Operating Budget | Best Practices – LMN

The Best Practice guide to building an LMN Operating Budget: set sales targets and work breakdown, configure labor (wages, burden, OT), forecast equipment/materials/subs/overhead, choose an overhead recovery method (MORS recommended), and validate margins in Profit & Loss and Analysis before activation.

Step 1: Review Operating Budget

Navigate to Budget > Click an Operating Budget

Tab	Best Practices, Tips & Notes
Budget Info	Navigate to Budget > Click an Operating Budget > you will land on the Budget Info tab The Work breakdown section feeds the industry averages you will see throughout the Operating Budget in LMN. Fill in your percentage of revenue into each of the 4 areas as appropriate. 💡 Note if you do work outside of these 4 categories, try to pick the closest type of work.
Sales	On the Sales tab. Entered all of your company's Divisions here and add your previous actual sales figures and forecasted sales figures.
Field Labor	On the Field Labor tab. You'll notice all your Employees by Role, rather than by individual Name. 💡We recommend to set it up like this for a few reasons: Easier to manage with turnover. The Price List will display individual wages for Field Labor Items if they are itemized by name. This allows employees to see one another's pay, which may be undesirable. Labor Burden: Field labor burden refers to the cost of payroll expenses over and above the employee's raw wages: Payroll taxes, workers compensation, unemployment insurance, vacation pay Cost of Labor Burden / Total Wages = Labor Burden % Default 20% in many cases as looking forward into new years usually = more staff/more hours, so going off their data from last year would be inaccurate Overtime Multiplier - generally this is always set at 1.5x. Hourly Field Staff / Salary Field Staff - Do you have any staff members who divide their time between field and office work? (e.g. This could include roles like an Operations Manager or Owner.) If you have any staff in this situation, it's crucial to allocate their time appropriately between the field staff and overhead staff sections of your budget.
Equipment	In this section you will see all of your equipment. ⚠️ Note: Fuel, repairs, and insurance, along with miscellaneous equipment costs, are not included in this portion of your budget. We have found that recovering these as overhead expenses, rather than forecasting them, is a more effective strategy for most of our clients for a few reasons: This method does not require assigning fuel to specific equipment in the Price List, as accurately predicting fuel usage tends to be challenging. Instead of assigning costs solely to jobs with allocated equipment, these expenses are distributed across all jobs/projects.
Materials	Here you can see your materials as a general line item; You could also break out your material by division if you prefer more granularity in seeing where your material expenses are being allocated. Check that your taxes are set up properly in the Materials tab. Are taxes included in the material totals in your P&L? If not, we'll need to add them here. What is your forecasted amount for this year?
Subcontracting	You'll find this tab is more straightforward than some of the others. Based on the documentation you provided, previous amounts you have spent on Subcontracting are here.

Step 2: Review Overhead Budget

Improve Profit Margin in Your Budget

If your forecasted profit margin is below target on the Profit & Loss page, there are a few ways to close the gap—starting with a simple pricing adjustment and followed by structural changes to costs and efficiency.

💡Use a Sales Adjustment Line: Add a Sales Adjustment Line to increase your forecasted revenue to a realistic target. This tells the system you intend to charge more for the work you estimate, raising margin without changing cost assumptions.

When to use: Your overhead and direct costs look accurate, but margin is still under goal.
What to watch: Setting the target too high can price you out of the market; align with win rates and competitive pricing.

💡Reduce or optimize Overhead: Trim discretionary expenses, renegotiate contracts, or delay non-critical spend.

💡Increase actual sales: Improve close rates, upsell, or expand pipeline to spread fixed overhead over more revenue.

💡Improve efficiency: Raise output per crew hour so sales rise faster than variable costs (e.g., materials and fuel) while overhead remains flat.

Overhead setup checklist

Confirm these common items are budgeted under Overhead so your margin reflects true operating costs:

☑️ Fuel, repairs, insurance, and miscellaneous equipment-related overhead (separate from job-charged equipment costs).

☑️ Software fees (e.g., LMN and Greenius, plus any other subscription tools).

☑️ Forecasted credit card processing fees.

☑️ Overhead Wages for staff not estimated on jobs (e.g., designers, office admins, mechanics, and the office portion of owners/managers).
Example allocation: If an owner spends 50% of their time in the office and 50% in the field, allocate 50% of their salary to Overhead Wages and 50% to Field Labor.

Step 3: Review Profit/Loss Tab

The Profit/Loss tab gives you a high-level snapshot of your budget—showing estimated income, net profit, job expenses (COGS), and overhead.

Sales Revenue	Total Revenue from all Divisions
Cost of Goods Sold	Field Labor Wages + Field Labor Burden + Equipment + Materials + Subcontracting + Rentals.
Profit	Gross Profit = Total Revenue - Job Costs. Net Profit = Gross Profit - Overhead Expenses. Profit Margin = (Net Profit ÷ Total Revenue) × 100
Overhead	Overhead Expenses + Overhead Equipment + Overhead Payroll

Step 4: Confirm Overhead Recovery Method

Finalized most of your budget and review how your overhead will get recovered in LMN.

💡LMN recommends that you use the MORS system which is selected as the default for you. Basically, LMN will automatically mark up your subs, materials and equipment job costs and whatever overhead still remains is worked into a mark-up on your labor. This makes you more competitive on jobs high in revenue/hour (more materials and equipment) and prices your rate slightly higher on jobs that require a lot of labor hours (since you only have so many hours to use each year). Click the link mentioned about for more information.

Step 5: Review Budget Analysis

In the Analysis tab you will see how everything comes together. This page offers a clear view of your company’s projected performance for the year.

"Where is My Revenue Going?" Chart	A simple visual breakdown of revenue allocation
Revenue Per Man Hour	See average unbillable percent and input to calculate the below Formula: Forecast Sales Revenue ÷ Total Hours = Revenue/Man Hr Example: Your jobs should generate around $85/hr per person* to hit your sales goal.* ⚠️ Note that’s your total price of a job (materials, equipment etc included), divided by the labor hours you have set for that job.
Average Charge Out Rate/Hour	This is the average rate you charge per labor hour. Example: Different crew types may have different rates (e.g., $40/hr for maintenance, $55/hr for install).
Company Capacity	This represents the total revenue your company could theoretically be able to earn based on Forecast Job Costs and labor hours in your budget under optimal conditions.
Throughput & Throughput/Hour	Measures how effectively your company turns expensive resources (labor, equipment, overhead) into revenue. Think of it as the money that’s left over for your costs after you pay your vendors! Formula: Revenue Remaining After Paying Variable Costs Maximizing throughput per hour helps identify the highest revenue-generating jobs.

✅ You now have a complete budget that gives you a clear path forward for pricing and profitability

Need more help? Contact our Support Team by email at lmn-support@granum.com, through Live Chat, or by phone at (888) 347-9864

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