Just starting out. Questions about covering your costs in early bids.

[Chris Wood]

Hi Folks,

I have been climbing off and on for 10 years now. Later this month, I will be formally opening up a tree business north of Boston. We will be fully insured with just the basic equipment(dump truck, chipper and me climbing). In the early years of running a tree business how do you go about recouping equipment costs and insurance costs? Take a high hourly wage and just pay off the bills that way? I was anticipating charging about 110$ an hour for two guys at the job site. Do you think I should be charging more than that? Working North of Boston, in the past no one has had an issue at that bill rate.

Any thoughts on pricing and covering your insurance and equipment costs would be great.

Lastly, when legally classifying your own tree businesses, do you guys go with DBA or LLC?

Cheers,

Chris Wood

 

[joezilla11]

I'm in ohio but from my experience a DBA is usually for a one man show or an existing business that wants to run under/add a different name in which case they file for a trade name (which is ohio's version of DBA ). Typically if you want to run a business and have employees an llc would benefit you. Under an llc you are not personally liable for actions of your employees , your business is and it's assets. If you are sued they sue your business. But again this is limited, you are always liable for your own actions and work regardless.

 

[Grouchy old man]

Why is an LLC always the first thing that comes to mind when somebody wants to set up a business? Maybe because there are sites all over the internet wanting to set one up for you? Every state is different in what an LLC means and provides, some don't allow it and the IRS doesn't even recognize it. To them you would still be be a sole proprietor at tax time. Best advice is to talk to an accountant and an attorney about YOUR specific situation. Depending on many things an S corp or C corp might be a better fit.

 

[Pelorus]

Hey Chris, welcome to this site.
When you refer to "we", are you going into a partnership deal with someone, or are you the sole proprietor, with the business registered in your name?

I don't like to charge an hourly rate, and most often just cite a figure based on how difficult the job is, and how long I figure it will take, ie. 1/2 day, full day, multiple of days. Also, my experience is that it is also better (more profitable) to price each tree individually, and add them all up, instead of just coming up with a single price. The sum of the individual parts usually works out to be more, and if the owner decides to add or delete a tree, then it is easy to come up with a revised price that makes sense to everybody.

Figure out how much money you need to make in a year, and divide the number of days you figure on working into that. Don't realistically plan on actually working more than 250 days/year, unless you live near Jeff in California. This can give you a rough ballpark figure of what you need to make each day to break even.

 

[imagineero]

You can price your work any way you like; by the hour, but the cubic meter, by the number of guys and amount of gear on the job, or whatever.... but you are only going to win jobs if your price is competitive for the level of service you offer. A lot of tree companies earn closer to $200/hr for 2 groundies plus a climber and a chipper, but then, most guys aren't charging by the hour, they're charging by the job. On, say, a $1600 job, can you get the job done in 7 or 8 hours? If not, then you're not worth $200/hr.

When you first start, you probably don't have a lot of gear, or a lot of skills, or a well trained crew. Things are going to take time. If you want to make money, stick with simpler, smaller jobs, that are clear of property and power. Those jobs are quick money makers, and they're a sure thing. Price them at around $100~$120/cubic yard of chip removed, and get good at estimating the chip in a job. Never tel the customer you're quoting that way, just give them a quote. If you're any good, you should pretty easily manage $200/hr at the rate of $100/cubic yard of chip if you take on easier jobs.

Stay clear of complex jobs, and individual trees over about 18cubic yards. You'll spend way too much time on those, and you can't compete price wise against the guys who are geared up to do them. You won't make money on those jobs, you'll just wear yourself and your gear out for very little return.

Shaun

 

[Chris Wood]

Hi Guys,

Thanks for the thorough response everyone.

Over the years I have done a number of more technical jobs(lots of lowering over structures etc.), but I anticipate leaving the real hairy stuff to a bucket worker. That said, for the guys that don't have a bucket truck how do you guys deal with bringing people in to do jobs you can't handle. Just tack on a finders fee and arrange another company to come in deal with it, or have other companies throw you a small percentage of the job for finding them the work?

In terms of hourly work. I asked that just in terms of when I price out a job. I use the hourly estimate for my price calculation. Say it is a four hour job, I will just multiply by 120$ an hour (for one climber and one ground guy) and call it a 480$ job plus a chip dump fee. In my bids, I spell out the bid by tree so that they client can pick and choose what they want to prioritize. I may consider bumping up the hourly price a bit to put money aside to go towards the general equipment fund though.

I will look into LLC versus a Corp. It seems in Mass it is pretty common for folks in the green industry to go the LLC route.

I never thought of pricing by the chips removed. Once we get the chipper I will start some calculations and see how it plays out.

Any other words of wisdom for a new tree company. We hope to start with a landscaping component of the business for starters to make sure we have enough work early on, and then once the treework get's established we will likely let go of all landscaping. I will be pricing and climbing all the jobs. My business partner will be my ground guy and he will spearhead the landscaping/lawncare component. There are a lot of tree companies in the area, but I think we are both pretty well connected in the communities we live in(about 30 minutes apart from eachother) so I think we should be busy once I name gets out there. We hope to keep equipment costs low early on, and once the tree business gets established try to specialize in just pruning and small take downs. There are a lot of big guys around here with monster cranes that can easily beat me out with large removals. I don't have a lot of interest in getting into monster take downs.

Lastly, we are hoping to run a small firewood operation with our takedowns. There is a guy in town and he does real well firewooding the stuff from his jobs. He moves 400 cords a year at 300$ a cord. He actually has to buy logs to meet his firewood customers demands. I don't anticipate getting into something like that, but in the slow winter months processing wood for future seasons seems like it could work for us.

Cheers,

Chris

You can price your work any way you like; by the hour, but the cubic meter, by the number of guys and amount of gear on the job, or whatever.... but you are only going to win jobs if your price is competitive for the level of service you offer. A lot of tree companies earn closer to $200/hr for 2 groundies plus a climber and a chipper, but then, most guys aren't charging by the hour, they're charging by the job. On, say, a $1600 job, can you get the job done in 7 or 8 hours? If not, then you're not worth $200/hr.

When you first start, you probably don't have a lot of gear, or a lot of skills, or a well trained crew. Things are going to take time. If you want to make money, stick with simpler, smaller jobs, that are clear of property and power. Those jobs are quick money makers, and they're a sure thing. Price them at around $100~$120/cubic yard of chip removed, and get good at estimating the chip in a job. Never tel the customer you're quoting that way, just give them a quote. If you're any good, you should pretty easily manage $200/hr at the rate of $100/cubic yard of chip if you take on easier jobs.

Stay clear of complex jobs, and individual trees over about 18cubic yards. You'll spend way too much time on those, and you can't compete price wise against the guys who are geared up to do them. You won't make money on those jobs, you'll just wear yourself and your gear out for very little return.

Shaun

 

[Nemus Talea]

12 years ago I opened a paintball field, (started climbing to make the woodsball field safe) and at that time my lawyer was unsure of LLC's as that they hadn't been as legally tested. I went with a S corp. A corporation is the entity in total and the DBA is a name the corp can Do Business As. Puppy Kicker Inc. could do business in public as Grannies Cupcakes. A corporation can have more than one DBA. Not sure if there are "real" legal protections to the corporation if a DBA gets in trouble, if so, you might want the landscape and tree under separate names. Might be handy when dropping the landscape. Tell your lawyer your future plans. If he says your tree work assets would be best protected from a gardening accident with a separate DBA...
I'm in New York so I am not sure how this flies in Mass.
At that time an LLC was $300 - $500 cheaper, but this is the foundation of your business, so get it right. A little over 1K for a S Corp isn't so much in the long run, which I hope you have.
Its a good bit more for a C Corp structure, but from your stated plans, I doubt your lawyer would advise that.

 

[stltreedr]

My attorney and accountant both say that LLC's are so cool they should be illegal.... But they aren't. You get great benefits with personal liablity and taxes, but none of the crap that goes along with a regular corporation. When running as a DBA- which I did for many years, your personal assets are at stake, even if they have nothing to do with the business. As mentioned before, states vary.

I wouldn't sub out your bucket work or anything else for that matter. Get yourself some equipment by whatever means necessary, savings, loans and do the work that you can sell.

Good luck.

 

[tspain]

Best advice when I got started was to create a business plan. It really helps you figure out your numbers and the true cost of operation. Its hard to get started, but once you have an idea what is really going on with your fiancees you are not running blind.

 

[imagineero]

I never thought of pricing by the chips removed. Once we get the chipper I will start some calculations and see how it plays out.

To my mind, thats that only sensible way of measuring the volume of a tree. When quoting, the critical factors to me are;

DBH (amount of ripping to get it through chipper, or firewood)
volume of chip (amount of chipping and number of dumps required)
distance to the road (amount of labor)
access (amount of labor)
targets under the tree (hours of climbing)

You need to have some rational ways of quoting your jobs and I've layed out my system numerous times on this site. The short end of it is $100~$140/cubic yard for whole tree removal depending on the size, distance, access and targets for whole tree removal, but no less than $200/hr. For trimming jobs I pretty much work it off $200/hr because the amount of tree you remove is so much less but the time involved is so much more. That only works if you're a good climber though. A quality trim ends up being $600~$800 for a big tree for me. Bare in mind that my work is residential, so when I do a trim it's generally for property clearance. That means it's going to be the biggest, longest, heaviest branches on the tree, closest to the building with no room to lower off. That equals higher risk and more time.

Shaun

 

[miko0618]

I assume you don't want a loan.

we have a rental place that will allow you to put your rental balance towards the purchase. lets say you need a small chipper at $1200. it cost $40 a day to rent or $120 weekly. you can rent it for 10 straight weeks and own it.

or you can just fork out your paychecks on gear as you need it.

I always add 10% to anything I bid. lets say you expect a trim job to be 4 hours of climbing and your gonna charge $100/hr. your estimate would be $400. add 10% and make it $440. put the money into a savings. watch how fast it adds up. and its money you otherwise wouldn't have made. be strict about saving it. if you invest it back into your business with better equipment, advertising, ect.. it will grow very well.

don't cut yourself but stay busy. once you are the guy people trust, they will never question price.