We were asked on Tuesday what the overhead costs were, and why some tree companies were so much lower than others. A couple of questions really in the one.
First some overhead. And it depends on what the tree service is providing. Lets assume they are legitimate and train their employees and have properly Certified Arborists on staff.
a) Education costs – as per Ministry of Labour – First Aid – WHMIS – Job Specific Training – Tailgate sessions
b) Education costs – to maintain Certified Arborists – would typically run around $4,000 per year for a Master Arborist as a minimum cost and upwards of $8,000 for a Consulting Arborist. A Certified Arborist would run around $2,500 per year on average as minimum.
c) Tools – they wear, break, etc. One can easily calculate as a minimum $3,000 to $5,000 per employee. This includes ropes, pulleys, measuring devices, chains for saws, etc.
d) Vehicles – license – insurance – safety – e-test – boom or crane inspections. Most of the larger trucks are running around $4,000 per year before they can drive on the road to have all tests and licensing completed.
e) Lifts – all lifts need annual inspections as per Ontario law – factor in around $1,000 per year.
f) Insurance – this depends on the size of company and if they have true arboricultural insurance or just that of a general contractor and the amount they carry. $3 million is considered minimum and most of the larger companies would carry a minimum of $5 million.
g) WSIB – this depends on if the company does line clearance or not and the rates will vary with their volume of work as well as it is payroll based. In 2013 the owners will not have to pay, it will become mandatory (no more single owner contractors with no owner insurance), and as in the past it is not legal to hire sub-contractors and not pay their WSIB amounts. This was another loophole that WSIB told us was being closed in our last meeting in Mississauga.
h) Fuel – most crews will easily burn through a couple of hundred dollars a day when on job with heavy trucks. The bucket truck and crane can each easily burn one hundred dollars apiece.
i) Depreciation – every tool and vehicle needs to eventually be replaced and must be factored into overhead.
j) Office costs – telephone – cell phone – Internet – postage – software – taxes – etc. All must be factored in.
k) Membership – professional association costs – all major companies belong to associations which help to move the whole industry ahead. This is typically in the $2-3K range for most companies of any size.
l) Advertising – this can vary – in 2012 our advertising costs were in the area of around $11,000.
Note we have not got to labour yet.. nobody has yet been paid for the work!! Fact is most of these above costs are fixed and come out before the first employee is paid.
Now why are some companies lower than others. Well they can cut out some costs such as advertising, professional memberships and perhaps not impact much. But they go beyond that and cut out training, WSIB, vehicle inspections and in some cases insurance! You see there is a reason the costs are there, it is to protect you, provide you with excellent service and ensure we are here for you tomorrow.