commercial job bid's TOO LOW

[Creativeland]

I have just relocated my business from MA to central FL. My understanding was the labor down here was much cheaper than up in MA. I have picked up 2 deceint commercial project but the first question I am always asked is why so LOW... I have not felt that way but thats what I am being told. Is there any one in this area that can help me here. Both project's I have bid 2 men at $53 an hour there (not man hours) total for the 2. Does any one here think this is low or am I on the money..


Please help, I would like to pick up the extra cash but also not look like I am screwing the company..

Creative Landscape

[Kerry]

Well your too low for this area. And I would think your too low for Florida.
Remember most of the folks there were from up north.

[Creativeland]

What do you think the rough rate for 2 men should be??

[Kerry]

Around here for landscaping jobs the going rates are between $35 and $60.00 per man hour.
Its lower for maint. jobs and really depends on what your doing. But it seems to range from $25 on up.
Now this for the legal guys there are a lot of guys that lost their jobs and try to do this work for peanuts.
For instance last Dec. when we had that small ice storm guys were doing cleanups for as little as $5.00 an hour.
We have a few LCO's that price cutthroat style. They have good equipment and lots of help and under bid everything. They also spray pest. without a license.

[Seascape]

Your coming in low because your giving 50% of your labor away. Theyre getting 2 for 1. And if your off a bit off on estimated time they really get a deal. Your labor rate is going to be to high. Focus on your calculated labor and figure up your man hours the way they will roll on the site. 2 at a time. By the time you acumulate a few unbillable hours your dropping your hourly production rate like a rock. Your going to find that your guy or guys are making just about what your making. Differance is theyre home at 5 taking a shower and your still out selling jobs or fixing something they broke until 9 pm that day. So as soon as that happens use the formula youve been using and figure up who made what that day. I think youll like my formula better.
mike

[Kerry]

Mike is right on.
We have one LCO that sends 2 guys out to do cleanups. Pick up sticks and pine cones and the like. They are billed at $25.00 per hr per each man.
Dont give away your labor.

[Creativeland]

I think youll like my formula better.


Seascape what is your formula?? I am a small LCO and right now I only run me and 1 full time employee. Like I said earlier I just relocated and do not have a ton of account's but for only being here for 5 week's or so my total gross sales for next year will be 30k...

We only work 14 hours onsite right now. His pay is 12 an hour. 14 hours covers 3 residentals and 2 fair size commercials.

[Seascape]

First you have to figure your hourly rate. (rate PER MAN HOUR) Theres another thread that just so happened to touch on this yesterday in the lawn service portion of this board. titled pricing misconceptions. Read the article phil posted on it. Once you get that far start figuring in your TOTAL MAN HOURS. You have to charge for that other man and make money off him. The system youve been using accounts for some of him. My typical rate is 45 per MAN hour. Your bidding 2 total hrs @ 53. Thats probally why your coming in low. Your hourly rate is basically 26.50,,, clearly to low. And thats not even considering the time hes sittin at red lights in the truck,sharpening blades,picking his nose ect... throw that in the equation on a day and you will be lucky to see 20 an hour per man. something tells me your halfing your competition. At this pace youll struggle. Go look at the article and focus on your direct and indirect costs and figure your hourly cost to operate. You may have to ask to ammend your bids and or pull out of some. Not good for business but might be required to lace up your show. Only other way to salvage a bad bid like that is to upsell. You can recuop some losses that way but there goes some more TIME. Its going to take alot of upselling to bring your hourly back up on each site but you may be able to improve the #s on sites youve already signed by doing this.
mike

[Creativeland]

Thanks Mike...

[Phil Nilsson]

Creativeland,

You might run into this problem when figuring out your various overhead costs ... especially true of a company that has not reached what you could call "full operating capacity" ... this you'll have to allow for IF you base some of your prices on cost ... because certain costs can be "top heavy" and tend to elevate your price when trying to build them into your price ...

Some are fixed overhead categories, there are others but for example ... (rough numbers) if you had a monthly rent of $500, plus yearly insurance of $1,000 that's $7,000 in cost (but) if you have real low productivity potential hours ... like a one man band working let's say part time at this ... a day a week for example ... your total production hours are "packed" with excessive cost in the beginning until you add more productive customer hours (more accounts) ... so this tends to want you to elevate your prices too high. Forcing your customers in a sense of absorbing a lot of expense based on the low number of hours you work the accounts.

Total annual overhead dollars $$$ divided by total projected annual hours = the passalong OH rate built into prices. Picture (an extreme example) the company that has that $7,000 in annual OH costs but only works ... 100 hours per year productive billings. How can it passalong $70.00 per hour in OH rate included within its price? ... It can't ... the market won't pay it.

In other words OH passalong must be reasonable, not the customer's fault your OH costs are way above production hours. So when you get to the OH part of cost scenario you must cost in ONLY what can be considered ((((competitive OH rates)))) otherwise you could be way overpriced ... based on cost.

The above is why (in spite of your cost) you should know the going rates for all work in your market. Because in spite of your costs that is the price world you must operate.

Phil