Field Services (Lawncare Pricing on Drive Time v Work Time and Using it for Team Planning) - Case Study

​Before I get into the example I would like to comment.  Companies often have issue with field services and planning due to the mobility aspect, but if there is a segmentation, the planning becomes clear.  Think of each vehicle as a brick and mortar location … that moves.
 
First, set up the planning as if it was a location.  There are the lease payments, equipment investment, inventory investment (parts), maintenance, and all the admin that would accompany an actual store such as general liability insurance and licensing and permitting.  You will eventually forecast revenues and have your AR and AP that is directly attributable to the field service, but don't think of it as mobile yet.  Think of it more like a service station that has a certain number of available hours for the day for appointments, only these appointments will have more idle time between them due to the drive time.

If you are working out a plan for field services for the first time, or considering changes, you should probably work with different sizes of vehicles.  The reason is that you must understand the investment in the equipment and inventory load out that you would like to have given a certain size of vehicle.  As you begin with a large, ideal vehicle, you can then choose another smaller, more economical vehicle and perform the same the loadout.  Of course, the smaller vehicle will force a selection of equipment and inventory that you believe is absolutely essential given less capacity for the equipment.  This planning will also have you questioning what types of service will be most common since this will determine equipment and inventory carry and have you working out how other services could be completed if they are beyond the current equipment and inventory.  These are all good questions because they get you to consider data collection and future analytics.

Secondly, address the mobility.  The mobility is where we begin to look at costs that only involve driving, distance, mpg, price per gallon, and auto insurance for example.  You might be wondering how you would arrive at distance, but at first this is just an upper bound that will be adjusted for different lengths of appointment time.  For the upper bound, think of the total time in a shift ... say 8 hours.  Then think of the average speed of your vehicle as you drive around town ... say 40 mph given the stops and starts at lights and stop signs.  Your max distance, with no customer stops, is 320 miles.  Next, you are obviously saying to yourself that you will have stops for customers ... yes!  When forecasting revenues, you must work out how many appointments you can fit into a workday relative to drive time and appointment completion time. 
 
The forecasting of revenues is the most difficult piece for individuals to understand for appointment driven services, regardless of whether they are at a brick-and-mortar location or if they are field services, because there is a bound relative to any price point.  Let’s look at each individual profit center, that takes appointments, in this case a service vehicle. You can only squeeze in the maximum number of appointments of a given appointment length in each day.  If you consider the ideal scenario that consists of only appointments with the highest contribution margin per unit of time, if achieved, the only way to increase revenues for this profit center is then to either raise prices or cut variable costs.  This means that each profit center has a maximum amount of revenue that can be achieved and only in an ideal scenario. 
 
This is one reason why there is the attempt to “grow” through increasing the fleet size or the number of profit generating centers … this then becomes a question of capacity of services available and the actual demand for the services or the utilization.  But again, given a total number of profit centers of the appointment driven variety, there is still that upper bound of revenues since time to provide the service is the constraint.  
 
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That said, this case study that I put together is for a lawn services company providing lawn care and lot cleaning services to commercial enterprises.  We will look at a pricing method utilizing drive time and work time as pricing factors with a consistent margin.  To approach this planning process, I started with the base costs for equipment and labor.  These are represented as fixed costs that occur whether services are provided or not which includes the labor since the labor is available for the entire period regardless.    
 
As mentioned above, there is a maximum number of appointments (or properties) that can be serviced in a day.  This will be represented using time and will be covered below.  Time is effective because it is THE constraint for appointment driven revenues.
 
As in any case study, the equipment costs may have changed but I researched several journals, blog sites, and web sites to arrive at an equipment list for a team of landscapers.  I also researched wages for the titles of the landscapers using a scraping program applied to Indeed, which gathered wages for these open positions in a list of metros across the US.  Again, the wages have changed, but I will list my findings at the time.
 
Initial Equipment Specs
 
The list below is the equipment set up for the 3-person team inclusive of the truck and trailer, a zero-turn riding mower and a push mower.  All additional equipment for trimming, hedging and edging, blowers and spraying for weeds is also included.

​In that list you will see a couple of additional figures in addition to costs.  In order to approximate time to complete a given size lot, I need to know the speed at which the 54-inch zero-commercial tractor mower can cut and the approximate standing/push mower speed.  I have also included the equivalent square footage figure for an acre and an estimate for the mpg and fuel tank size for the truck.  I will also include $300 annual maintenance.  The full $64,200 will be assigned as overhead cost per day per property over an annual term.  This would incorporate replacement costs over time into the costs and therefore be considered in the pricing on margin of cost.
 
Below is the early stage of calculations for how quickly the mowers, working together, could complete an acre.  The assumption for the process was that the tractor and push mowers could work the large grass patches and some of the closer trim while the third individual could use the other tools to complete the edging or hedging, to be joined by the push mower once their coverage was complete.

We have to think about the mowers as mowing a strip, a width and a length.  If we were to take the square footage of an acre, 43,560 ft2, and laid it out into one long strip 4.5 feet wide then the linear distance would be 10,080 feet. 
 
How long would it take a tractor mower to mow that strip if it was moving at 70% of the speed of its potential of 880 feet per minute?
 
It would take 16.4 minutes.   (nothing runs at listed speed or 100% efficiency.  70% is usually a safe starting point)
 
If we take the combined effort of the push mower and the tractor mower, both could complete the job in 14.12 minutes.  Of course, we are assuming that there aren’t turns and stops as the mowers mow, it is a measure of straight linear feet, a long path.  As I said, this is an initial estimation.
 
The labor data is from indeed for the respective position titles in the respective metros.  The team would consist of a foreman and two laborers.  The figures are hourly wages by position, summed up to a total hourly cost of labor, $58 / hr for Metro1. 
 
The Base Price was used for a different pricing method than the one walked through in this article but is the price per hour that was fed into a pricing formula for which there was assigned hours relative to property size and a base level of hours for showing up.  This method had consistent revenues across drive time and work time segments, but differing margins. 
 
As you can see, there is also an approximation for fuel costs in each metro and at the bottom is the “Standard Workday” of 8 hours and an unpaid 30-minute lunch.  Any of these numbers can be adjusted, a modeling foundation can be created and then tweaked to meet all figures that are believed to best represent costs, pricing, and operations.
 
 
Work Time / Drive Time

Number of Properties that could be completed in an 8 hour Work Day given Ave Drive Time/Work Time Relationship

The above chart displays the relationship between the drive time between properties (row labels) and actual work time to complete the services at the property (column headers).  If we were to view properties as a “10 minute” property as opposed to the acreage, we could then look at the workday in terms of the number of properties that could be completed that are sized in the minutes to complete.  The available workday is the 8 hours minus the 30-minute buffer time that would always be the “idle/nonbillable” time associated with the load-out in the morning and evening and finally we must consider the drive back since the drive to the property is included in the segments as you see below.
 
As an example for the above chart, if the average drive time between properties is 45 minutes and the property took 5 minutes to complete then you could complete 8 properties (round down) of the 5 minutes size.  By the same token, if the drive time was 5 minutes between properties, each of the 5-minute completion time, then you could complete 44 properties.
 
I have boxed the diagonal as a visual marker.
 
 If you consider how a time block looks for each property you would have two pieces:

​This happens over and over for the day.  The only pieces we are missing are the and drive back to the staging area, be it a garage or warehouse or wherever the equipment and trucks are stored, and the buffer time which would include beginning loadout and closing.

This basic premise is how we arrive at the number properties that can be completed in the drive time\work time chart above. 
 
For this model we could begin by using a 30-minute time for the total buffer time, 15 minutes for the morning and 15 minutes for the evening and the drive home will be the ave drive time between properties for that row.
 
 Using Time Segments as a Basis for Team Planning and Scheduling
 
 
Why might looking at properties as time be effective? 
 
This scaling can now be used for different teams.
 
In my example above, the 3-person team and equipment set up could, in ideal conditions complete a 1 acre property in about 14 minutes  (yes, I know this is fast but it is an initial model).  So we know, according to the work times above that we could assign them any property from about ¾ of an acre to about 1.5 acres and they will all within our sweet spot of properties completed and work time ratio.
 
If you had larger properties, how might a team be set up?

​If we added a tractor mower, then perhaps we complete an acre in about 7.5 minutes.  (Certainly this isn’t a linear relationship between completion time and size of plot due to obstacles, but again … just a model).  Using the dark gray area and a 7.5 minute time, we know that we could give them properties from 1.5 acres to about 5 acres in size and fall in the dark gray area. 
 
(There are currently options available, using AI and GIS software, that will calculate property sizes, including identification of grass, pavement, sidewalks and plant life.  This project was assisted by a third-party service given a list of properties.)
 
Because we have charted properties as a category of completion time as opposed to size, we can use this chart for different teams, as shown.  Each team can be given a minutes/acre completion time based upon their abilities and have that number used as a guide for the size of property that they could complete in that time on the primary chart above.  This also provides for a KPI and performance measurement metric for the teams if so desired. 
Let’s talk about completion time for a moment.
 
The addition of the tractor and the reduction of time to completion should guide the conclusion that certain team sizes and equipment will be optimal given certain sizes of properties.  Obviously, a small property under a ¼ acre probably would make use of the second tractor mower, as exampled in the 4-person team, and so the 7.5 minutes of completion time would no longer apply.  Likewise, as properties grew above 1.5 acres, the 3-person team might begin to take longer to complete the properties than the 14 minutes per acre potential.  More acreage would require longer walks for edging, hedging and blowing, in addition to more reliance on the tractor mower as opposed to the push/standing mower.  So, as I said, completion time is not a linear relation to the size of a property and has a sweet spot for the size of the team, equipment, and size of the properties.

Perhaps the completion curve for the 3-person team would look something like the chart above.  The time is around 15 minutes for property right around 0.7 to 1 acres.  Under 1/3 acre there are perhaps obstacles causing slower completion and above 1 acre we see slowing again due to longer walking distances and more reliance on the tractor mower.  This is just something to keep in mind when assessing time to completion of properties.
  
Cost Allocation
 
We are going to assign daily costs for a 45-week year of 5 days per week as a basis for overhead allocation. (Remember this is lawncare so the weeks are dependent upon weather or approximated by USDA grow zones).

• 5 days per week for 45 weeks per year = 225 days

 

• Each day consists of 8 hours of labor costs.

 
We are going to assign a “depreciation cost” that will represent a use cost on the equipment and a “maintenance cost” that will represent annual maintenance and upkeep on the equipment.
 
Finally, we will implement a fuel cost for drive time which is the variable cost relative to the arrangement of average drive time and average work time for a day’s scheduled properties.  The fuel prices were higher when this was compiled.  The fuel replacement is calculated on the drive time at 20 mph and a fuel efficiency rating of 13 mpg.
 
Daily Costs
              
Labor                         (8 hours * Total Hourly Costs)
Depreciation         64,200 / 225 days
Maintenance         300 / (225 days)
Fuel                            ((Ave of 20 mph * Ave drive hours per day) / 13 mpg * $4.50/gal)

It should be noted the fuel cost is increasing for the longer drive times and the number of times that that drive time must be completed (the number of properties plus the drive home).
 
We will now look to achieve a consistent margin across all segments and compare profit and price.
 
 Pricing
 
There are several considerations for the pricing of services.  There are market prices (value), the competitors’ bids for the same services (competitive cost), and the baseline margin (cost plus) that a company would like to achieve just to name a few.  We are going to look at a 30% margin over cost.
 
Working reverse from the costs and using the margins we arrive at pricing for each property given average drive time and average work time.

​Because we are evaluating price on 2 variables we can view the relationship as a 3D plot. 
 
Since our pricing is being staged on an even margin, the pricing “jumps” are nonlinear, reflecting the percentage increase of price required to meet a 30% profit margin.
 
Our daily cost is affected by fuel consumption which is derived from both the ave distance driven per property and the number of properties, so our price also reflects a “penalty” for drive time.  The longer the drive, the higher the price.  This could also be looked at as a utilization penalty.  You will see why in a moment.
 
Viewing our prices as a matrix:

Ave Price per Property Incorporating Drive Time and Property Size and Still Achieve Desired Margin

​And let’s see the respective revenues:

Revenues based on Averages

Obviously, the relationship between drive and work reflected in price will affect topline revenues and note the increasing price moving down and to the right.
 

• A 45-minute drive and 5-minute work we can fit in 8 properties of a 5-minute size.

 

• A 5-minute drive and 45-minute work we can fit in 8 properties of a 45-minute size.

 
The difference in cost between the two is the final drive home of either 45 minutes or 5 minutes, respectively. The total drive time is 45 minutes and 6 hours 45 minutes, respectively.
 
The final price then reflects the 30% margin, calculated as
P = C / 0.7.
 
 
And if you are curious about the profit margin.

Profit based on Averages

​With a different cost structure that doesn’t account for drive time, we see a different profit matrix.  This also allows us to consider how we would handle a longer drive to a property if we incorporated a charge for the drive.  We could consider longer drives as long as the corresponding work time (size of property) fell below the diagonal.
 
Closing
 
We should, again, address the concept of property size relative to time and costs.  This same pattern that we see will occur as we increase team size, but, obviously, the costs would increase and so would the pricing.  That said, the larger team would be able to handle larger acreage in the same amount of time relative to a smaller team so a higher price would be called for with larger properties.
 
This work time to property size concept was briefly mentioned in the 3-person team at a 14 min/acre pace vs a 4-person team at a 7.6 min/acre pace.  (Again, yes this is fast, but it is illustrative a point for time to property size)  And while there isn’t a large increase in costs from the 3-person to 4-person team, consideration should be given to optimal team size to complete the average property size and the number of teams available to maximize profits.
 
If you know that all your properties are going to be around ½ acre to ¾ of an acre in size, then why have a 4-person team when you might be better off considering two 3-person teams or a 2-person team and a 3-person team.  As mentioned, there is going to be a “sweet-spot” of property size that a given team size and equipment setup is best suited to handle.