You will make highest profit % on selling labor, as opposed to parts/supplies. If you get 70% gross profit margin on your labor and + 40-50% gross profit % on supplies, you will really do well.
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hvac
pool repair
plumbers
all come to mind too
you can have a ‘slacker’ in the field of one of those businesses who could probably double the margin regularly vs a seasoned wc’er bustin out glass all day
for those smaller wc business out there that want to grow, this is one revenue ‘wall’ you will realize at some point . . .
the trade off is repairs are unpredictable and you better be the first one to pick up the phone and to be there, but once there you have a captive audience at $150 per hour + after cost of goods margin
This thread is one of my favorites. I have reread it many times. There are so many variables for any business depending on the area they operate. What you can expect average gross sales for a 2 man crew varies from region to region. Therefore all the numbers are skewed proportionally. The overall idea of having a ratio of sales staff to office staff to techs in field, along with what proportion of revenue each should receive is brilliant. Inside those ratios is a system an owner could begin to lean on to build a larger business.
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if you go by the profit first principle
take out your 15% off the top
now make a budget that works with the 85%
and the simple numbers principle: have a salary cap for gross payroll and then get the labor production ratio for the company and figure how to make it climb
this is all good stuff
the better stuff is getting the rates that pay everyone a decent salary within that framework that makes them want to excel and stick around very long term, seems most models and rates are built around getting the cheapest employees one can find a la subway and other franchises
run it with your numbers and see where it comes out
with supervisors and other non direct revenue producing employees that are necessary I seem to always find it exposes lack of economy of scale (very linear returns, more people does not equal a higher economy of scale return) and what I mentioned earlier, that other industries are getting far more revenue per lower paid employee across the company overall. throw in weather, wild weather and extreme weather unknowns and its even harder to make the good cycles go beyond just breaking even over (or filling in) the bad
I would say this seems to me to be why so many settle for a sweet spot (wife running office for “free”) or owner and less than 5 guys (minimal admin, tech, mgmt. etc expenses)
there’s a huge grand canyon between sweet spot vs large self functioning business with absentee owner. (which can be achieved with under 5 people for an insurance office)
these are the innate challenges with this industry
what are your ideas to overcome them?
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Good post Bruce. I am spending the winter systemizing my business. The calculations I am trying to nail down is cost of “support” staff for the techs in the field. Then trying to break that down to cost per day. Once I have acquired the “real” cost of a systemized business I can adjust my rates to support that. There was a post by Chris one time that touched on this area, I’ll have to try and dig it up.
let me know what you come up with, I would be interested to hear
awhile back, a nice balanced business I plugged in would need to be charging/generating 150+ Pmh
and that would only happen with top shelf seasoned employee production levels
I’m not Debbie downer, just realistic, like a business buyer would be
oh, cost of support, its all going to come back to average job size, the smaller the job size the more admin is necessary
adjust way higher for itty bitty storefront
adjust way lower for average job sizes in the $1,000’s
if you’re mainly residential (in the 100-500’s) and just window cleaning then you’ll need 1 FT admin person (and that might be a tad too much workload) per 22.5 full time work days or 4.5 FT people from my past experience.
or 1 FT day of admin per 5 FT field days, but 1 FT day doesn’t work out to “Monday”, it works out to 1.6 hours per weekday since there’s activity every day that needs to be done
but this is not accounting for a backup which was definitely very necessary at times.
@Chris what did you find end result at All County or are you under a gag thing after
the sale? 
keep in mind
“cost of support staff”
is a moving target
after x staff you will need an increased factor of support staff, and after y staff you will need an additional increased support staff
at x you need 1 admin person, what if they are sick? on maternity leave? etc, so you really need 2 admin to start really (at the need of 1 FT)
at x point of field guys you need a manager, an assistant manager, and backups for these
depending on job size, how many field techs per mgr? will it be a production manager? a non production manager?
my point is, once you open Pandora’s box, you need backups! or more staff than you need, you need floaters for the field (to cover for those on sick, vacation, personal days etc), you need backups for the admin and backups for the mgrs.
so factor in more staff than you need probably at 1.5 of what you think you need.
Bruce what’s the specific question here? I want to make sure I answer you right.
thanks, then let me ask the question in a more thorough way that would be very helpful and interesting for all
if you take or reflect on where you ended off, or at largest size that you felt you had a balanced staff for all the functions
how many total non revenue producing, and partial revenue producing people did it take to support how many field people?
or it could be divided out for example .5 per 1 ft field person
out of that total, or if it’s easier to figure from the start:
how many:
ft admin per ft field person
ft sales
ft managers, middle mgrs., op mgrs.
what other non revenue support positions if any, did you find were necessary at your size? (truck and equip mechanics maybe, IT stuff, go-fers)
I’m thinking in the end it comes out somewhere in the .2 - .25 range? per field full time equivalent
(I suppose it could be lower taking into account rookies, newbies, turnover, extra hires in probationary period etc but if you divide by what the average FT seasoned guys were producing annually into gross revenue instead to get number of FT Field people to use for the other calculations it will remove that skew)
Definitely interested on my end.
I think my brain works more along the lines of…
1 Non Revenue per 2.5 in the field.
vs
.12 per 1 field person
- which goes more along the lines of “when should I hire another?”
But either way works for me.
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Gotcha OK here goes it. Well, actually I will talk in terms of “If I was ever going to do this again” This is the exact blueprint I would use. Why don’t we just talk about 1 Million bucks - A nice round number. To deconstruct a bit:
1 Million / 12 Months = $83,333
Weather here is unpredictable so I would do it like this:
April - November - Full Time - 8 months @ $115,000 per month
December - March - Part Time 4 Months @ $ 20,000 per month
$115,000 per month over eight months could be done like this:
24 working days per month ( during this seven month period ) = $4791 per day
$4,791 per day / 4 trucks = $1198 to earn per day ( two dudes in truck )
There would be a 5th truck. It will be used as a floater if one of the vehicles needs repair and or for an Ops Mgr or owner to drive.
10 window cleaners on staff - Salary @ 30% + 11% Tax expense = $410,000
Lead guy / manager / 1/2 in the field half in the office = $45,000
Sales incentified office woman = $45,000
I would probably also keep 2-3 experienced on call type guys around. In case you have to let someone go, if there is an emergency… whatever.
Depending on other expenses owner could yank a 100k salary out of it. He would need to be involved. 60% of his time would need to be focused on marketing sales related activities. 20% of financial stuff and the other 20 on operational and team development.
BUDGET
Direct Labor - $410,000
Office / Sales - 45,000
Ops guy - 45,000
Owner - 100,000
Total - $600,000
Then you just need to tweak the budget to make this all happen with 400k or fewer expenses. ( Its possible )
Mechanic - Oncall, minor stuff - Oil changes, etc have the operational guy handle as men are coming in for the morning.
IT - As needed. Computers just work these days and with everything in the cloud he might not even be needed.
Go-fers - I’ve always had one they made me lazy, I probably would never get another one. The ops guy can handle any running around, and equipment drop offs and refills to the guys.
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I’ll put it this way I know someone with 6 full time wc’ers
Grossing 500-600k who’s paying himself 10k a month and 10k profit
All that to make a 100k?
Unless his profit he gets to take out after salary is very substantial ?
Seems that a million dollar company more of hassle than it’s worth maybe as it grows over a mill it becomes better paying for the owner
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In the template I laid out the company should have more profit than the owner.
I think it is at first. Your right.
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THanks Chris, I appreciate the well thought out response!
who’s the back up/assistant for the ops guy in this structure since he is such a key player?
it didn’t take long to realize a part timer or backup for the main office person is very necessary at times
sweet spots are leverage, leverage can reverse and all land on you, the owner, like when the ops guy quits and the office girl goes on maternity leave or similar
(not poking holes at your layout Chris, just pointing out things others may gloss over or not consider)
ahh yep, .2 non revenue
1 per 5 ft
those extra 2 guys hanging around would come out of profit unless they are on call type?
I would say this is a sweet spot and as one grows that .2 is ratio going to rise since more support staff will be needed
someone could probably plan/budget based on a .3 rate and if less great, stow it away in profit
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The Ops guy is the backup office person.
There’s always a window cleaner who thinks he can do the ops guys job better. This is his chance!
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if he makes 10k a month and there’s another 120k (20%) sitting leftover in the bank account every year, that’s pretty sweet isn’t it?
if everything’s on target the owner could take another 60k+ in salary
YES! - And Im a strong believer in using the business as a tax shelter in every LEGAL way possible. I would rather pay myself a lower salary and then draw other income from the business in other ways.
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ok, that’s one pretty unique ops guy lol, field, sales and office pro, but I see what you’re thinking here
thanks for adding more
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@Brian_C, you switch up to this model? Im very interested to hear more
