Forecasting projections.

Ravenswoodtree

New Member
Hi everyone,

Its the winter, a perfect time to go over the numbers, prep taxes, prep for the comp audit, tweak strategy and friggin take a break.

I started working on some projections and playing around with some excel sheets.

A couple questions.

As the business owner what is your gross salary to gross sales percentage? I just calculated mine. I personally grossed less than fifteen percent of gross sales. What is a good percentage? Looking over the numbers at the end of the year, I realize that fifteen percent aint so great.

How many days a year are workable? I just did some pencil scratching and figured subtracting bad weather, some holidays, downed equipment, and sick employees we should be able to get in between 150 to 200 work days in. I live in Massachusetts, so snow and rain can cramp our style.

How did you guys determine your daily target for a crew? I kinda of winged it. I realize thats not sound business thinking, but at this point it works. My daily target is $1800 with three guys , dump truck and chipper. Daily targets vary widely from different industry folk i have personally spoke with. I know one one dude with a 73' bucket and a 24" chipper struggling to hit 1200 a day with all that equipment. A climbing operation that does fine pruning for $2600. Another climbing operation that struggles to get 1500. I realize prices vary widely by season, by saturation of the market, by clientele, etc. What daily targets work for your single crews?

I am going to try to post my excel file over the next day or so. Its basic but kinda of interesting.
 

Ravenswoodtree

New Member
I have attached the file. Let me know if it makes sense. I realize there are clearer ways to express these projections , but in the interest of being quick and dirty (and a bit rusty on my excel chops) I think this works.
 

Attachments

ROYCE

Well-Known Member
Your doing some great things in your slow time. I too and hoping to get some forecasting done, but we just haven't slowed down like we did last year.
With your figuring you are going to make 270,000 for the 150 day scenario and 360,000 for the 200 day scenario. With a three man crew and some equipment that is very achievable. However, I feel your really playing it conservative. You have left 60 days off the work schedule to compensate for bad weather, equipment break downs, and employees being sick. If you could stay busy year round your projections for that would be 468,000. Now that might be a little un-reasonable in your market if weather gets bad.
So, to answer your question in regards to owners pay it depends on what your making a year. I know a owner who company makes 3 million a years. 15% of 3 million is 450,000. That is a very nice salary. However if you pay yourself 15% of your lowest projection your making only 40,500. That is not too bad considering you only worked 150 days of the year. Lots of time to do other things. I would play yourself what you feel you are worth and what the business can afford.
I try and bill out around 2K a day for three guys, log truck, chipper, chip truck and bucket truck. We are busy year round. However, I pay myself very little right now to keep money in the business. Most all our equipment is paid off, so this year I will be able to double my salary with-out putting the business in jeopardy. Unless I decide to buy a knuckle boom crane.
 

dmd

Active Member
Hey Chris this is the same stuff I do. I love understanding how the money gets to my pocket. You said three guys... Does that include you or three guys plus you?
$1800 per day seems low for a guy with your tree knowledge and from what you've told me about your market.
I forecast based on a 168 day year. But usually exceed that. My percentages are skewed since we are a family business.
 

Ravenswoodtree

New Member
Hi Doug

$1800 covers myself (the climber) and two ground man, one or two dump trucks and our small 12" chipper. If the dingo comes, i try to get some more for that.

It would be nice to get more for the day target but there are some real challenges in this area. As we all know, the tree industry is growing in rapid ways. Some of that growth isn't particularly desirable growth. In my neck of the woods(within 20 miles of my log yard) there are least six big tree cranes trying to run full time. In addition, there are a couple dozen, possibly under 50 tree companies chasing the market here(north of Boston) within 30 miles. Also in addition, landscaping companies of all sizes are adding "treecare" as their list of services. "Treecare" for them often is this ugly thing that we arborists shudder at. A broad slice of the market is middle income work. Mary homeowner needs a tree removed or branches away from the house, she can call one of 50 dudes. In my opinion the middle income market is flooded, creating a price war that i don't want any part of. So, i am happily left to focus my energy to pursue only the upper income market. My hope is that quality can be sold over price, at which point 1800 or 2600 doesnt matter any more to my clients. This has been the goal all along, but it has taken a while to establish myself if the fine treecare market. Since i don't chill with millionaires on the weekends, it is slow to get my name and reputation passed around.

What i have realized over the past couple years is that keeping busy doesn't mean profitability. You can beat your head in keeping busy and have nothing to show for it. That sounds obvious, but when i started out, i got all giddy dropping 10k of checks in the bank at once, then you look at your expenses and you're still behind. I realize all this centers around careful business management rather the industry. But i suspect i have run into the challenges of many climbers that figured, well shit, i'm gonna open a tree company.

How do you guys balance and calculate when to buy more iron or not? It is easy to justify why I want so-so, but quickly all profit can go right out the window.

I have been enjoying this thread. Thanks everyone for participating.
 

djm

Active Member
There are 52 weeks a year. If you are productive 48 of them you are looking at 240 billable days. You will struggle to make good money leaving 40 days on the table. Your salary as a percentage of gross sales will fluctuate with the size of your company. When you are smaller it will be a larger percentage. When you are larger it will be a smaller percentage but the number will be bigger. Just go to work every day you can. Good luck!
 

treehumper

Well-Known Member
$1800 covers myself (the climber) and two ground man, one or two dump trucks and our small 12" chipper. If the dingo comes, i try to get some more for that.
Great to hear you're thinking you need to be the business guy first, tree guy second. That is the only way you'll be able to build and grow your business with any sort of direction and control.

A few questions:
Do you pay yourself as a climber? For a 3 man crew working an 8 hr day, I'd be looking at $2400 min.
What are your selling, general and administrative costs? Do you calculate into your costs commissions, marketing and administrative wages? Whether you pay them out or not they need to be part of your costs. By doing this you have a better idea of what those costs will be when the time comes to add to your payroll. While this may be paid to you for these functions you can also opt to reinvest this back into the growth of the company. The key is they already exist in your mind and your estimates.
Is your company incorporated? Your gross profit is just that, profit not pay. This is separate and apart from the wages and should be estimated based on that.

If your actual is 15% then you're doing pretty good. Estimate on the basis of a higher margin, say 25% with a full work year based on your historic average number of workdays. Look at your uptime or downtime and find where you could be better managing them. Planned maintenance of equipment can help reduce unscheduled repairs. Look at the service records of your equipment to determine what parts you should be maintaining an inventory of to reduce turnaround time on repairs. You can also see if the equipment is starting to outlive it's usefulness and whether it's time to replace vs. repair. Where parts are consumable such as tracks on a mini or belts on a chipper shorten their duty cycle and replace them at 75% of their life. Keeping costs under control isn't just about the best price. It is also about spending at the right time and managing your equipment to maximize uptime and minimize unscheduled downtime.

One of the suggestions I've made for us is to create blocks of work based on the jobs we have and identify those that can be done by a short crew or on days where the weather is inclement. Make sure you've also discussed flexible scheduling with clients on these jobs so that you can make a quick change to the day's work plan without the need for calls to clients for permission. This should help reduce the number of days lost to sickness and bad weather.

I would stay away from adding a cost for a given piece of equipment. I'd rather subtract it and the service it brings from a price if a client is looking for a better price. How you get the job done should be inconsequential to the customer unless your using it as a selling feature. And when using it as a selling feature stay away from those features that are a benefit to you, ie., increased productivity. That would imply to the buyer that you are going to make more money out of them. Focus entirely on the benefits they value. The want the lawn to be left undamaged? A crane will ensure that. What does the dingo do for the client? It'll make you more efficient but that is offset by the cost of the equipment. What you can do by using a dingo is increase the total revenues per day. Eg., that 8 yr job for a 3 man crew at $1800 can be done in 4-5 giving you the opportunity to schedule additional jobs that will fill the time gap.
 
Great to hear you're thinking you need to be the business guy first, tree guy second. That is the only way you'll be able to build and grow your business with any sort of direction and control.

A few questions:
Do you pay yourself as a climber? For a 3 man crew working an 8 hr day, I'd be looking at $2400 min.
What are your selling, general and administrative costs? Do you calculate into your costs commissions, marketing and administrative wages? Whether you pay them out or not they need to be part of your costs. By doing this you have a better idea of what those costs will be when the time comes to add to your payroll. While this may be paid to you for these functions you can also opt to reinvest this back into the growth of the company. The key is they already exist in your mind and your estimates.
Is your company incorporated? Your gross profit is just that, profit not pay. This is separate and apart from the wages and should be estimated based on that.

If your actual is 15% then you're doing pretty good. Estimate on the basis of a higher margin, say 25% with a full work year based on your historic average number of workdays. Look at your uptime or downtime and find where you could be better managing them. Planned maintenance of equipment can help reduce unscheduled repairs. Look at the service records of your equipment to determine what parts you should be maintaining an inventory of to reduce turnaround time on repairs. You can also see if the equipment is starting to outlive it's usefulness and whether it's time to replace vs. repair. Where parts are consumable such as tracks on a mini or belts on a chipper shorten their duty cycle and replace them at 75% of their life. Keeping costs under control isn't just about the best price. It is also about spending at the right time and managing your equipment to maximize uptime and minimize unscheduled downtime.

One of the suggestions I've made for us is to create blocks of work based on the jobs we have and identify those that can be done by a short crew or on days where the weather is inclement. Make sure you've also discussed flexible scheduling with clients on these jobs so that you can make a quick change to the day's work plan without the need for calls to clients for permission. This should help reduce the number of days lost to sickness and bad weather.

I would stay away from adding a cost for a given piece of equipment. I'd rather subtract it and the service it brings from a price if a client is looking for a better price. How you get the job done should be inconsequential to the customer unless your using it as a selling feature. And when using it as a selling feature stay away from those features that are a benefit to you, ie., increased productivity. That would imply to the buyer that you are going to make more money out of them. Focus entirely on the benefits they value. The want the lawn to be left undamaged? A crane will ensure that. What does the dingo do for the client? It'll make you more efficient but that is offset by the cost of the equipment. What you can do by using a dingo is increase the total revenues per day. Eg., that 8 yr job for a 3 man crew at $1800 can be done in 4-5 giving you the opportunity to schedule additional jobs that will fill the time gap.


Right on! This is one of the most concise descriptions on pricing and projections I've seen on here. I would only add that it seems like lots of guys on here have very impressive backlogs and are always trying to figure out how to get it done, but based on some of the rates I see on here (and out in the 4 areas of the country I've worked in), it seems like as a group we're just not charging enough. I like your base rate of $100/man hour for any tree crew. It's very reasonable, yet allows us to make money and pay our people well. PHC work should be going for $200 or more an hour as well. It just seems like we could all do ourselves and our profession a huge favor by charging 20-50% more than we are.
 

treehumper

Well-Known Member
We find reasons not to by focusing on price and cost instead of value. We also lose sight of what we are selling. There is a mistaken belief that we are only selling labor, unskilled, semi-skilled and skilled. What we are selling is knowledge driven labor. The sooner we grasp that concept the sooner we'll start charging appropriately. The amount we need to honor the skill, knowledge and experience we bring to a client.
 

mattbever

Member
Good thread guys. I think this is the next 'big thing' that needs to happen in Arboriculture. Better business. Most all of us work our tails off, but it seems only the chosen few get paid what they feel they deserve. The majority just complain about low ballers and hacks and how hard everything is...

The chosen few do things like put there projections up for peer review and think constructively about how to optimize their efforts; good on you Ravenswood!

And thanks to the rest who have taken the time to post. There is some simple but often overlooked info here. Good stuff.
 

Ben Heller

Member
I have attached the file. Let me know if it makes sense. I realize there are clearer ways to express these projections , but in the interest of being quick and dirty (and a bit rusty on my excel chops) I think this works.
Ravenswood,
I just recently did a more extensive projection of my business which includes expenses as well as gross sales. I would be willing to send the file to you if you were interested in looking at it. My accountant set it up for me so I think it is a pretty good synopsis of our data. I don't really feel comfortable putting it up for the public to see though, sorry. Feel free to pm me or email me at hiawathatree@gmail.com.
 

ward

Well-Known Member
Thanks Ravenswood for this. These numbers are really helpful to everyone! Nicely done.
 

KevinS

Well-Known Member
Hey Chris this is the same stuff I do. I love understanding how the money gets to my pocket. You said three guys... Does that include you or three guys plus you?
$1800 per day seems low for a guy with your tree knowledge and from what you've told me about your market.
I forecast based on a 168 day year. But usually exceed that. My percentages are skewed since we are a family business.
168 days? Why are you working less than half the days of the year?
 

dmd

Active Member
Kevin, those are money making days. I use the rest of the time to bid jobs, fix equipment and relax.
 

treehumper

Well-Known Member
Good thread guys. I think this is the next 'big thing' that needs to happen in Arboriculture. Better business. Most all of us work our tails off, but it seems only the chosen few get paid what they feel they deserve. The majority just complain about low ballers and hacks and how hard everything is...

The chosen few do things like put there projections up for peer review and think constructively about how to optimize their efforts; good on you Ravenswood!

And thanks to the rest who have taken the time to post. There is some simple but often overlooked info here. Good stuff.
I'll say what I always say....

If you own a tree business then be a business guy first, a tree guy second.
 
Top