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New Start Up Venture

Morning all,

 

Another start up venture post.....apologies!

I have spent some time reading through the various posts on this site which has led me to sign up and post myself. I am currently reading Paul Powers how to book and it makes for very good reading however he runs his business as a sole trader, whereas I would like to run as a LTD company to separate personal finances assets etc from the company. 

From the other threads I understand it's far better to price per job than to quote per hour, albeit in your mind your thinking approx 2-3 hours so you times that by your hourly rate to get a fixed price: in PP books he breaks down each quote with fuel, waste fees etc, is this normal or should you build this costs into the hourly rate?

For example ( numbers made up, not venturing into the hourly rate debate just yet....!)

3 hour job based on £1 an hour

£2 fuel costs

£1.5 waste fees etc

£0.50 profit

Total quote £7

or, is it better to just say yeah to mow your lawn, remove cuttings and waste it will be £7

 

Thanks in advance. 

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Replies

  • You don’t need to break down costs for the client. It is better to give a total fixed price, but if the job involves removing waste and/or other tasks associated with the job at hand, you can list these tasks involved but not a breakdown or list the costs involved.

    This way the client can see the work involved and also see what they are getting for their money. It also makes them aware of the intricacies involved which they probably haven’t thought of. With domestic clients you would normally do this verbally but with commercial clients you may need to commit this to paper or email.

    Pricing is something that gets much easier as you go along as it becomes largely based on precedent. If you have a mowing job which pays say £100 and you go and look at a new job which is very similar but is half as large again, then it is easy to come up with a figure of £150.

    It is also useful when looking a new job that is very similar to an existing one, to be able to use the experience gained on the first one to correct any under-pricing. So if you are charging £50 on the existing one and now realise it should have been £80, you can now quote £80 on the new one of the same size.

    I have said this repeatedly, as have many others, but grass cutting should be £60p/h or more and hedge cutting should be £35 to £40 p/h.

    I would also avoid removing waste from site. I have only done this once in 35 years. On small domestic gardens use the green bin. Always mulch and never collect grass on all but the smallest of lawns. I have a mowing job where the previous contractor collected and took the grass clipping to the tip. I mulch instead. The job now looks far better [as attested by the residents] and the time saving is considerable. The price is £90, the same as the previous contractor, but I am on site for 35 minutes only and no time going to the tip. Mulching is far more efficient.

  • PRO

    There's a lot more to being a ltd co than simple separation of assets etc. As a new ltd co with no trading history you may find suppliers refuse to give you credit accounts for a few years. Also a ltd co is becoming less and less tax efficient (what used to be the main benefit) with much higher levels of paperwork and accounting required. To a degree, what you can charge and how you charge depends on your target market. To compare with Vic's post above, in my area, there is not a full coverage council run waste collection service. Odd clients have a brown bin but usually they have filled this themselves as they tend to be the keen gardener types. Seventy five percent of my clients are 'fine lawn, rolled and striped' and if I told them I was going to mulch it, I have no doubt I would be loosing the jobs straight  the away.Given amount of negative feedback I got on the three days once  I  was forced to use a wheeled mower instead of a roller mower due to a warranty repair, suffice to say I wouldn't even try it!

  • PRO

    As your just starting this up and you have no experiance of pricing and costing, I would advise you to go as a sole trader and see how it pans out. If your still doing it in a years time, then think about changing to a ltd company.

    As far as pricing is concerned, you need to give one all-in price to the customer, but you should have a rough figure in your mind as to what time it is going to take you, + cost of machinary, fuel, and getting to the job.

    Don't forget, the cost of travelling to the job should be incorporated into the price.

  • Hi all,

     

    thanks for the response, all very helpful!

     

    Without getting into too much, Vic, you mention that mowing should be £60 per hour for not more, surely this does not mean domestic lawns?

     

    Also Adam / Adrian, thanks for your comments, as I understood that the limited company meant that any personal liability was seperate - if the business was to fail and end up insolvent then any personal affects are safe. Totally understand this may not make for the most profitable enterprise but surely as a new guy who isn't 100% on business running etc should be leaning towards lore of a LTD as a newbie is more likely to fail and get it wrong?

    • PRO

      Hi Darren.

      Your outlay to start this business is very low, your most expensive outlay is going to be the van which could be on HP. so your not going to owe very much money.

  • PRO

    Darren, if you are just doing garden maintenence as opposed to landscaping then your risk factor from a liability perspective is low.  Obviously you need liability insurance but as long as you don't go and borrow money and put your house up as capital then if,and I say if, it did go belly up, you're not going to be massively in debt.  I am still a sole trader and I employ 5 people and we are currently running 4 vehicles (but that's more because we are travelling seperately still).

    Although technically all the money is mine, I have seperate accounts and pay myself a wage so I know what's left is just for spending/saving for the business.  I am looking to go LTD as we are picking up more commercial contracts lately.  But when you are just starting out and doing most things yourself, there's enough admin anyway without making it even more complicated or expensive.

    As others have said, give yourself a year or two then perhaps look at it again.

    That's just my two pennies worth anyway :-)

  • I suggest you ask an accountant about Sole Trade / Ltd company. My (Ltd) company (nothing to do with horticulture) has been operating for decades, employs nearly 100 people, turns over £A Big Number ... but if the business wanted to borrow any money from the bank at a half decent rate I, as a director, have to make a personal guarantee and put my house on the line ... I guess that changes at some point, but it doesn't seem to have done yet!.

    Keeping finances separate between Personal and Sole Trader is not difficult (the business side would have its own bank account / credit card etc., so just make sure to put the expenditure / income in the right "pot"), and the Sole Trader route is less complication for "use of home as office" type expenditure, less accountancy cost, less set-up-cost

    As a Sole Trade if you are going bust I can't see you owing much money to anyone (but you may have a different view) as no one is going to extend you much credit and the writing will have been on the wall for some time - i.e. you won't be taking any money home ... so unless you are deliberately screwing suppliers for credit you will be able to exit with the only person owed money being you.

    Liability would be covered via insurance, but that is a question I would ask the Accountant - what would happen if you backed into a client's oil tank and burnt their £million house to the ground? Also if you undertook a large job, bought a bunch of materials, spent time on it ... and then didn't get paid? If you can't afford to lose that money then you should "cover" that by deposit upfront and, pre-agreed, stage payments at various stages of completion, or even Customer paying for all materials so your only risk is your time.

    Depends on the punter no doubt, but when I employ someone to do a job, and they are a one man band, I am careful to support them ... for example, we run supplier invoice payment once a month, but all local trades are paid "immediately" even though it is a pain to have to raise individual payments. In return I hope that the trades remember me and will prioritise work for me if I am in a bind ... and those that do continue to get my business, and prompt payment :).

    >> mowing should be £60 per hour for not more, surely this does not mean domestic lawns?

    I'm the last person to advise on this, because I don't calculate hourly-jobs at all, but out of curiosity I scribbled some figures down

    I think the £60 an hour figure looks good.

    You work 8 hours a day, 200-ish days a year.

    £60 an hour (8h x 200 days) is £100K a year.

    But ... if you actually only have 4 billable hours a day its only £50K. And that is Turnover not Income. Billable Time does not include sat in van / traffic, foul weather, reduced winter work / hours ... nor time spent doing book keeping, and visiting Prospects and preparing quotes.

    I totted up £15k of expenditure (replacing & financing expenditure, running a Van). Not including Accountant, Bank fees, Bad debt etc.

    I wouldn't want to do it on the prospect of £50K turnover ... but, starting out, you could. But unless you have a plan for getting to £60 per hour I am doubtful your business model will be viable.

    • depends on your area i suppose but the 60 quid per hour for lawn mowing is probably based on using a large ride on machine which expensive to buy and run and covers a lot more area per hour rather than a pedestrian lawn mower. Good luck to anyone who can get 60 per hour for standard mowing though. to my mind hedge cutting is harder work than mowing so maybe that should be charged at 100 per hour lol

    • With all due respect to you and your £big number businesses, £60p/h as unviable as a start-up gardener? Don't talk rubbish.

      • I agree and what I was trying to say "I wouldn't want to do it on the prospect of £50K turnover ... but, starting out, you could". 

        Do people really want to do this long term for less than £50K p.a. turnover? A full time, employed, gardener around here is over £30K and that is a much easier life than the hassle of running a business and none of the cost of equipment, risk, long hours etc.

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