GreenEdge Lawn Care: The Retirement Village Contract
GreenEdge Lawn Care is run by a Year 13 student who has 25 hours a week available for lawn work, including travel and quoting. The business has 14 weekly clients who pay $55 per mow; each takes 40 minutes and uses $12 of fuel and blade wear. It also has 8 weekly clients who pay $40 per mow; each takes 25 minutes and uses $8 of fuel and blade wear. Fixed costs are $180 a week for vehicle lease, insurance and phone. A retirement village has offered a fortnightly contract for 30 small lawns at $38 each. Each village lawn would take 25 minutes and use $7 of fuel and blade wear. The village requires all 30 lawns to be completed within a two-day window. Spring growth adds about 20% to mowing time. The owner could hire a casual mower at $28 an hour or buy a second mower for $3,200. The owner wants to grow the business but not miss existing clients.
1. Calculate contribution per labour hour for each of the three types of work and current weekly profit.
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$55 client: contribution = $55 - $12 = $43. Time = 40/60 = 0.667 hours. Contribution per hour = $43 / 0.667 = $64.50.
$40 client: contribution = $40 - $8 = $32. Time = 25/60 = 0.417 hours. Contribution per hour = $32 / 0.417 = $76.80.
Village contract: contribution = $38 - $7 = $31. Time = 25/60 = 0.417 hours. Contribution per hour = $31 / 0.417 = $74.40.
Current weekly profit: 14 x $43 = $602; 8 x $32 = $256; total contribution = $858. Fixed costs = $180. Profit = $858 - $180 = $678 per week.
The ranking is not the same as price. The $40 clients are the most profitable per hour because they are quick, followed closely by the village contract. The $55 clients look best per job but are the least productive per hour. This matters when capacity is tight.
2. Assess whether the contract can be accepted without extra labour, showing capacity calculations including spring growth.
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Normal week: existing mowing time = 14 x 0.667 + 8 x 0.417 = 9.33 + 3.33 = 12.67 hours. Village contract time = 30 x 0.417 per fortnight = 12.5 hours per fortnight, or 6.25 hours per week. Total mowing = 18.92 hours. Add 5 hours for travel, quoting and admin = 23.92 hours, just under the 25-hour limit.
Spring week: mowing time rises by 20%: 18.92 x 1.2 = 22.70 hours. Add 5 hours = 27.70 hours, which exceeds 25 by 2.70 hours. The contract cannot be serviced in spring without extra labour or dropping work.
Two-day window: the village needs 12.5 hours of mowing in two days, or 6.25 hours per day. In spring this becomes 7.5 hours per day, plus travel and existing clients. That is a long day for one person and creates weather risk: if one day is wet, the work backs up.
Judgement: the contract fits on paper in normal weeks but not in spring. Accepting without a capacity plan would risk late service to existing clients and the village.
3. Recommend whether GreenEdge should accept the contract, and explain how it should manage capacity.
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Recommendation: accept the contract, but only with a casual mower available for spring and a negotiated window. Do not buy the second mower yet.
Financial reasoning: the village adds $31 x 30 = $930 contribution per fortnight, or $465 per week. In spring, the extra 2.70 hours per week at $28 casual pay costs about $75.60. Net gain is about $389 per week even with casual labour. Outside spring, the contract fits within 25 hours and adds the full $465 per week. The contribution per hour of $74.40 is above the $55 clients at $64.50, so it is better use of time than that segment.
Why not buy the mower: the second mower costs $3,200. The contract's extra contribution would repay it in about seven weeks if no casual cost, but the mower is idle for much of the year and adds maintenance and storage. A casual mower is variable cost and can be used only in peak weeks.
Management conditions: ask the village for a three-day window or a wet-day backup day. Keep the $40 clients first if a choice must be made, because they earn $76.80 per hour. Give existing $55 clients plenty of notice of any schedule change. Review after eight weeks using actual hours, fuel use and complaints, not just revenue.