Mike Andes explains why lawn care businesses underprice their work. Labor eats 60-70% of revenue, and a $20/hr employee actually costs $25-30/hr after taxes. Factor in 20% waste on driving and training, and you need to charge $60/hr just to break even.
60–70%
Example wage: $20 per hour; employer cost after taxes: $25–30 per hour
Approximately 20% (driving, training, meetings)
$60 per hour
So when, when 60 or 70% of revenue is going to wages and you're still a labor revenue producing team member that like it probably tell it's, it's really bad. Okay. So I'm pretty confident saying pricing is actually a problem. Okay. Because at 60 you will break even by the time you take out materials, you take out overhead, you take out wages. Like just wages. Let's say you're paying someone 20 bucks an hour. By time you pay taxes, you're looking at 25 to 30. Well now that's 50% of your revenue. And that's again $60 per hour is time on the job, let alone the 20% of waste of them, driving.
Training, meetings, etc, so now your effective hourly rate, like how much they earn divided by their clocked hours is probably like 45 to 50 bucks an hour. Okay. Because you're charging $6 on the job site and they have 20% waste, you're really under 50 per hour. And so then you take away their $25 per hour and we're already at over 50%. And it's assuming they hit budget hours like every single day.
