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Using dLER and mLER to Create a Salary Cap for Your Team

⏱️ 43:59 🎤 Michael Pletz
AUDIO EPISODE
Using dLER and mLER to Create a Salary Cap for Your Team
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Chapters

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  • 0:00
    Understanding dLER and mLER
    The host introduces dLER and mLER, crucial for budgeting and overhead recovery, recommending Greg Crabtree's books 'Simple Numbers' and 'Simple Numbers 2.0'.
  • 2:05
    Cost of Goods Sold
    This segment details budgeting for field labor, equipment, materials, and subcontractors within the Cost of Goods Sold, including calculating labor burden and equipment depreciation.
  • 13:54
    Overhead Expenses
    The episode covers budgeting for overhead, distinguishing between labor, equipment not used for revenue, and general expenses like accounting, advertising, and insurance.
  • 19:06
    Profitability and Sales Goals
    Discussion moves to the profit tab, adjusting sales goals to achieve desired net profit margins, and considering how growth impacts costs and efficiency.
  • 22:15
    Labor Rate Recovery Method
    The host explains the preferred labor rate recovery method, where all overhead is recovered through labor, highlighting its consistency across projects.
  • 26:23
    Single/Multiple Overhead Recovery
    This section compares single and multiple overhead recovery methods, noting the complexities of applying different percentage markups to various cost categories.
  • 32:48
    Adjusting High Hourly Rates
    Strategies to reduce perceived high hourly rates are discussed, including adjusting sales forecasts, adding labor hours, increasing efficiency, and auditing expenses.
  • 36:25
    Improving Sales Process
    The host emphasizes improving the sales process and client value communication to justify higher pricing, detailing his personal approach using YouTube and welcome packages.

Speakers

M
Michael Pletz
Host — How to Hardscape

Key Takeaways

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Utilize dLER and mLER from Greg Crabtree's 'Simple Numbers' to accurately budget and manage labor efficiency in your hardscaping business.

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Develop a comprehensive budget for Cost of Goods Sold (labor, equipment, materials, subcontractors) and overhead expenses (admin salaries, non-revenue equipment, general expenses) to determine accurate pricing.

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Implement the 'labor rate recovery method' for overhead, as labor is the most consistent element across all hardscaping projects, simplifying overhead allocation.

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Accurately calculate equipment costs by factoring in replacement cost, years of use, resale value, and annual expenses (maintenance, fuel, insurance) to determine true cost per hour.

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Continuously monitor your net profit margin and adjust sales goals, labor hours, and operational efficiency to ensure profitability and a strong return on investment.

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If hourly rates seem too high for your market, consider strategies like adding field labor (especially lower-cost employees), increasing efficiency, or auditing and cutting general overhead expenses.

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Enhance your sales process and clearly communicate the value you provide to clients to justify premium pricing, rather than just competing on price.

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