Clearly ours is an industry that involves mostly time and cost of equipment operation. There are some materials but for the most part that can easily be figured.
We have been using a chart that helps us approximate the time. Sometimes the final numbers looks right...Yeah the chart says that Pinus strobus will take 5 hours from take down to final shovel of needles into the truck. Sometimes it says 3 hours but we all know from past experience that that particular tree in NFW will be finished in less than 9.
It comes down to finding a hard formula to get you in the ball park and then personal experience to fine tune it.
Once you know what your time is then you can apply your hourly rate.
We all have a rate that we would
like to get, a rate that we
think we need to get and then there is a third rate, based on your business plan and analysis that you absolutely
must get.
It is that third rate that you really need to hone in on, figure out and deviate as little as possible from. TCIA has a neat little booklet on how to figure it out. (from personal experience it that particular book is confusing and a nightmare. But once you figure it out it is priceless information.)
This all should be broken down in to man-hours
Then, if this nightmare is not enough, you need to determine whether the market will handle your rate. We have found that given our season, our expenses, payroll and profit needs required that we charge $XYZ per man hour.
We knew from past experience that we could sell nearly all our bids at 66% of the $XYZ rate and less than half the bids at 75% of the $XYZ rate and less than 10% of the bids at the $XYZ rate.
How did we find this out? over the years, before analysis we tried it all and kept track of what worked.
Your hourly rate will sell the right percentage of bids if it matches the need of your
- market: The BruteForce&Ingnorance Lot clearing market only pays so much. The FinesseEstatePruning market tends to pay more.
- Client Demographicseople making $20k per year and living on rented property have a lower price threshold. People making $200k per year have a higher one. Retirees hang on to thier money tightly, Up-and-Comers more likely to invest in your work
- Local Economy: No money coming in, less money going out
Since the rate we
MUST get was outside what our market would handle, we had to review our rate calculations to adjust it downward. This included cutting budgets, refinancing and postponing capital expenditures. Your personal company situation
WILL BE DIFFERENT
You may find that you have to make your company a little more lean and trim. On the other hand, you may find that your MUST HAVE rate is so low that you can sell everything you bid. If that is the case then you can market yourself as the lowest price around and sell even more! Then again, you might find that your MUST have is too low for the market and need to up it(with incresed profits
) to stay just under the market and still sell as the low price!
So now, you have your estimated time, in man hours, which should include your dumping times and multiply that by your man-hour rate (the third one) Add your dumping, permit, rental and other fees and BINGO you have your bid.
Since the man-hour rate is calculated based on your costs, payroll and profit needs you can also know how flexible you can be + or - on that rate (usually fairly tight) Your bids will be more consistent across the board.
No more Mrs Smith saying "well you did Mr. Jones tree for $300 less than mine yet his was half the size of mine and his was harder to get to!"
Also in coming up with your man-hour rate you will discover how many man hours you need to sell to meet expenses (break even) It will also tell you how many man-hours you will need to schedule and pay your people for.
I suspect that you will find that as much as you try to lock in a firm formula, it will only get you there part way. Granted it will be a good foundation to work from, but your expertise as an estimator will play a huge role and out of necessity will need to improve every day.
For the longest time we have been bidding larger jobs by the tree and losing jobs because it just seemed to be adding up to too much.
Now we are finding that if we bid using a day rate (based on rate #3) for the larger jobs (meaning we cover daily expenses, payroll and owners payroll for the day) We are now selling more larger jobs
Anyhow, long winded reply but hopefully helpful.
If you want I can post a copy of the "bidding grid" we use that you can play with. Just let me know if you want to see it.