Realistic, profitable companies tend to fall in between 80% and 87% efficiency. Really productive efficient companies are between 87% and 95% efficient.
What if my efficiency is more than 100%?
That's saying your sales goal is greater than your job costs + the right overhead and profit. You'd have to, on average, charge more than LMN is telling you to charge to hit that goal.
It might be realistic if you do all kinds of plant material/irrigation/lighting work. Profit margins in those sectors tend to be greater than average, however we'd be likely to recommend that take a more conservative sales goal. It's not very likely that you'll recover every job cost at the right price and finish every job on time or under budget!
What if my efficiency is less than 80%?
Somehow, you're not charging for 20% (or more!) of your job costs. This can come from any of the following:
- too many unbilled hours/too many payroll hours not producing revenue
- consistently going over budget on estimated hours (either because the estimates are too aggressive or your crews are too slow)
- estimators consistently missing job costs (such as disposal costs, delivery charges, materials, equipment costs)
- not charging enough for overhead
- square foot pricing
- unit pricing for materials (e.g. cost of the material x 2.5)