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370. Know Your Cost of Doing Business

⏱️ 25:36 🎤 Aaron Sutter
AUDIO EPISODE
370. Know Your Cost of Doing Business
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Chapters

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  • 0:00
    Understanding Overhead Costs
    Aaron introduces the topic of knowing overhead costs and how it's crucial for pricing and profitability in a solo lawn care business.
  • 2:06
    Tracking Expenses is Key
    The host stresses the necessity of meticulously tracking all business expenses to identify areas for cost reduction and accurately assess profitability.
  • 4:29
    Calculating Your Break-Even
    Aaron outlines the formula for calculating the break-even point per lawn cut, explaining how to use overhead costs and the number of cuts per season.
  • 6:35
    The Earthpro Tool
    He mentions Earthpro CRM's built-in calculator for simplifying break-even point calculation and how it revealed unprofitable lawns in his own business.
  • 7:34
    Aim for 20% Profit
    Aaron advises aiming for a 20% profit margin, highlighting that many lawn care businesses operate with much lower margins and how cutting expenses helps achieve this.
  • 9:20
    Why Your Price is Unique
    The episode explains why individual businesses cannot simply match competitors' prices due to varying overheads and the need for personalized pricing based on the break-even point.
  • 10:12
    John Payjack's Insights
    Aaron recommends John Payjack's 'Profits with Payjack' podcast for its valuable and simplified advice on running a profitable green industry business.
  • 11:21
    Adjusting for Varied Properties
    He discusses the nuance of pricing for different property sizes, suggesting a 'per hour' calculation for varied jobs instead of a flat 'per lawn' rate.
  • 12:41
    The Empowering Truth
    Knowing your break-even point empowers business owners to make informed decisions about pricing, cutting expenses, and even firing unprofitable clients to build a more successful business.

Speakers

A
Aaron Sutter
Host

Key Takeaways

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Calculate your exact overhead costs annually, including your salary, to understand the true cost of running your business.

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Track all expenses meticulously using software like Wave Apps or QuickBooks, rather than just collecting receipts, to identify areas for cost reduction and assess business health.

✦

Utilize the provided formula (Overhead / Total Annual Lawn Cuts) to determine your break-even cost per lawn, ensuring you're at least covering expenses.

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Aim for a 20% profit margin on top of your break-even price for every service to achieve significant profitability in the lawn care industry.

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Do not base your pricing on competitors; instead, determine your unique pricing strategy based on your specific overhead and desired profit margin.

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Consider calculating your pricing per hour rather than per lawn if you service a diverse range of property sizes to ensure consistent profitability across all jobs.

✦

Periodically review your break-even analysis to identify and address unprofitable clients or excessive expenses, making necessary adjustments to your business model.

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