$250K/year lawn care business mowing ONLY commercial properties

Hey, everyone, it's Mike here. And today is going to be a.

Special episode because usually I talk about residential mowing, residential lawn care and landscaping, but today we're talking about a commercial company, someone that's trying to build a massive business that is really just focused on maintaining large apartment complexes, retailers and apartment complexes. So it's going to be a really good episode. They're just getting started, they're willing to grow. They're trying to double their business this year. And so I think it's going to be a really, really good episode that will kind of balance out what I usually talk about as residential. There's a lot of things that go on in the business when it goes commercial. The hourly rate is different, the amount of your revenue that's going to go out the door towards wages is different. So a lot of really good stuff here. And we show actual properties, actual numbers, and I think it's me really, really beneficial. This is Stephen again, trying to pretend like he's working hard. And Zach is over there also trying to pretend like he's not dropping sunflower seeds on the office floor. So let's go ahead and put the tape.

Hey, Mike, how's it going, dude?

In the ender, how's it going?

Good, man. I feel like I'm talking to a celebrity, dude. I am talking to a celebrity.

Are you in Dallas right now?

I am in Dallas, yes. And I wasn't sure. What seat are you guys in? I think it's up north, isn't it?

Yeah, north of Seattle. Like an hour and a half or so north of Seattle.

Oh, man.

To get cold there, comparatively to you guys? Yes, well.

But actually I'm originally from Brazil, man, so this is really. Yeah, so it gets really, really cold. I'm like, I can do Texas. This gets really hot, but I can do this.

It's awesome. Cool. When did you move?

Over 21 years ago, man, from Brazil to Texas. And I. I love it, love it here.

Awesome. Cool. So I know you have like 500 units. That's pretty awesome. And then you started the lawn care side of things.

Yeah. So this is my quick story. I started investing in multifamily and I started buying apartments. So, you know me, entrepreneurials. Like, I start seeing my contracts for the loanscare. Right. And I'm part of the program that we. I do consulting there and we help people how to buy multifamily, those large apartments. Right. So I have a huge network of other people that owns apartments as well. I was looking at the invoices, man. Of all those landscape contracts, I was like, what the heck is this? And they were spending so little time in my properties, like, just a little bit of blowing. And one day I was actually walking behind you, and I saw a lot of the leaves piling there. So I was, you know, I gotta be money here. And so I have a guy that was in my trust and he works for me. And I was like, dude, let's pull a landscape company to service all of my properties and put the word out. Anyway, that was in February, dude. I just spoke to a few other people that is in apartments and just. That shit's exploded. Like, now I'm in a point that I. I have to stop. And I'll be like, dude, I'm, you know, I'm getting delayed behind jobs and stuff like that. And like, my focus is in this landscape now. And I never intended to be full time on this. Right. I just wanted to have this guy and offer him a partnership in the business for him to, you know, here, take it, run it, and I would just bring the business. So.

The purpose of my call today with you just, you know, have a little bit of guidance and direction, you know, of staffing is an issue. Charging, you know, became an issue, is getting better and, you know, how do we can scale this business and make it right. Right. I don't do any residential. It's only commercial. And we only doing those stuff. Right. So. And then some tree jobs came in and I picked one project was, you know, 31,000, cut the trees and. But now I don't have experience with any of this. Right. So I'm like, getting by what the guys tell me. But by being a contractor and be on this business for a long time, I, you know, I kind of understand how business runs and staffing, all that, but I, again, I am very new to the landscaping world.

That's cool. Cool. So are you mostly wanting to do it for your properties and, like, people, you know, are you really wanting to actually, like, make it a business, get commercial properties?

I already made it a business. Right. So I already have that. Let me double check here. My. How many contracts we have right now, including my properties? We have 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12 big property contracts. So they're all over $1,000, exception of one a month and 12 month contracts.

Cool. So right now you're probably on track, assuming no growth or like, same growth pattern, at least 200,000, I'd say this year. You think?

Yeah, 250,000. That's my goal for what I have right now, but I'm already full because obviously those properties also very big. Like, you know, this one of mine is like three acres, seven acres. And sometimes, you know, the tractors cannot get all of them so they have to use the push mowers and trim and aging and whatever. So they at least I'm trying to do two properties a day with the four man crew and I, I'm thinking to scale more to this, I'm gonna need a set of a crew just to, you know, to do this, but to do the, the routine or the route, to do another route if I want to expand. So that's one problem. And then I. There's a lot of other little projects like tree trimmings, gardening or doing flower beds and shrubs and sod and replanting, which those are the high ticket items that I call like a really profit. Right. So what I'm trying to do is just create this so I can, with my contracts as well, I can go year round and pay my expenses. But now the extra ones, it's where you're going to, you know, really bring profit there. But then I don't have the labor.

To do that on those contracts. Do they just include the mowing or do you already bundle in all those other services as part of that contract?

Yeah, I'm bundling your services. Right. So there is a basic visual, for example, I can show it to you, but it's visual sprinkle inspection. We don't.

If we're.

Sprinkler is going to be extra. So we're just gonna make sure all the heads are functioning okay. Once a month on the summer and the high season is once a month cutting. And then when it comes down to the low season, it's only every other week there is flower. Some of the contracts are very basic. Flower beds in front of the signage of the property included as well. And there's a spring cleaning there. So I did a chart of services based on what I used to have when they used to service my own properties.

Is there is? Yeah, totally is there is. There are the four guys that work for you now. Are they all full time?

They're full time, yeah. And I'm getting two freelance guys that are just, you know, come in work and they, you know.

Okay, when you're bidding right now in the commercial work, what do you kind of use as your hourly rate? I'm only asking because when I look at four man crew versus, you know, 200 grand in annual revenue, it seems like that might be Low. But also it's commercial work, which I understand is a lower rate. But what do you have an hourly rate or do you do use a different matrix for that?

Let me, can I share my screen and show my.

Yeah, let me share this here.

So this is kind of a budgeting kind of thing that I just did a lot back at the nappings. And so this is the current properties right now those are not current that we're starting in two weeks. But this is how much of revenue are we making?

Got it.

Per month. Okay. Which you know and like I said I can scale this but the problem is like I am, I don't know how I'm going to handle this, this work. So that was the, that was one of the things. But now if I come here on the labor part of it, this is what I have here as my payroll. I paid them by the days, not by the hour, which probably, I know watching a couple of your videos, you really incentivize people charging by the hour.

So this is what I have.

That's where I'm a little concerned. It seems like, like our, our yearly tour, even like the weekly side, it's, it's most of our revenue. Right. Like in terms, so 854 a day to 4200 a week. So that's the majority. Like if we're doing $17,000 a month in revenue, just our wages will be almost that.

Yeah, but you know, this is not counting. I'm just talking about contracts. And then there's the extra stuff. Right. Like we got some of the. I just charged $7,000 just to do the front yard and that was kind of a quick job that I could do one or two days. But this applies the same rate and that's what I'm counting in. That's where I'm making us profitable. But then I guess I have to come here and select this hourly thing per day and really find out how many more of this, this route here I have to do it.

Well because like. So you're saying, what you're saying is given that about $17,000 a month in payroll, you think your capacity for revenue Is more around 30,000amonth? Is that what you're saying? Given those other add ons?

Yes.

Okay. Because that becomes a little more interesting. I'm just a little bit concerned right now by the fact like we're projecting monthly income of 17,000 but essentially our wages with those employees are also equaling that. But as long as you know that hey, having those four or five employees allows me to have a capacity of say, 35,000. Then we're on 50% of revenues going towards wages, which is not great, but is more common in commercial to have that higher percentage because it's just straight labor. There's no. Not material markup and other things like that. Right, right.

Well, it was one of the things, right. Like when I. When I come from.

When I'm underwriting a deal for a real estate, right, we kind of project every single thing on the underwriting from to the sale of the property.

So.

But I have a team of people of doing it together. And this one is kind of like I started as something that was gonna go to my, you know, to service my properties. And then, you know, people start asking, can you do my property? One of my friends, their own properties as well. So this where I'm at.

Is that a way that I can pay you guys to help me out and really go through those numbers?

And we, you know, well, let's look at one now. So, like, let me see here. Because, like, when you do an estimate, for example, right now, and you go one of these properties, how are you kind of doing the bidding process? Are you thinking like, how many hours will this take? What's kind of your metric?

The little loophole here is that like I said, there are my friends.

Got it.

And they just shared with me the T12 of the property, the trail in 12. And I said, that's how much we spend a month on the thing. And I was like, you know what? I will match their price. Because for me, I was like, you know what? This company's problem making money. So it's probably my mistake to be doing that. It was a cut corner, easy way. You know, they show me the actually T12, and I have the T12 on my properties. I know how much I was paying. So when I go to bidding, it's not like I'm beating. I'm competing with other, other. Other people. I'm just looking at the T12 and look at the scope of work, what they have currently. And I just literally I just match it.

Got it. Yeah. My concern with that is that especially I'm looking at some of these properties now, like Estrella, Etc. I'm looking at them up on apartments, dot com and things. So I'm seeing their properties and because they're so large, I feel.

Mike, one second, please.

Yes. You're fine. Yeah. Dallas. I'm just looking at some of these properties. Yeah, look at Enclave.

Yeah, I can show you. Yeah, this is one of mine is 7.5 acres big.

It's all of this area then that's it. Got it. All right. And then are you just doing the mowing here? Are you doing like other things as well?

Well, we're doing mowing. Let me see here, my chart of work here. So we look at what we are servicing.

This is probably what like 200 units?

147.

Okay. Yeah, that's cool.

Kind of like lower middle class kind of.

It's a. It's like a B minus kind of.

Yeah, yeah.

Cash flows, man.

Oh I bet, dude.

Yeah. Like right now, what was the dollar amount per month that you're getting for this?

Yeah, I'm opening right now. So.

1950Amonth.

And then you go there.

Weekly and then you said bi weekly during the non growing season. Right.

So I'm looking here at the contract and the charts of the yearly charter service. Right. So mowing line trimming, aging.

You know, fertilization twice a year.

Pre emerging twice a year.

Let's see, blow.

In January. So two per month until you get a season in May. It's a little bit more because you know, it's more leaves and stuff like that. Shrub streaming once a month from February to November.

Bed weeding.

Twice a month all year round.

There's leaf removal included on January, February, March, twice November and one in December.

Low hanging branch level one trimming which just basic. It was like a dead thing coming up. You know, we just pick it up, it's not too big. And then there's obviously the visual inspection on irrigation as I mentioned and that's it.

Okay, so basically the, the bread and butter. There it is the mowing.

Right.

And trimming, edging of course with you know, the crew that comes in do that.

How long does it need to take the crew to do that job? Do you know?

Yeah, well when we started because was like a beginning of the. The spring and used to take a little bit more. But now they got on a schedule. It takes them probably about four hours.

And that's with all of them there.

Yes.

So four hours and then how many visits do you think? For moen they do probably 40 a year. You think?

Yeah. It says here one second it says 42.

Is it 42? Okay, so that is where I'm looking at. Okay, so four hours times four guys equals 16 times that by 42 visits, that's 672. So if I take 22,000, divide that by 672. That is the problem.

So what I did is I took 24,000 for the contract for the year. I took out $2,000 worth of like for the fertilizer. Just because like that's not labor. Right. Just kind of other stuff. So 22,000 I took four hours. Multiplied four guys at 16 hours per service, multiply that by 42 visits in a year. I'm not really even looking at the relief cleanup or the bush clean up or anything like that. That's 672 hours. When I divide 672 out of 22,000, I'm at $32 per hour.

As our labor rate.

That's the part where, where it's pretty skinny. Like commercial is relatively. Is going to be a lower first. Like dollar revenue per hour. Traditionally, right? Yeah. But 32, that's why right now our wages are so close. Like such a massive chunk of our revenue.

Right.

That number is just very low. And two things can come into play there. One, it's not necessarily that they're underpriced. It might just mean that you're. Because you're brand new and you don't have all the equipment in the correct setups. And the crew that is used to doing big commercial work.

I don't know. But like the previous company might have done it in say eight hours instead of 16. Right.

So you think a job like this, on your experience, would it be less than four hours.

With four guys? The thing is, it's such a big property. Like you really can't just send like one or two guys there. It's going to take them all day long. It's very demoralizing. You almost have to throw a lot of labor at it. But the problem is I don't see them getting done a whole lot sooner than three or four hours. Right, right. But at four hours, literally it's going to be under $30 an hour. Because again, I'm not counting like leaf cleanup, bush trimming, I'm not cutting any. I'm just counting mowing. Assuming that was the entire conduct was mowing, that'd be 32 bucks an hour.

Right.

And that's just too low. Like commercial in my opinion needs to be over 40 to 45. For residential, I say more like 50, 60 just because there's more admin work. The nice thing about what you have going is you only got 12 contracts to deal with. It's a whole lot less headache. You can, you know, keep it in your head. It's not as difficult, you know, to have that much revenue. You'd have to have, you know, 80 customers that are residential. Right, Right. So that's the nice side. But the, the flip side is at 32 and I, I would actually say that numbers probably like 28 or 27 because we don't, we didn't include lease cleanups and all the other stuff that, that gets very, very thin. I see. That would be my concern right now. And again, I wouldn't say that it's necessarily underpriced. It's just that when you go and take a contract from a company that is currently doing say 2, 3, 4 million in revenue, I know there's some big players in your area. They're way more efficient because they have trucks that have been around for a long time. They have all their equipment paid off. Their guys have been doing the properties that are large for a long time. They typically have it nailed down and that's why it's a little harder to break in that market.

I do have, we do have the equipment like I have a 0 degree more and all the equipment necessary with the trailer and truck and they're all already got, you know, stickers and look cool as such. But like I, yeah, I, I, I see what you're saying. It's just like that's the part when it comes with the mentorship. Right. I got a mentor for me to get into the multi family and like, you know, how can I utilize more leverage your experience so we can make this, you know, a, a little bit.

Better in your, in your market. Like what do you pay those guys per hour right now, employees on average?

I'm paying me.

You pay. Got it. So you were, but just, just for.

The, comes down to it can come down to about $20 an hour.

Cool.

So, and they don't give me the hell. For example, one, two.

Like it's a little bit over, you know, over time and stuff. They're cool with that. You know, for now, until I know it's scaling, it's going to be more problems and you know.

Yeah, the only reason why I look at the hourly rate is because that's really how we should be estimating those projects to be able to be accurate. Right. So when we, when you go to a project right now, I know you've just been trying to get your foot in the door and that's awesome. Like I'm not opposed to that. You have the capital to be able to just get your foot in the door, learn and like just take the job so you can learn. Right. And I remember like my very first commercial contract, I charged $400 per month. And it was easily a $2,000 a month project. But I didn't know what I was doing. And it was, I still am glad I did it because I got my foot in the door with a commercial large project. And like we figured things out and down the road we ended up, yeah, charging about $2,500 a month for it. And they, it was just so dumb. For years they were getting it for 400 anyways.

But I think the big thing is when you start doing these estimates now, it's like, hey, thank you for showing me that number. That's a good reference point. But I'm going to base it on how I know I need to charge for this to work financially. And I would say knowing what the hourly rate is is important. That's like the foundation stone for you to go look at job. Okay, If I have four guys here, it's going to take them three hours. Okay, it's 12 hours per visit. If I have 40 visits in a year, that's going to be 480 hours. Take 480, multiply my hourly rate, divide it by 12. There's my monthly, monthly cost and I can compare it to what they might be paying. But just to go after that number is tough because yeah, like.

That'S my only concern. There's a reason why they're switching too. If it wasn't good service or whatever it might be.

Right, right, of course. And you know, but like I said, because this is, this is, I'm not competing. I'm not putting ads on Google and anything that I'm competed between three other companies and who gets the best price. That's not my, it's not the case right now. But the advantages is one of my, my goal was if I can get the monthly contract that can pay for my expense, for my expenses, at least break it even. Okay. Which obviously I see the profit, but my, my just the world thumb and bear with me. So that can take us over 12 months. But then once we're already in the properties hours, the extra stuff, for example this week, a tree, a piece of a branch falling there. And I charged them $1,000 just to remove them and took them less than 30 minutes to get it right. Chainsaw, chop, chop, chop. Put in the truck, haul out of there. And for example, there's a large.

The pool on this property specifically we're gonna have to do the whole pool design garden stuff. And that is a $40,000 project. And that's where we can project and budget that a little Bit better, you know, because it's like, you know, material and labor and such. So that was my idea. My second crew can come in and just execute projects like this and that's where we can bring the profit. So I don't know if I'm. If I'm going the wrong direction with this or.

I think it's a good strategy for commercialized loss leaders. Right? Like hey, Moen's gonna be our loss leader. I'm not gonna make any money on these contracts. But then all the upsells and other things they need will make bank on. That's great strategy. My only concern is right now we're basically breaking even on wages. When, when, if you break even on these contracts, you really need wages to be around 50%. Right. Because there's still overhead obviously like fuel, insurance.

Right.

All the other stuff. So I would really be trying to just look at it in perspective of okay, I want to break even on these mowing contracts. Great. Here's how much I have to charge for wages on these jobs. Here's how much I'm making on these projects. As long as those are like, you're able to cover the cost. That's a good strategy. I think my only concern right now is like our total revenue is basically equal to wages right now. Which means overhead is now going to be a loss. Right.

So that would be my only concern. But I agree with the strategy. The loss leader strategy in commercial is the way to go in my opinion. Get them for mowing and then those one off projects are big and you can really make your profits there.

Because like the way I put this together and I show it to you, this is like a little yearly budget kind of thing. I know 80% here it will be the cost of labor because it's labor intense and all the labor subtracted by the guys that I have now. And maintenance, financing, payments and gas marketing, which is very little. But accountants, marketing, miscellaneous accounting, tax, tax. Doesn't even know yet, but comes down to this much expenses. And.

This is, this is the income that I was thinking about. Landscape schedule for the, for the route for the contracts and additional income.

Did you mean how that 408. Yeah, it.

Yeah, it's. I don't know what is this? But it's supposed to be this plus this.

Right, Got it. Well, if that's the case, like.

Then, then get introduced. Yeah. See that? That's moving the chart out. Gay graduate. 208.

Is 70.

Where's that number coming from? I guess what this assumes really though is the Fact that your wages are going to stay with their, where they're currently at essentially.

But you're going to be able to produce an additional $200,000 in revenue.

So this will be the income, right?

Yeah. Like in this case, it's not so bad because now your labor is around 55% of your total revenue is going out the door for labor. That's better. Right now where I'm concerned is that we're at 90, 100% of revenue is just going towards labor. And what this is assuming is that our wages stay Basically the same.

17, $18,000 a month, but we're able to add $200,000 in additional income. And if you think that's possible without increasing number of employees, then I think this all checks out. That is the variable here though. Can you add $200,000 more in additional income without adding to your labor?

Well, that's, that's, that's the key here. Because if I can.

If I get into a groove of like they're coming and leaving like at least two of the days of the week that it can come in and do the extra jobs, some, some projects or what I could do is because I, I do have a construction company too that only serves my properties. Only I don't open this to the public because I turn around the units in five days.

Right.

My properties are all 99% occupied tenant comes out, we renovated in five days, they're ready to go. But what I do is I don't have one single employee. They all subcontract that out, right. And that, that little company and it's still property and I have no overhead, no like no headaches, no nothing. I mean this, every, everything has a little bit headaches. But.

I was thinking too, for example, if I get a large tree treatment, I just got one, it was $31,000.

Right.

I could just hire subcontracted out smaller company with insurance that's, you know, reliable and just make 10 grand off of it, you know. And there's true treatment on this project every like every, every year, every year round. There's a lot, right? Because there's a lot of trees. There's a lot of, you know, those largest, those properties are large. So we could do that for man. And that's why I was estimating around 200,000 that way keeping my labor. What of what I wasn't decided that you have kind of helped me today open my eyes is like if, if I should scale by getting more contracts. But you, you know, you help me show me that the contracts doesn't make much money at all.

Yeah. And the thing is too, like, if you're planning for that 200,000 additional revenue to come from subcontractors. The other thing you got to keep in mind too, from a money out perspective is that, you know, 2/3 of that is going to be going out the door. Right. To subcontractors. Right. So it really comes down in my mind to if you think you can add 200,000 revenue without changing labor cost, which I think that's the part where I think we might, it might be this model might break down. Is, okay, well, if we double our revenue by adding these more work, either A, we're going to have subcontractor costs or B, our labor is going to go up. Right. And that's, that's where I'm concerned. I'd just be constantly tracking what percentage of revenue is going out the door towards labor. Like right now we're talking 90 to 100%. As that, as the business matures and you get more efficient, that needs to get down to below 60% and ideally under 50% in a commercial operation. In residential we go under 40. But again, we're gonna have more GNA general and administrative because of the more number of accounts that we have.

Right. And that label chart that I showed you is also with the in office person. Right. That she does all our invoices and contracts and stuff like that. So that was already everything booked out.

Got it.

Yeah.

No, I think, I think it really just comes down to tracking that though. That's the biggest thing. My biggest concern with commercial is just how low that dollar per hour becomes when you start running the math on it. And I would recommend is when you start doing these estimates, obviously look at the numbers they're giving you, that's a huge bonus. But then really asking yourself at least just knowing even if you're going to give them that price and going to cut them a deal to get your foot in the door, just, you know, you've done it for several months now. So you can kind of probably go to a property like, okay, it's going to take about three hours. Okay, three hours times four, guys, 12. Like, just do the math and figure out what that hourly rate is and realize that if you're under 30, if you're under 35, there's just no way you're gonna make any money. By the time you pay people 20 an hour.

Spot here is like it's $45 an hour.

You said that I would be at Least exactly. That's how I would estimate. If I was you, I'd be 45 at the minimum. And 50 is definitely what I would be pushing for. As you become more where you're getting so many leads, you can't handle them and you don't care if you get them all, that's when I'd be shooting for at least 50. Because that way you're going to have a percentage of revenue is going to be more around 50%, 45% going to wages.

Yeah. So $50 an hour was estimated at four guys.

I mean per man. I mean, per man. Right. So that'd be $200 per hour on site.

Okay.

Right. So if we, so if we took this one, for example, where, you know, it takes four hours for four guys, 42 bits, 672 hours in a year. Right. Now, 672 times 50, that'd be 33,600. Then I got to add in what I took out for fertilizer. So that's 35,000. Give me one second. 35, 635, 600. And then if I divide that up by 12. So I would, I would say in order for you to make really good profit, that project right now is 2000. If you're able to get that to 2900, you would probably start making more around that 20% net. Net 20 to 30% net profit margin around $2900 a month. Because that's going to assume that $50 per hour marker.

I think I had this. I'm taking notes, by the way.

I'll send you the recording too.

So as far as scaling this and adding.

More, more like another crew and such, I think, you know, what I want to do is just really firm this up this year or this summer and really, you know, get operations tight and budgeting and stuff like that. But.

Do you see, you know, based on your experience, a potential of growing this in a bigger scale where.

And you know.

Like you're in a perfect market for. Right. Dallas Fort Worth is extremely competitive when it comes to commercial, and that's why you're having that compression on your hourly rate so much. But what the goal in my mind is is really delivering what they can't deliver when it comes to servicing these commercial properties is like, how do you work with a property manager? Do you do those value add services? Because a lot of them don't. And so knowing your numbers, you can at least just break even on the mowing is important. Right. I think that's, that's my only Concern right now is I think we're losing substantially on that part, which is totally fine because you're getting your foot in the door, you're getting experience and you're still going to get those other jobs to probably get you up to break even across the board to make up for the losses. But you can definitely scale it because what's going to happen is other services in other multifamily property owners and property managers get annoyed by their contractors and their service providers that don't have good back end support, Right? And a lot of times these companies, because they're at $30 an hour for labor rate, once you run the numbers, they can't afford good back end, they can't afford good communication, answering the phone, email communication, surveys and reports on the property. They can't afford it. And so they're just running a very tight margin. So the goal, in my opinion with commercial is get your foot in the door like you have and then build a name for yourself where people are like, look, you're going to pay 20%, 30% more for these guys, but they're going to do a good job and they're going to give you reports and they know how to do all these different services. And if there's a project that comes up, you don't have to go at five bids like just roll with them and that's what you want. And there's plenty of demand in your market for that because there's plenty of properties like that one that have 100, 200, 300 units. And if that's your bread and butter, you're in a good market for it.

So next step here, if I'm going to go to budget for a brand new property, right? So we're going to have to kind of estimate how, how, how long are we going to take the cut. So this was the rule of thumb that I created and I'm going to show it to you. So if you, you, if it makes sense. Give me a second. After watching a couple of videos, I try to put this by the hour thing, but let me show you. All right, man. So cost labor chart. This is how much I had with three and the head guy, right? So this is my, the guy that I'm gonna offer him a partnership and stuff that he's working for me. This is how much I'm paying him by the hour because this is my main guy. I trust him. And this is the three guys. So.

This is my 40, $49 per hour. Hold on, let me figure this out here. Because I. It's been a long time.

For three. Okay. If I have all this, guys, it's 180 as a company, $185 an hour. Does that make sense?

Is that in wages?

That is everything. Counting how much we should charge a kind to be profitable because it comes down. My hourly rate is $89 an hour for cost for guys, county insurance guys, gas and whatever. So if I charge the final client $185 per hour, is that accurate? That is my hourly price to be profitable. So I'm making pretty much double of this. This is my cost.

Okay, where's the. Okay, I understand. So, so 60. So 20, 20, 20 plus the 28. That'd be. That'd be $88 per hour. Where's the two numbers above that? Oh, I see. As they added. Okay. Yes, yes. Okay, got it. So $89 per hour is your cost.

Okay.

Why is it keeping going? Okay, there you go. I don't know what's going.

You're saying your final. So you're trying to charge 185 per hour, is that what you're saying?

Right. That was for, you know, if I have to come into an hourly rate and obviously I, I made a mistake of charging based on, hey, just give me a contract. I just match whatever they're paying. But I didn't actually because I didn't know also what time how long they're going to take to accept execute those projects. But now I do. And now I'm looking at this number here to charge. This is my kind of number. That is somebody, hey, how much you charge for the hour to bring this crew here? My trailer, my things pay insurance guys, everything and the company's profitable. That was the number I came up with.

Yeah, that's.

Is this realistic? I don't know. And that. That's why I'm asking you.

Yeah, no, I think that's good. That's around $46 per hour. That'd be a good starting point, right? 185. And what you said there's right in the bottom to the 16 and the insurance costs, the equipment and insurance, that's obviously overhead which is going to eat into this. But if this, at this current here you basically at 50, right around 50% of your revenue would be going towards wages. So that is a number I'd be shooting for. This is going to be where you start to break even. Right. Because if you're around 50 to 60% in of your revenue going to wages, the other half is got to cover all your Overhead and then some profit. Right. And this also is thing is too, when you look at $185 per hour we're talking about on the job, there's going to be at least 10 to 20% of wasted time and drive time, loading up in the morning, unloading in the day, etc. So even though this might look like 50% of revenue is going to go towards wages, it's actually going to be more like 60 to 65%, even if you hit these hourly rates. But you're 100% right in terms of the estimate. The budgeting side, when you look at a project, this is what you should be using, 100%.

Okay, so you think I should increase this by the hour because they help me more to understand the final cost of the hour being profitable, counting all those factors in that you just said.

So I think this is a good starting point though, because at this rate, you're at $46 per hour. Honestly, that's like it's probably a 40 to 50.

What is this 40. What is $46 per hour coming from? I don't understand.

Oh, 185 divided by four guys. Oh.

Okay.

In terms of rate per person. Right. So I'm just trying to calculate that number because easier.

This is my four guys, by the way.

Yeah, yeah. So four guys, 185 divided by four for $46 per hour. That's in comparison to what right now you're charging literally probably around 32 to 30. If we were on the numbers on a lot of the properties, I bet you'd be around that. So if you're able to get 46, I. E. 185 per hour for a crew of four, I think that's good. That'd be a great starting point.

Gotcha. All right, man, That's. That's good. It's. I'm all over the place now. Like, you know, I got to do some tweaking here. My. On my stuff.

And honestly, like, this is the thing, like, say right now you're on this one property, you're charging around two grand a month. You know, getting it to 2900 is going to be like the ideal. You'll make really good profit there, et cetera. At 2000, you're probably breaking even, maybe even losing a little bit. Right. You're probably losing about 10%, I would guess, on that contract. Again, on the contract side, which is fine if you're going to get those up sales, it's just a matter of how do we at least get to break Even right? So I really believe if you get your foot in the door, that you have and do service on this property for this entire year, if next spring you're like, hey, we're going from $2,000 to 2,400 because of inflation, I generally believe you get 80% of your contract to say, yes, you might lose a couple, but you're not going to care because you're going to fill the pipeline. Right. Filling the pipeline is what's going to give you the confidence to charge these rates that you need in order to make profit.

Right.

So as you burn through, you know who you know and friends and all the rest of it, now you're gonna start getting leads from other people and that filled up pipeline is gonna give you the confidence, start charging what you're actually worth and what you need to charge.

Gotcha. And Mike, so the, oh yeah, that was, you know, you just mentioned about the, the increasing the labor or for, for the contracts. Let's say I don't, I come to the contracts and I find out that I'm losing money contract. So how would it be a good approach with the people? Like hey, because one of my friends also, he owns properties as well and he had a company before me and they send them a letter like, hey, we're gonna go up on prices because of inflation, cost of whatever, blah, blah, blah. So what would it be a good approach on your accommodation like, or yeah.

So like obviously you probably sign a 12 month contract now when it comes up for renewal, I would just basically roll with it. I'd be like, hey, upcoming season, here's your contract and just give it to them inside of there, right? It's inside the contract. It says the new price, the monthly rate, it's going to be changing and if they come back and say, okay, well we have to get bids or that's fine because again, you're not going to care if you lose, you know, four or five of those contracts if you have another 10 people beating down your door trying to get, get you to do service for them. Right, right, right.

And I totally agree with you as well. Like, you know, those people really value the, the, you know, the customer service doing, the interaction that they have with you and everything. So that, that's a big plus.

Yeah. And too like right now you probably had like a 100% close ratio because you've been basically matching people's prices and getting in the door. Right now it's a matter of as you raise your prices, you're going to have a 40:30, 50% close ratio. But now that's what's going to allow you to have the margin, right? And so.

At the end of the day, a full pipeline gives you the confidence to raise prices, like literally next spring because you've now built the brand, your website looks great, and all the rest of it. Next spring rush now you're gonna be actually ranking. People are gonna know who you are. You're gonna have so many people beating down the door to do work with you. That's what's gonna give you the confidence, like, hey, I'm raising my prices. If you wanna leave, fine, whatever. I got tons of other people that need service. That's what you're looking for. And so this year, if you get your foot in the door by doing what you've been doing with your friends and stuff, that's awesome. Get your foot in the door. Even if you lose a little bit, just get your foot in the door. Learn how to do these hourly rates accurately. So when you look at a property, you know how many hours it's going to take. Because then that way next spring you'll know what you need to charge on these properties on the bump up. And I wouldn't bump it like 50%, right? Like, I wouldn't take it from 2000amonth, 2900. But at least go halfway there and realize you're going to lose some clients. But by then your pipeline will be full to where there's people coming to you and you're like, hey, if you guys want to leave, if I lose four out of these 12, I don't care. I got a ton of other work coming in at the rates that I want.

Okay, that, that's great on the business side. Now if I can just have another five minutes of just the. And this calls for 45 minutes.

Was an hour. I can, let's call it, let's call it an hour. I think it's 50, but don't worry about it, go ahead.

No, no, it's fine, it's fine. And I want to be respectful of your time. So the, the, let's say for I'm having problem now to also find more specialized staff to designing a landscaping and do some of the dry. So I utilize a couple guys by the hour with the freelancer upwork. You know, I actually finally got this from Dallas, but he only works remotely and I sent him some of the drives and he was able to, you know, draw for me how many plants do I need and all that stuff.

So.

Is that beneficial to have those Guys on a full time basis and, or just I know, as we growing, as we think. What's your thoughts on that?

I would definitely do them as freelance for now. Until you're utilizing someone very consistently, you don't need someone full time. Like in my opinion, when it comes to commercial work, you're probably going to need to be in multi million in revenue before it actually makes sense to hire someone like that full time. Right. Because if you're going to pay someone, you know, 50, 60 grand, someone can do all the design work and CAD or whatever they're using for 3D stuff, like you're going to be looking at 56 grand at least and that's a huge hit. If you're doing 500,000 a year in revenue, that's 10% top line, that's probably.

30 or 40% of your profits. Right. So I would just keep doing it freelance. Even if it seems like you're paying them, you know, more per hour, you know, until you're literally about 1.5 to 2 million, it's probably not gonna be worth your time to get someone full time.

Yeah, that's a good, that's a good advice because you know, I, I can't take this business so much bigger. But I, the thing is, it's about time. I cannot let my main business to be neglected right now to open that landscape company. But at the same time I wish that I, you know, I had a team or, or somebody, you know, I even considers like, why don't I hire like a kick ass project manager and I can just open the gates. I can sell this to a lot of people, to a lot of other people that I know, my network. If I put on my Facebook just like, hey guys, I got this landscape company, I know I'm gonna get a lot of leads, a lot of people, but like I can't be that heavily involved in this business right now.

Yeah, and that's, that's the thing too is like the challenging part with your model is the fact that you make your money on those more specialized services, but that those services also, the more specialized services require more specialized skills, which is more expensive. Right. And so you know, either a, you go simplified services, you don't offer those other ones. Even though right now that's where you're like, what you said to me is extremely true. And that is you're making your money and all your profit on those upsells. Right? The thing is to have those upsells being done profitably and being done efficiently and making the Customer requires a manager, a property, a project manager. You being there, it's a lot more intensive. Right. So either A, you focus on those things and you hire up, but realize that that's going to be a big overhead draw by getting someone that experience, or B, you focus on those basic services that we've been talking about in the contracts and then just make sure that those are profitable and then you can scale that without needing as much top, you know, top heavy management. That is expensive. Right. And that'd be my biggest concern is if you keep adding all these services at 300, 400,000 in annual revenue, if you need someone that costs 50, 60, 70,000 because they have all the management experience, they have all the experience in the industry, there goes all your profit. Right, Right. So that, that in my opinion, most people do this backwards. They add a bunch of services when they're small and it becomes very inefficient. That allows their top line revenue to grow very, very quickly and then they're like, oh, sick, I'm not making a profit. Let's cut out services. That's one way to do it. It just means you're going to burn a lot of money. Yeah. In my opinion, it's like focus on a few services that you're really good at and then just grow that slower. But you'll be profitable from the beginning because otherwise you're just going to inflate the revenue by adding all these services. You're going to lose money doing that and then you're eventually, over time, it's going to contract your services. And it's not to say you shouldn't do anything outside of mowing. It's just a matter of like, okay, we do mowing, we do the contracts, but then like maybe do one other specialty service that is the bread and butter from a profit standpoint, but can be scaled and not be so dependent on somebody and the skilled labor. Right. You'll go from, you know, $180 a day to need to pay them 250 or 300 if they need to know how to do walls or, or edging or you know, pruning higher trees, whatever it is. That's when it starts to get expensive to the point where it's like now you don't make much money there because the overhead required to just manage that skilled labor. Yeah. So like, I think, I think my biggest recommendation to you is like track one number and that is what percentage of your revenue is going out the door to wages. You know, for our franchisees, we track that every single month it's like, what? Because that is a very, very key part. That is your biggest variable cost, right? And so in your market or in your industry of commercial, that is your biggest cost is the determining factor of whether or not you'll be profitable. Because you really only sell mostly labor. You'll sell some of those other products. But in terms of making the business profitable, labor is a huge component of what you're doing. And so I would track the number religiously. And that's going to end up meaning that when you go to these projects, you start bidding with that 185. That's exactly what I'd be doing if I was you. That will get you back to more like that. 50 to 60% of revenue going to wages. Because right now it's like 80 to 100%. Right?

Sounds great. Thank you. It was great to meet you, man.

You got it, brother. Take care. Have a great day.