Hey Mike Callahan, had a question submitted how to go out and determine the salary of an involving lawn care or home cleaning company. Basically the question is really revolving around probably two parts in my opinion at least in my experience in my business. The first part of it is how do you actually go out and continue to grow your bench and stay within your budget and actually figure out how much you should be paying the individuals on your existing team when you replace them and then the second part of the question Ithink we should look at is how do we go out and figure these salaries and compensation for new team members as the company continues to grow and evolve and scale. It wasn’t uncommon in my business several years to actually double in size each year so those are things that I think really need to be taken into account well in advance of the upcoming season. Traditionally what we’re gonna do is in a service business if you’re looking at I would go out and create a bhag a big hairy audacious goal I mean this is gonna sound a little crazy first I’ll hang in there with me but the idea is that big hairy audacious goal is gonna be 10 to 15 years we’re gonna break that down into yearly goals and growth goals and then as we get into let’s just say going into 2020 if we had done this in say November or December or we’re going into 2021 and we’re doing this in the beginning of Q4 going into next year what we want to do is create an organizational chart of the existing business as it is no names on it strictly positions and responsibilities so first thing is we go in and we create our goals for 10 to 15 years we’d back those into yearly goals and as we’re going into next year’s goal we create an organizational chart hopefully already have them if you don’t we’re gonna create one with the existing positions and responsibilities only do not put names on it. Now once you have that we need to go in and project what our future growth looks like for the next 12 months on that organizational chart and it is all the roles and responsibilities so as the business is evolving the business owner maybe the bookkeeper they may be the estimator they may be the general manager in the morning get the crews out. Each business is different as we scale certain people in the organization way but maybe wearing multiple hats so the point of the organizational chart without any names in it with responsibilities we wanted to find all the roles and the responsibilities then we go to grow out the management team for crews so if we have five mowing crews and we’re looking at seven next year and we’ve got those responsibilities we’re gonna go in and potentially plug in the names of the existing people that are handling each role and responsibilities in the business and like I said somepeople’s names may be on multiple roles now looking at the roles are you taking one individual so maybe one individual is running the shop they’re doing the maintenance they’re gassing the equipment they’re doing quality control and training and maybe more so obviously at that point you’re gonna realize that person is probably overburdened with too much work and then the compensation for that individual needs to be aligned to that so that’s for the first part of the compensation. Now that we have all the roles defined and who’s sitting in them in the existing business if we’ve got say maybe four more positions on two two-man crews and we got gentleman and lady that need to be put on those crews we need to go and figure out the existing wages on our team so in the office and in the field now you’re fixed general administrative cost for the office is going to be fixed projected into next year long as nothing changes so that’s the place I would tackle first figure out your fixed cost if you make one saleor a million sales it doesn’t matter your general administrative costs your in labor producing labor is gonna be the same. I think this is where it dives into the question that was being asked is now that we have our organizational chart in our existing people with projected raises are plugged in there we’re gonna put those on a thing that I call a average wage sheet now if you’ve seen any of my videos where we go in and do a budget overhead recovery it is the first sheet we go over it’s the average wage sheet we’re gonna break the average wage sheet downpour division of the business so a basic example of average wage sheet per division in a lawn care industry would be landscape maintenance, hardscaping and maybe irrigation fertilization weed control those are significantly different overhead models that are gonna have to be addressed as far as wages now we don’t care about the overall overhead of the business but the wages and compensation may be significantly different from a maintenance crew to a hard scape crew or fertilization crew so we want to break it down per division and at first we really don’t want to put their names on their we’re gonna put technician one crew leader one technician three and break it down per crew and break down the pay levels and then we can pencil in the projected employees for that year. Now that we’ve got say five mowing crews and we’re adding crew six and seven we have projected average wages that we’ve budgeted for now on the below that what we’re gonna do is average all of them to get an average wage across all of your crews so let’s say your average wage is fifteen dollars and thirty cents so then we know at that point no matter who’s out on those crews on average that’s what it’s costing us and some people have more seniority or experiences their pay is gonna be higher but we want to know on average what that’s gonna cost us then we’re gonna figure out our average overtime so our average overtime that we’re paying per season so maybe it’s 5% 5% of our payroll for that reason is gonna be over time so we’re gonna figure out our average wage with average overtime so maybe that bumps it up to about 18 bucks an hour so we know why on average now whoever’s in the field based on our seven crews that we’ve projected with future hires is going to be say $18 an hour whether it’s straight timer overtime it’s on average that’s what it’s gonna come out to be the piece below that that most people miss is labor burden now labor burden is going to be your FICA unemployment workmen’s comp holiday pay vacation pay any of those things like that the need to be plugged in in it’s usually if you call your payroll company you can find it as a percentage of the dollar so what you’re gonna do now is multiply your labor burden times your average wage across all your employees in each specific division so it needs to be done per division now this is probably a long answer to this question but there’s a reason why we’re doing this. Now we’ve got each division we’ve got an average wage with projected over time and labor burden. The gentleman or ladies question was how do I go out and predict payroll increases or replacing individuals throughout the season in a quickly growing business so this is how we tackle it non emotionally. Now we have a hard copy on an excel sheet or Google Doc and we know based on the projected two crews that we have a technician in there for say $14 an hour a crew lead at $18 an hour that is what we can pay for those individuals so the gentleman that was running Callahans when he would make those moves I said I don’t really care what you pay the individuals but on average that crew has to cover that average wage so the the delta of the 18 and maybe the $15 an hour guy when that comes out per hour that neat for that screw that has to be taken care of and if you’re gonna go fire let’s say Dave, Dave doesn’t show up he’s a no call no show we’ve gone through the process in the handbook and he is gonna be either coached up or coached out when we replace Dave you have exactly what Dave was making within the budget now if Dave was only making 13 bucks an hour and the applicant that we found was probably needed 16 or 17 then either when I was running the business or the gentleman who ran the business for me either had to take some money out of some other areas in the budgeted wage area or maybe it’s coming out of his pay but that is what you have to work with within your budget. The idea is we want to create a non-emotional budget that dials out your projected wages with overtime and labor burden and once you have that into place that’s your roadmap for success and that’s your hiring guide. I would always tell the manager the gentleman running business like hey if you need to give this guy an extra $2.00 hour it’s got to come out of somewhere because that is our budget and that’s where we’re at now obviously there may be some exceptions if we find an individual maybe in a management position or someone that you know usually takes three or four years and they walked into the door and they’re the perfect applicant but then when we go back to the average wage sheet we’re gonna add that number in there and see what does that projection of the extra two to three dollars an hour with overtime and labor burden do to our overall budget does it move that percentage of projected profit so much that it’s not worth getting that individual in there? Those are the non emotional decisions that you can make once you take it out of your head you project where you’re going in the next 10 to 15 years break it down to yearly goals and at a bare minimum you got at least projected budget for the year in advance and then that is your roadmap to a fast evolving company with non emotion you know your wages your average wages your projected overtime all budgeted in and you can track it weekly. If you haven’t seen our KPI she definitely something to check out but this is where we track all of that after it’s been documented in a standardized budget so average wages each person that goes in your putting their pay rate in we’re projecting how much overtime so we have average wage across each division with overtime and then labor burden and now we have a non-emotional roadmap to go out and hire to the budget what we’ve projected. Comments or questions drop them below but I want a big shout out to Megan definitely dropping a lot of knowledge on Megan at the PPP and accounting right now and everything that’s going I want to say what’s up with Bobby Follet direct competitor in my local market for years great guy Tony Douglas, Chase Holmes, Todd Goodrich another great guy in the Rochester upstate New York Keith, Taylor and everybody else watching and Charles Clark obviously as well what’s up buddy didn’t see up there. The goal is if you haven’t done it we’re going into the end of Q2 you’ve got six months left in this year get an average wage put together how many projected hours of production are you gonna have for the rest of the year create a budget and stick to it and create daily and weekly accountability and once you’re comfortable with it bring your team in and show the wins and losses and get them to tie into and buy into that accountability and budget. Comments or questions drop them below. I thought I’d make a quick video- how do you go out and set a budget and stick to it and have a basically a road map how to go out and hire new employees and stay within that budget because the worst thing you want to do is go into season grow more than you projected and start hiring up and outside of that budget so we need to track it and stay true to whatever we put down on that paper and if we can’t stay true to it i need to run the numbers before we do that to make sure that it’s not eroding our bottom-line profit most lawncare and landscaping companies net margin nationally I believe is about four to six percent net in my opinion it’s not worth putting a crew out for less than ten percent net profit so from what I’ve seen most people we work with Simple Growth most companies start out fifteen to twenty percent projected net and it is these mid-season shifts unpivoting that we are desperate for an employee and we pay way outside of what it’s been budgeted and we project everything in there but it’s that non-billable drive time and accountability that we don’t track so we just think it’s gonna come out in the wash and it doesn’t. Hopefully that was helpful but go out figure out where you want to be in the next ten to fifteen years back it up to yearly goals and then create the projection of a an organizational chart with no names which is important because we’re not building the position around Bill, Joe or Bob or Susie we’re building it around the position and then we’re gonna train to the skill set so if we hired and built a position around someone that’s gonna be really hard to replace that position. A lot of things that we’ve gone through in my company and learned the hard way so I thought I would share it but build the position to the position mark down the responsibilities don’t put names on it and then make it another version that organizational chart put the people’s names in there you’re projecting to have in there for the year and then take those people put them into an average wage sheet per division so basically landscape maintenance design build irrigation fertilization those are probably all different ones and well if you’re doing snow removal in the Northeast that’s definitely a different division because those pay rates can almost double some cases triple so that’s gonna be your financial basically roadmap to hiring and firing and what pay you have in the budget and if you don’t at least my opinion it’s eroded bottom-line profits a lot quicker so it’s a good non-emotional benchmark especially if you’re growing and scaling your business and you don’t want to do the business owner having to make all decisions and hire and fire you can give that document to whoever’s there and hold them accountable to it and now when we build that out hopefully the beginning of the year you brought that you may be your gentleman in when you build that out so they have ownership and they have ownership of the numbers or on that page it’s not you dictating to them what they can pay they have had a 50% input of what the average wage is gonna be foreach position. 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