Video Transcript
0:00
you ask user groups uh Patrick wants to
0:02
know how are you coming up with your
0:04
hourly man rate when services are priced
0:07
per thousand in the rate matrices inside
0:09
the software would you just figure
0:11
expense plus product plus labor divided
0:14
by Machine hours question mark or do you
0:16
prefer paid hours
0:18
I have a huge difference in my job hours
0:21
and my clocked in and clocked out hours
0:23
so uh Patrick great question uh love
0:26
your approach on this uh might be a
0:28
little bit different approach than I
0:29
would take on it here so I’m going to
0:30
break down how we would tackle this here
0:32
uh for the business for job costing
0:34
accountability and budgeted time so uh
0:37
really looking at it uh to summarize
0:39
that question again how do you come up
0:40
your man rate
0:42
um for fertilization
0:43
when a price Matrix is based on uh per
0:46
thousand square feet so what I’m going
0:48
to do is open up the simple growth
0:50
blueprint here and I’m actually going to
0:52
tackle the pricing matrices first and
0:56
then I’m going to dive in how do you
0:57
actually come up with that hourly rate
0:58
but really uh there’s two parts of it
1:00
you need to come up with that hourly
1:02
rate of what are you charging per hour
1:04
and your Breakeven fully loaded uh labor
1:07
labor burden all your expenses and the
1:09
difference between your hourly rate and
1:11
your Breakeven is your profit and uh
1:14
with the fertilization If the product
1:15
cost of product markup if there’s any uh
1:17
so really we’ve got almost two questions
1:19
in one uh so I’m going to actually show
1:21
you how to tackle a price break matrices
1:23
for fertilization with a budgeted or a
1:26
desired Revenue permanent on a break
1:27
even with product costs
1:29
and then I’ll dive into how to show you
1:31
how to actually set up and come to do a
1:33
break even uh Revenue number so the
1:36
first part we’re going to do here is
1:37
we’re going to dive into the simple
1:39
growth blueprint here so no matter the
Simple Growth Blueprint
1:41
software you’re using this is where
1:42
we’re going to start we’re going to
1:43
blueprint it and then we’re going to
1:45
build it in your software so what we’ve
1:47
got here is our round number one for
1:49
fertilization and our custom field is
1:52
sure square footage that’s where we’re
1:53
measuring uh the Ariana satellite image
1:55
and then we’re going to go out and
1:57
actually uh estimate that so the first
1:59
thing we want to do Patrick is we want
2:01
to go in per service
2:03
or all the rounds probably and average
2:05
them together so I’m going to keep this
2:06
really basic and we’ll assume that we’re
2:09
just doing it for round one uh so let’s
2:11
assume round one
2:13
um or maybe round two has a uh a
2:16
granular product as well as a liquid so
2:19
if we’re uh going in and prescribing the
2:21
IPM integrated Pest Management we may be
2:23
doing a a broadcast of the fertilizer
2:25
fertilizer but doing a spot spray for
2:27
the areas we need treated for post
2:29
emergent uh so the first thing here is
2:31
we would go and get our chemical costs
2:33
or fertilizer cost of the year so our
2:35
cost per bag let’s say is 28 bucks it’s
2:37
a 50 pound bag
2:39
and that bag is going to cover 12 000
2:41
square feet
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traditionally we are not marking the
2:45
product up occasionally we do an essay
2:46
setup or deep dive some clients like to
2:48
mark that up so I have that here but
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really what is going on here is our
2:52
calculations of product hours our cost
2:53
for that bagged product is two dollars
2:56
and 33 cents per thousand square feet
2:58
now the question is if we’re doing a
3:00
post-emergent uh weed control but it’s
3:02
not a blanket application how do we
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figure that out how do we actually get
3:06
that job costing in there well folks I’m
3:08
here to tell you it’s not going to be
3:09
100 perfect but we’re going to grab an
3:11
average and that’s going to work out on
3:13
average based on historical data so
3:14
let’s say we’ve got a jug of 120 dollars
3:19
and uh we could plug in the ounces but
3:23
let’s say that jug coverage now is going
3:25
to cover 110
3:28
000 square feet
3:29
and once we go in here
3:33
we have the ability to put in a coverage
3:36
so right now that’s zero dollars so if
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it was a blanket application we could
3:39
put in 100 and it would be costing us a
3:41
dollar or nine but most of the time
3:43
we’re not doing a blanket application
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for post-emergent weed control it’s a
3:47
spot spray scenario so every thousand
3:49
square feet what percentage are we
3:50
actually doing a post-emergent spray so
3:54
let’s say on average on the high side
3:55
we’re covering 30 percent of that
3:57
thousand square feet so what we’ve got
3:58
now is our blanket application of 233
4:01
per thousand and 33 cents per thousand
4:04
for our post immersion spot Sprint uh
4:06
add them together we get 266 is our cost
4:09
per thousand so what we’re going to do
Base Price
4:11
is really go in and say hey Patrick as
4:13
we’re building this out with you or
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you’re building yourself uh what is your
4:16
base price to show up and Patrick says
4:18
you know Mike my price is uh 55 bucks we
4:21
plug that in and we say okay well how
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many square feet does that actually
4:25
cover Patrick’s well maybe that covers
4:26
four thousand so we plug that in and
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what happens here is if sheet starts to
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actually calculate the the price
4:34
all the way up to almost an acre here a
4:36
little over an acre down here and we can
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stretch this all the way out to two
4:40
acres if we need B now I would say for
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most folks we would probably want to cut
4:45
this off and actually go up to about an
4:48
acre so that would be somewhere right
4:49
around this area here
4:53
and if we went in we could delete that
4:56
out
4:58
or actually just hide it
5:02
and we can say every
5:06
foreign
5:10
over 42 000 square feet is x amount of
5:14
more dollars time and cost so Patrick to
Dollar Per Hour
5:17
answer your question we really need to
5:18
have this dollar per hour in expense per
5:21
hour so I’m going to get into this in
5:23
the second part of the video but let’s
5:24
just say we know our Revenue per hour is
5:26
110 that is our goal per man hour for
5:29
the the licensed fertilizing technician
5:32
and let’s say that our Breakeven is
5:34
about 49 per man hour so after doing
5:37
several hundred of these a year uh
5:39
that’s probably where I’m seeing
5:40
ballpark in the average of the country
5:42
now we don’t want to base it on other
5:43
people second half of the video I’m
5:45
going to show you how we come up with
5:46
that break even in the hourly Revenue
5:47
goal but once we have that we figured
5:50
out our calculations for the product
5:51
based on the bag product 100 coverage
5:54
and our liquid post emerging at 30
5:56
percent coverage for spot Springer IPM
5:58
now we’ve set our base price at 55 and
6:01
that covers up to 4 000 square feet and
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what we’ve done here is I’ve set a
6:05
production rate of 0.047 so maybe that
6:08
is going to cover our production for the
6:09
first four thousand square feet
6:11
for hose and reel push spreader or some
6:15
extra added time for unloading loading
6:18
in that dashboard time now in addition
6:20
we can do is go in and say hey if I’m
6:22
using a write-on spreader we’re probably
6:23
going to be closer to a 0.02 or maybe
6:26
somewhere in the middle of a 0.035
6:29
that’s our production rate per thousand
6:32
and you can see what the sheet has done
6:34
automatically says hey I’m based on this
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base price that Patrick potentially gave
6:37
us we’re charging 13.75 per thousand and
6:41
what we’ve done is built a methodology
6:43
into the sheet here where we can
6:44
literally plug this in and say baits at
6:47
7.50 this is what we would charge based
6:50
on these price breaks but if we went in
6:52
and say Hey you know at ten thousand at
6:53
100 bucks it’s a little bit High not
6:55
where I want to be let’s plug that in at
6:57
seven and now the sheet drops it down to
6:59
97. so we’ve done is give me the ability
7:01
to to alter your production rates per
7:03
thousand and your charge per square feet
7:05
all the way down here now what happens
7:08
is when we go into service autopilot or
7:12
any other pricing softwares that you may
7:14
be using that we could uh build out with
7:16
you
7:17
you want the ability to actually go in
7:19
and take this so this is really your
7:21
blueprint
7:23
um good news is now none of the other
7:25
software that I know of actually give
7:27
you a profit and profit percentage
7:29
projection okay so if we go in and pull
7:33
up a product like service autopilot this
7:35
is going to be our blueprint this is
7:37
what we do with hundreds of businesses a
7:39
year uh we go in
7:41
we go into our services
7:44
and then we go in
7:47
and we pull up or create a fertilization
7:50
service
7:54
and see if we have on this test account
7:55
if not I can show you so we’ve got a
7:57
fertilization of weed control maybe
7:58
early summer treatment
8:01
and when we pull it in we go to the rate
8:03
matrices and the idea here is the the
8:06
top five lines here we’re going to line
8:08
up two
8:10
the top five lines here in this sheet
8:13
and we continue to add the lines all the
8:15
way down price breaking and say ten
8:17
thousand twenty thousand thirty thousand
8:20
wherever those breaks are where you want
8:21
and that every thousand over the last 42
8:24
000 is an additional 350.02 time and
8:27
it’s costing us 364. so based on the
8:30
cost that material we’re actually losing
8:32
money if we’re at 350. so we need to
8:34
adjust that and that’s something that’s
8:36
very very common because when we deal
8:38
with companies and work with them
8:40
they’re throwing numbers against the
8:42
wall and hoping they stick and they’re
8:43
assuming that they’re making money so
8:46
this is a non-emotional way um this is a
8:48
great example so I’m glad I added in the
8:50
post-emergent in there because this is
8:51
where folks get into trouble
8:53
um that 350 is not covering 3.64 cents
8:56
per thousand cost and a one minute
8:58
production rate per thousand so they
9:00
have to be charging at least three
9:02
dollars and 64 cents per thousand after
9:04
the first acre to at least break even so
9:07
this would probably have to be a
9:08
significantly uh jump so we’re at 450
9:10
that’s making sense this here is
9:13
probably got to be closer to four four
9:16
dollars and 25 cents on average to make
9:19
sense on your price per thousand so the
9:21
idea is we can now check our math of our
9:23
profit and profit percentage our hourly
9:26
wage that Patrick asked about that we’re
9:27
going to get into in a minute in the
9:29
hourly uh in the expense for manner so
Answer
9:31
to Patrick to answer your question
9:32
exactly
9:33
um the matrices does not
9:36
um determine your dollar per man hour
9:38
Revenue goal we need to have a dollar
9:41
per minute hour Revenue goal
9:43
um
9:44
determined and they break even number
9:46
would it cost you power to break even
9:47
before we ever go into the matrices so
9:50
we need a revenue hour a revenue per man
9:52
hour goal and a break even we need your
9:54
non-emotional product cost per thousand
9:56
with the coverage and once we bring the
9:58
revenue permanent hour the Breakeven and
10:00
the product with product costs and
10:02
coverage it all comes together into the
10:04
blueprint and then your top five cells
10:06
here are going to go into the top five
10:09
cells here and then you would continue
10:11
to add matrices and lines as we build
10:14
that out and we literally copy and paste
10:16
them in that’s then when you plug into a
10:18
square footage it’s going to calculate
10:20
the exact price so that is the way we
10:23
are going to tackle a price break model
10:26
in any software
10:27
um and if you’re using service autopilot
10:29
you take the top five lines and transfer
10:31
them in here we want to set our
10:33
calculation and our custom field to
10:35
probably per square footage so to answer
10:38
your question uh Patrick needed we need
10:40
to develop your charge per man hour and
10:42
a break even and we need to include your
10:44
product costs in the rate matrices in
10:46
service autopilot service autopilot
10:48
question second question is how do we
How to figure out your man hour rate
10:50
actually figure out what Patrick needs
10:52
to charge per hour and what’s it costing
10:54
him so the idea here is we’re going to
10:56
go into simple growth
10:58
um
11:01
average wage and overhead recovery
11:04
template so this is where we can use a
11:06
more system multiple overhead recovery
11:08
system to build out and figure out what
11:10
your cost per hour is and how to get
11:12
that cost per hour and desired Revenue
11:15
hour man hour in the matrices in
11:17
addition when we go out to schedule
11:19
those jobs on a fertilizing technician
11:21
in my company we’re running 12 to 1300 a
11:24
day for one technician so how how do you
11:26
know what to charge for that technician
11:28
so what we’ve done here is we go into
11:30
setup say Patrick’s fertilization
11:32
Division and we may not have tax and
11:36
crew leads
11:37
um but we may have
11:39
a series of technicians and they could
11:42
be making anywhere let’s say from 28
11:45
29 and maybe we got a couple veteran
11:48
guys at 38 and 34.
11:51
and if you’re in my market Upstate New
11:53
York you’re going to be running about
11:54
1800
11:56
1700 hours a year so we put the
11:58
projected hours in here and the Sheet’s
12:00
going to say hey we got 5400 hours of
12:02
projected payroll based on those wages
12:04
it’s going to cost you 182 857 and let’s
12:09
say that uh five percent of their
12:11
payroll time is in overtime so the
12:14
average wage now across all those
12:15
technicians is 33.86 we’d want to go to
12:19
our payroll company and get our labor
12:21
burden is a percentage of the dollar and
12:23
then each technician as we go in we
12:26
would plug their hourly wage so if the
12:28
gentleman that is making 34 bucks an
12:30
hour we plug that in
12:33
and that is our hourly wage with burden
12:35
and OT with burden those are budgetary
12:38
numbers that we need so that’s the first
12:39
step we figured out average wage and
12:40
labor and next step
12:42
we’re going in and building out our
12:45
truck and tank or truck and trailer
12:47
whatever that looks like in your company
12:49
uh so in this basic example we’ve got a
12:52
2500 pickup uh purchase price here’s
12:55
Finance interest rate years of use
12:57
salvage value what are we selling it for
12:58
work days per year and uh hours per day
13:03
licensing and miles per gallon uh fuel
13:08
cost
13:09
oil changes oil change interview oil
13:11
change cost tire change interval entire
13:14
change cost and additional maintenance
13:16
so that truck if we were running a 2500
13:19
say GMC or Chevy truck it would be
13:22
costing us 7.78 per hour
13:25
in a yearly or monthly budget there uh
13:28
in that example we probably do not have
13:30
a trailer but we may have a machine so
13:33
we may have instead of a 60 inch laser
13:35
we may have a perma-green or an X marker
13:38
Toro ride at same idea uh we’re going in
13:41
the finance Years Years used insurance
13:46
um maybe that set of blades but
13:48
different uh swapping out of
13:50
preventative maintenance on that machine
13:52
oil changes cost of fuel and then we get
13:55
an hourly operating cost so we could
13:57
have the truck we could have the right
13:59
on machine and then we would probably
14:02
have somewhere over here a tank that we
14:05
were actually holding the materials in
14:06
but the idea is we’re going in and
14:08
driving in all those costs for the
14:11
fertilizing I’ll show you a mowing
14:12
example because I’ve already had it
14:13
pre-built but that’s the idea that we
14:15
want to build out all the divisions and
14:17
all the equipment here uh maintenance
14:19
package is going to be more for
14:21
maintenance or design build but it’s
14:22
your weed whacker stick out your blower
14:24
and one crew put the total cost of that
14:26
all in there and we run it over
14:28
and lump it together so that we don’t
14:30
get lost in the minutia but that’s also
14:32
going to give you an hourly cost as well
14:34
so once we’ve got all your equipment
14:36
we’re going to go in and let’s say we
14:38
have five of those 2500 pickups with the
14:41
tanks in the back and the spreaders on
14:43
the back we put in the purchase price
14:45
the quantity equipment type original
14:47
cost hours per year hours per day hourly
14:49
rate cost per year all from the previous
14:51
sheet and then it’s going to get you a
14:52
cost for all five of those trucks the
14:55
whole entire year and as you scroll down
14:56
to the bottom we’ll have a total
14:58
equipment cost so this is the idea that
15:00
if we are serving
15:04
um
15:05
Debt Service such as equipment payment
15:07
things like that that don’t show up on
15:09
profit loss we are covering it in this
15:11
process as a Debt Service because a lot
15:14
of companies will look really nice and
15:15
good on the profit and loss but in the
15:17
balance sheet they’re forgetting about
15:19
all the debt service so this Pro this
15:21
process will pull that Debt Service in
15:24
so we actually have a relative number to
15:26
recover that Debt Service as well so if
15:28
you are uh have long-term payables such
15:30
as loans for your trucks or equipment
15:31
that needs to be figured in when we
15:33
figure out some of these hourly recovery
15:35
rates uh next thing we’re doing is we’re
15:37
going to build an actual budget here
15:39
General administrative costs across the
15:42
top for overhead
15:44
plugging those all in
15:47
and we’re going to go in and put our
15:48
gross sales our material including tax
15:52
our labor with scheduled hours and
15:53
average wage from the labor sheet our
15:55
labor burden subcontractors equipment
15:57
that we just went through any rental
15:58
equipment and the total cost of sales
16:00
and it’s going to give us a gross profit
16:02
we’re going to take our detailed
16:03
overhead from the top and drop that in
16:05
here
16:06
and what that’s going to do at the end
16:08
is give us our total overhead to be
16:09
recovered as a percentage of sales our
16:11
net profit or loss and if we’re
16:14
recovering in a Moore’s overhead
16:15
recovery system we’re going to mark up
16:17
materials 10 equipment 25 and Subs at
16:20
five percent and what that’s going to do
16:22
when we plug that all in is going to
16:24
give us an overhead recovery labor
16:27
percentage and we’re going to drive that
16:29
into our hourly Bill rate per crew so
16:32
Patrick was talking about fertilizing
16:34
I’m going to use a mowing example same
16:36
idea a little more simplistic for
16:38
fertilizing we’re going to put the
16:40
number of people on the crew so in this
16:42
mowing crew it’s two how many hours a
16:44
day the average wage off the Labor uh
16:46
labor sheet is a labor burden the
16:49
overhead recovery is coming from our
16:51
labor recovery number down here on the
16:54
bottom
16:55
and now we know the labor on that crew
16:57
is 8 52 built in with a 20 profit margin
17:01
our truck and trailer for mowing crew
17:03
how many hours per day overhead
17:05
recovering profits a truck and trailers
17:07
cost us 152 a day uh we got the mowers
17:10
on the crew but this would be the
17:11
fertilizing machine on the truck how
17:14
many hours are we using it not curb time
17:16
time from shop to shop like we do the
17:18
trailer truck at 73 dollars
17:22
and our maintenance package our handheld
17:24
equipment so in this mowing example when
17:27
we run through this process for
17:28
Patrick’s question is we’re gonna have a
17:30
daily sales goal of eleven hundred
17:31
dollars
17:32
Breakeven is costing us 918 before May
17:35
profit and we need a budget 20 hours and
17:38
our break even is now 45.90 based on
17:42
that particular crew makeup and as
17:44
Patrick’s question exactly the hourly
17:47
Bill rate for that mowing crew is 55.
17:50
but if you went through the same exact
17:51
process for a fertilization technician
17:53
uh this would obviously be a bit higher
17:56
but I’m guessing your daily sales goals
17:58
are going to be between 15 uh 12 to 1300
18:01
it’s probably an eight to ten hour a day
18:03
and our bill right here is probably a
18:06
little over a hundred dollars and once
18:07
we get these non-emotional numbers
18:09
Patrick that’s what’s going to drive
18:11
right into the charge per hour and the
18:13
expense it’s not the matrices we need to
18:15
set our charge set our expense
18:18
figure out our average cost of materials
18:21
based on granular and liquid and whether
18:24
we’re covering 100 or percentage of spot
18:26
spraying and then build a minimum in the
18:30
price to show up so let’s say we’re at
18:32
60 bucks minimum and now that covers 5
18:34
000 square feet
18:35
the simple growth blueprint updates that
18:38
sets the price changes
18:41
and at that calculation hour 12 dollars
18:44
per thousand and we can adjust our
18:47
charge per thousand as we go down and
18:49
our production rate per thousand to
18:51
update the matrices and once this is all
18:53
set up we’d go in the service autopilot
18:56
or whatever software and take the top
18:58
five cells here
19:01
outside of the profit and profit
19:03
percentage so these guys here and
19:05
literally put them in the system the
19:07
problem with most software is they do
19:09
not give you the profit and profit
19:10
percentage projection so we want to
19:12
blueprint it confirm our projections and
19:14
then drive that into the software so
19:16
Patrick go out figure out your hourly
19:18
rate your break even put that into the
19:21
simple growth blueprint or something
19:22
similar figure out your product costs
19:24
across each round are averaged and then
19:26
drive your matrices with a production
19:28
rate that’s not emotional based on here
19:30
historical data or a conservative
19:32
industry average so Callahan’s corner
19:35
you ask the questions we had some live
19:36
right here on Facebook Patrick great
19:38
question please submit your question in
19:40
the comment or a couple of Facebook
19:41
groups are in and we’ll be answering
19:43
them pretty much on a daily basis
19:44
throughout the following months thanks a
19:47
lot Patrick for the question