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Straight formulas or software for bidding

Discussion in 'Bidding & Estimating' started by icudoucme, Nov 30, 2012.

  1. icudoucme

    icudoucme Senior Member
    Messages: 367

    Does anyone have information on http://www.profitsareus.com/ ?

    A couple years ago I had a decent snow plowing business. I sold it (the routes) and kept the equipment for my personal use. I haven't bid a lot or driveways in 2 years. I've gotten so many phone calls from friends and business associates that are asking for services. I want to make sure I am charging a fair price. When I used to bid this is the formula I used.
    Vehicle cost (hours on vehicle divided by cost of ownership)I then calculate how long it will take to plow the lot) +(plow cost divided by 6 years) + materials used x 4

    This used to give me enough money to cover my cost, repairs, insurance, and a decent pay check. My problem now is now I have a family and don't want to work all day and all night for days on end. I need to have someone that can work for me. That being said do I keep my formula the same and take less of a check for myself and take care of the employee that plows for me or do I factor in the payroll aspect into the time it cost to plow the route?

    any advice would be welcomed.
  2. BossPlow2010

    BossPlow2010 PlowSite.com Addict
    Messages: 1,069

  3. merrimacmill

    merrimacmill PlowSite.com Addict
    from MA
    Messages: 1,823

    It sounds to me like you were on the right track, but when you complicate things beyond just paying yourself and the truck or piece of equipment, you need to develop a solid overhead recovery system. This is because there will be additional overhead added to the operation. First, an employee is going to break things you won't, next is payroll taxes and workers comp fees, and then basic administrative costs. This will also include shop rent, insurance, advertising, utilities, and any other expense that doesn't change with the amount of snow. There are several types of overhead recovery systems that you can implement, and they are as follows:

    Single Overhead Recovery - This is when you use your expected overhead cost, as a percentage to your "cost of goods sold" (the stuff that costs money to complete the job, like salt, fuel, etc), and apply that percentage to your price as the "overhead mark up".

    Labor Hour Overhead Recovery - This is another easy method of overhead recovery, probably the easiest. This is when you take the total of your overhead expenses, and divide it by the total number of expected working hours, and then that number is the overhead cost per hour. For example to make it easy, your overhead is $25,000 per year, you plan on working 550 hours in a winter so $25,000 / 550 man hours = $45.45 per man hour of mark up. So if it cost you, after taxes, $35 an hour to pay a guy then add the $45.45 to that and your hourly rate will be $35 + $45.45 = $80.45 and then you add your net profit margin on top of that.

    Multiple Overhead Recovery - This is the most complex, but most accurate system. With this system you recover certain percentages of overhead on different costs. This is best for snow because most times there is very few labor hours in a season, but very high expenses. So if your using the labor hour method, your hourly rates will be through the roof. But the money needs to come from somewhere.. So you have 4 prime catagories of expenses. Labor, Materials, Equipment, and Subcontracting. Just for example, subcontracting can recover 10% of the overhead, materials 15%, equipment 25%, and the remaining % would come from labor. This method gives great flexibility because you can play with the numbers more to be competitive. If there is not a lot of room on subcontracting, but a big margin on materials, then you can recover less of a % from subbing, and more of a % from materials, etc.

    The most important thing is to understand how much overhead, as a dollar figure, you are recieveing from each job. Add this number up, account by account, until you cover your expenses. Then any other work you can do beyond, without increasing overhead, is profit above and beyond what your working to cover.

    As I was finishing typing that, I realized it got a bit out there and could be confusing to read instead of seeing. But to point you in the right direction, check out www.landscapemanagementnetwork.com , they have really unbelievable budgeting tools available that WILL change your life for the better.

    I bought this "Profits R Us" deal, and it was OK. Followed an ok concept, but was laid out very funky, and I wasn't impressed. I downloaded it, and after 20 minutes realized it was useless for me. They sent me the disk, I threw it out when it got here. The budgeting end was OK for landscape maintenance, but I just felt like how the snow bidding part was written, was for someone who doesn't plow a lot of snow. None of the pricing methods follows any industry standards that I deal with in my market, so I found myself changing the entire spreadsheet around until it made sense for my business. Before I got done with that, I found that website I mentioned above and moved on.

    The great thing about LMN is that you can use the online budgeting tool to create as many company budgets and play with as many financial scenarios as you want to come up with a solid plan. And doing it doesn't take a lot of work like creating spreadsheets each time will.
    Last edited: Nov 30, 2012
  4. icudoucme

    icudoucme Senior Member
    Messages: 367

    Thank You! The formulas you laid make sense. I'll check the link out tonight.