Math on mowers

Dave Rykbost, president of Dave’s Landscape in Hudson, Mass., wanted to more accurately calculate his mowers’ cost per hour (CPH) rates to ensure that he was charging enough for his equipment. I told him that first we needed to determine how many hours were put on his machines each season as well as for their lifetimes. So off to his shop and yard we went. Climbing over 60-inch riders, walk-behind and stand-on mowers, we wrote down the hours on each of his machines. Once we had that data, we could then proceed to calculate how much his mowers cost per hour to operate. We would then enter the CPH information into my MS Excel pricing worksheet for Dave’s two-man mowing crew and calculate his rate to charge customers.

Assess the numbers.

Run-time hours on Dave’s stand-on mowers were roughly 500 per year. Riders were getting a little less while the walk-behind mowers were accumulating a little more. Past experience told us that lifetime hours for the rider mowers would be 2,500 hours. The stand-on and walk-behind mowers would not last as long, and we estimated their lifetime at 2,000 hours. I prefer to be somewhat conservative with the lifetime hours and generous with the maintenance costs when calculating the CPH for trucks and field equipment.

I also like to trade in or sell these machines when they reach 75% of their lifetime hours. This allows me to get a maximum amount before major repairs usually happen occur.

Calculating the CPH.

There are three separate CPH components to consider when calculating the CPH for a truck or piece of equipment. They are the acquisition, the maintenance and the fuel components. First is the acquisition cost per hour. Our 60-inch rider mower will cost us about $16,000 plus sales tax. We plan to include financing for three years at 5% interest, pay a 6% sales tax and sell the unit after four years and about 1,700 hours for roughly $3,500.* Our acquisition CPH calculates to be $8.62 or 55% of the lifetime cost to own this item.

Maintenance is the second component. In addition to all of the maintenance services, I include either truck and auto insurance, or inland marine insurance, in this category. If there’s a cost or man-hours expended to maintain a vehicle or piece of equipment, it goes here. Since in-house mechanics tend to be hard to quantify for specific items, I tend to use market pricing from vendors to estimate costs. The maintenance CPH for our 60-inch mower is $3.34 or 23% of its lifetime cost.

Finally, we estimate the fuel CPH. For field equipment, I estimate how many gallons the specific piece will consume during normal usage. In the case of the 60-inch mower, I used one gallon per hour at an average cost of $3.50 per gallon. I calculate the fuel CPH for trucks and automobiles as follows: I estimate the annual miles driven and divide it by the average miles per gallon. This provides the gallons consumed per year. Then I multiply the gallons per year by the average cost of the fuel per gallon.

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For an Excel sheet budget sample, visit bit.ly/lawnwebextra

This gives us the annual cost of fuel, which we divide by the estimated annual hours for the vehicle. The result is the fuel CPH for the vehicle in question. For our mower, fuel costs us $3.50 per hour or 22% of its lifetime cost.

To obtain the 60-inch mower’s total CPH, we add the CPH for all three components together. In our case, the total CPH is $15.66 ($8.62+$3.54 + $3.50). Interestingly, the total CPH for rider, stander and walk-behind mowers tends to be about $1 for every thousand dollars of purchase price. No such correlation exists for vehicles, smaller hand-held equipment (edgers, trimmers, blowers, etc.) or larger field equipment such as skid steers, excavators, loaders, etc.

Once we completed our calculations, Dave felt confident that he could accurately calculate the cost per hour to operate his equipment on his mowing and maintenance routes.

Since he also had the annual hours used for each piece of equipment, he could accurately estimate each machine’s daily usage by reverse-engineering its monthly, weekly and daily hours.^

One final comment.

Dave and I had neither perfect nor complete data when calculating these CPH figures.

However, we had ample data to do so. Use the process illustrated in this example to cost out your field equipment.

Travels with Jim follows Jim Huston around the country as he visits with landscapers and helps them understand their numbers to make smarter decisions. He can be reached at: jhuston@jrhuston.biz.