Landscape Management, November 2016

profit centers Mowing Landscape Maintenance a mathematical equation we can use to maintain positive cash flow or calculate our return on investment Now I know its important to understand the market in which you operate which of course includes competitive price points If you need to adjust your costs to arrive near a desired price point so be it But its your exact costs that determine the price of a project No two companies do their accounting exactly the same and there are endless ways of doing a cost based estimate Ive seen landscape construction companies job cost so specifically that each vehicle and piece of equipment is costed to the job by the number of hours its estimated to be used in addition to their materials and labor While this approach is certainly doable and even Having a defined price you charge is not the same as knowing your numbers unless of course the prices you charge have been reached by cost based calculations necessary in some cases it requires knowing vehicle and equipment costs per hour of operation It can get tricky if you dont know how long a vehicle or piece of equipment will remain in service before being replaced or how many billable hours will be sold for that vehicle or piece of equipment each year How detailed you get when preparing your cost based estimates is a matter of necessity and preference and its THE WAY WATER WA S INTENDED Achieve a balanced LANDSCAPEMANAGEMENT NET November 2016 34 company specific Whats important is that were arriving at our prices based on our actual costs however specific and detailed those may be Voories is the COO at Brilar a Detroit based landscape maintenance and snow removal firm He can be reached at mvoories@ brilar net Continued from page 32 Simple math Heres a basic method of costbased estimating anyone can use Assume our vehicle equipment and fuel costs are rolled into overhead Were going to calculate our direct costs the costs directly associated with performing our project our known overhead for this example is 30 percent 30 percent of all revenue pays for overhead and our desired net profit is 15 percent so we must sell work at a 45 percent gross margin 1 calculate direct costs material cost 1500 Labor cost 749 Disposal cost 50 _________________________ Total direct cost 2299 2 test your proposed sale price to see if it achieves an adequate gross margin Sale Price 418418 Direct costs 2299 _________________________ Gross margin 188518 3 convert your gross margin figure into a percentage Gross margin 188518 Sale price 418418 _________________________ Gross margin percentage 45 4 subtract your overhead recovery from your gross margin percentage to determine net profit Gross margin percentage 45 overhead recovery 30 _________________________ Net profit 15 CLEAN HEALTHY SUSTAINABLE aquatic ecosystem with water movement and proper aeration Air O Lator has been the leader in water management for over 40 years We manufacture eco friendly high performance products that provide high oxygen transfer rates as well as moving large volumes of water keeping ponds and lakes clean healthy and algae free www airolator com 800 821 3177