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Travel costs and contract pricing

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  • Travel costs and contract pricing

    <font color="blue">Travel is a big expense ... windshield time getting to the jobs, but how do you charge and include these costs for bid & pricing purposes? If you use your hourly rate (sales) charge of let's say $35 per hour (instead) of <b>your cost per hour </b>of let's say $20 then you are expecting to make money on travel ... for doing nothing "constructive" at the customer location ... shouldn't you be looking to merely (retrieve) costs of travel not make money on it? In other words charging $20 for the travel (at cost) and not the $35? Also ... building in a sales rate ($35) into your bid for travel <b>inflates your bid and makes you less competitive with your price</b>. After all, equipment on a trailer in transit isn't being used during travel ... your thoughts on this?</font id="blue">

  • #2
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    I believe you should strive to make a profit on all of your hours during the course of a given work day. Having higher hourly rates built in for jobs that you have to travel to is a good thing because as you build your business long term you are automatically selecting more profitable, closer accounts. If you do sell some accounts further out you still get your profit margin, the same as your close in accounts. I have seen several companies over the years spread themselves to thin in part, because they don't charge for profit on all of their day.[8D]
    zturncutter

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    • #3
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      The time that the employees leave the shop is when you should begin making your needed amount per hour. Setting up different rates per hour for different things done in one day would be an accounting/timing/bidding nightmare.

      They have to recover your set $$$ per hour. If you need $35 per hour averaged every hour, Sure, you could lower travel time by $10 per hour for travel. But then while they are on site working, you better be charging $10 more per hour. Either way it's sliced, at the end of the day, you better be able to average that $35 per man hour you need.

      If you can not be competitve because of the travel time, that is YOUR fault and you need to stick closer to you area and reduce travel time.

      The type of work we do is a perfect example of this. We drive alot, but our hourly rate actually on the job site is almost 3 times higher per man hour than many other companies. But that figure comes down a bit when drive time is averaged in.

      You can break it down any way you like, but you still need to get the correct average at days end. Heck, you can charge more for trimming per man hour and less for mowing, and less for loading the truck. But at the end, you better still get that desired amount as an average.
      a.k.a.---> Erich

      www.avalawnlandscaping.com


      Build a man a fire, he'll be warm for a day.
      Set a man on fire, he'll be warm for the rest of his life.

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      • #4
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        I have basically eliminated windshield time by offering low, standard prices for all lots in specific areas. Crews will often park & spend a half day in one subdivision. Others will cut 5-10 on one res. street, then drive less than 3-5 min to the next series. Routing strategies & low prices are the key.

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        • #5
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          Scaper summed it all up. If you need to average $35.00 per man hour to make profit, then some jobs you are going to make lot more than others, but at the end of the day it should all average out if you are bidding correctly. Your employees are getting paid to drive. If you are not charging enough to cover the cost of them driving while they are not making money for you, then your average hourly rate will drop. It all comes down to the bottom line. You need to make so much money per man hour in order to cover your overhead and to turn a profit.
          “veni, vidi, vici.”

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