the numbers I saw that you pay employees seem fairly high to me.

Can you tell us how you estimate a job? I think I read that you don't go by hours? HUH? I am just curious how you do figure your cost's?

Don't give up on us,,,, we'll help ya find a solution.

[Mac]

I totally agree with what everyone is saying but I question why it is suggested that you bill 40 hrs a week? Wasnt it said that overtime is a huge killer and I think we all know no one is at 100% efficiency.

[Rick Carver]

Mac

I'm not sure what it is your asking about OT?

Billing a 40 hr week and calculate times the MINIMUM workable full weeks I think is the safest way to set up your projections and set budgets.

OT,,, is never a killer unless you do not have it calculated in on your estimate for the job that your paying OT off of,,,,, unless you have already recovered all other overheads for that projected & budgeted time period.

[georgiehopper]

We estimate a job based on materials + markup, plus labor + travel+ disposal..and whatever else might factor into it.

Our hourly rate is $60. Our billable rate would be around $384,000 ( our sales for 2005 were in that ballpark)

We use a "per square foot" number when we are estimating hardscaping such as patios and walkways. For walls we do not use a square foot number but estimate what the actual cost will be.

The "per square foot" number was figured out using all of our costs including overhead, equipment usage, etc. Our per square foot used to be $15.00 and it is now $19.50 on most jobs. This number will have to be adjusted because we work in 3 states...that number is acceptible in Virginia, but we're not so sure about Maryland and West Virginia.

[Rick Carver]

OK,,,,, I am seeing the picture now,,,, ;-)

Georgie,,,,, Can you tell me if you and your husbands time is used in the field for BILLABLE work or more for the admin side only for like sales etc etc,

Also,,,, how much OT (just a guestimate),,,, and about how many weeks did you work full weeks last year,,,, and finally,,,(for now LOL) were your guys on salary or did you pay them by the clock?

I am very interested in helping you find a solution,,, we can do it here or by email directly, it is up to you,,,

[georgiehopper]

My husband's time is used for billable work..mine is not. I am involved mostly in the sales,administration,design,troubleshooting stuff... my hours are never included though.

Regarding overtime: we make sure there that there isn't any.

I honestly don't know for sure how many full weeks we worked in 2005. We've never tracked it that way. I'm figuring 40 though considering downtime during the winter.

Our guys are not payed salary...its hourly.

[Rick Carver]

GH,,,
What can I use to base your Husbands hourly rate on?? $25.00hr or $30.00 etc????

Also,,, You do not take a salary? If so how much?

Rick

[Rick Carver]

GH,,,,,

I am rereading the post's,,,,, sorry if I seem to be pushey etc.

You said that your hourly rate is $60.00hr,,, and your SQFT price was $15.00hr and is now $19.50hr,,,, I am a little confused.
Your hourly figure of $60.00 an hour includes what? What this represents or what calculates into this number?
Then this leaves me to wonder what the $19.50 is for SQFT,,, OK,,, so this would be for material?

[georgiehopper]

Our hourly labor rate is $60 an hour. That is what I use when I am figuring how many hours a particular job will take. The rate used to be $45 an hour but we raised it last year because we were losing money. It made a difference in 2005..but the extra money that was made with the increase was taken out to purchase a house (which I mentioned in another post) Maybe a stupid decision..but it got us out of renting both a house and storage space for vehicles and equipment.

When my husband takes a paycheck he is payed at $20.00 per hour.

I never take a paycheck... my time is never figured into anything....not design time, not sales, not anything. I work for free.

The square foot price is $19.50 per square foot..its not an hourly rate. Its the number my husband came up with to make sure that costs are covered and we make a profit on hardscaping(patios,walkways only) I guess its meant to include materials + markup & labor)

[georgiehopper]

I think another area that hurts us is suppliers. We go to typical garden centers for plants and materials..and though they are giving us a contractor's price, its still high.

We recently found a new supplier for 21a gravel ..in the past we were paying $36 a yard and now we are paying about $10 a yard.. that in itself has made a huge difference.

We are in the process of getting our nursery dealer license for Maryland so that we can have our own nursery set up on our property which is luckily zoned for it. Hopefully, that will help with the cost of plant materials.

Things like lumber, spikes, edging, etc...we end up buying from places like Home Depot..so we never get discounts there.

[Paul]

georgiehopper wrote Our hourly rate is $60. Our billable rate would be around $384,000 ( our sales for 2005 were in that ballpark)

Above is with material, without material, on the low side your talking $38 per hour, on the high side you might see $45 per hour. This barely covers or dosen't, your labor cost ($17 to $21 per hour not including company taxes, WC insurance, health insurance, ect.......

Next knowing your area, what you think is 40 weeks a year might really turn into 45 weeks a year! That will lower your labor recovery rate even more.

I really think you need to go to a Compass class.

[georgiehopper]

The $60 is not including materials or travel...that is added in separately.

Yeah I compass class would be good. Perhaps in a few months from now.

[Rick Carver]

OK,,,,,, here is an issue and I will try my best to show you,,, but I warn you, i am better at talking then typing with these big OLD fat broken up fingers. LOLOL

Using 60 hr,,,,,, Husbands 20 and the other labor rates of 17 and 21hr gives you a labor percentage of 32.3% lets say 33% Pretty nice.
However
Your 19.50 per SQFT for pavers including materials and labor? This would really put you behind the 8 ball,,,,, if you mean that out of the 60 that you use 19.50 to calculate your cost's,,, then you are creating a shortfall. In my area we can purchase a nice paver product and add the other install materials for 15 to 20 bucks a sqft. THEN THERE is the labor cost on top of that,,,,
If we use a medium here for examples only,,,, what can your crew produce per hour? I am getting a pretty good understanding I think.
If you budget the other money out of you hourly rate to pay other things and you have underbudgeted your cost's you have built in a loss. Lets take a look at it,,,,, Are you comfortable enough to send me your Overheads? If the labor above is accurate enough for you I'll use that in this continued thread? When we get done I hope to have you be able to set your companies chart of accounts up to include a small salary for you and a SALARY your husband should be taking,,,, even if he is not in the field 100%.

HEY,,,, it's your company,,,, if the money is available to use, use it anyway you want. Buy a new anything! :-)

For a long time a few years back it was better for me (cheaper) to use the banks money then for me to pull money from recievables when I had investments to make,,,(ahem) like buying my farm and hunting toys. ;-)

Lets keep working on exposing this solution,,,,, gotta run for a little while,,,,back in a few.

[Paul]

Then you should be doing close to or over $500K a year in business. My last landscape company ran those kind of labor costs. Our labor recovery rate was in the high $80!