Economic volatility, supply chain issues, material costs, and labor shortages will make estimating even more complex.
Accurately pricing jobs in the landscaping industry can be a difficult task. When pricing jobs, you must deal with pricing that greatly varies from project-to-project, as well as the need to consider a number of factors such as property, materials, crew size, special requests from clients, and more. As we head into 2023 facing economic volatility, supply chain disruptions, increased materials costs, and a labor shortage, the process of pricing projects will become even more complex.
Using the following guidelines, landscapers can better anticipate changes to projects that may drive up costs and price jobs in order to turn a profit, while maintaining quality customer service.
Hourly Or Fixed?
Before determining the price of the project and providing the customer a quote, you need to decide which type of pricing works best for you and your business. Both fixed pricing and hourly pricing have their benefits and disadvantages. When selecting hourly or fixed pricing, you should take into account the projects you are taking on, what type of pricing matches your expertise, and what makes the most sense for your business.
Hourly pricing may be best for newer businesses and for projects that don’t have a clear timeline or scope. Charging hourly allows more flexibility in your estimate, which is especially helpful when a project takes longer than expected. Additionally, charging hourly allows you to worry less about the timeline and focus more on the quality of work being done since you know you are being paid for your time. While hourly pay can be helpful for new business owners and effective for certain projects, it also has downsides. You won’t be rewarded if you finish a project quicker than expected. On the other hand, if a project takes longer than estimated, you could be met with unhappy customers over timing and pricing.
While hourly pricing is helpful for evolving projects, a fixed-rate works best for projects with an easily estimated timeline and clear scope. Fixed-rate pricing allows customers to have a better idea of the final cost and to ultimately feel more in control of the project. Additionally, you can set a higher price for your work and won’t be penalized if you finish a project faster than expected.
As you build your business and gain experience, it can be beneficial to move to fixed pricing. As you learn more, your expertise will allow you to complete work in shorter periods of time. You’ll need to keep a constant pulse on fluctuations in labor and material costs but learning how to take these factors into account will help ensure you are maximizing profit on each project.
Scope Of Work
Many factors impact pricing, and you can’t provide an accurate project estimate without understanding the full extent of the work involved. Taking into account the scope of work, as well as external factors such as materials and fuel costs, will impact the total cost.
When composing a scope of work, you will need to connect with the customer to obtain key details such as:
- What is the job location? The more remote the job site, the more fuel costs.
- How big is the yard? Measure the yard, so you know how much materials you need. • Is there any existing property damage, safety hazards, or accessibility issues? Do a thorough walkaround and take photos of the property. You can save these photos to your client’s profile for future reference.
- Is there a time constraint? If the client absolutely needs the work done within a tight timeframe, you can charge more.
- What services am I providing? Is it something standard like removing sod or more complex such as building a retaining wall? The more specialized the service, the more you will charge.
- Does my client have any special requests? You need to know ahead of time if your client wants something your usual sup- plier can’t provide, such as a unique lighting fixture that costs more than the one you’d usually buy from Home Depot.
- What materials will I need for the job?
Significant parts of the scope of work could be impacted by current Industry challenges—like the unique lighting fixture and its relation to supply chain issues. These challenges will influence the price and timeline for projects, which will ultimately impact customer satisfaction. Making the scope of work a priority ahead of pricing the project can help set expectations with customers and provide them with a higher quality experience as the project moves forward.
Labor & Materials
While businesses in Green Industries have seen healthy revenue growth in the third quarter of 2022, business owners are still impacted by these Industry disruptions. While you can’t control all the potential challenges that can delay projects, you can ensure you are pricing projects correctly and acknowledging some of the factors that can impact pricing as the project progresses.
When pricing landscaping projects, you will need to estimate both labor and materials costs to give an accurate depiction of what customers will be spending. To calculate the cost of labor, you need to understand how many hours the job will likely take to complete. While estimating labor needs can be difficult, using technology such as time tracking software can help you track how long certain tasks take to estimate the labor needs of future jobs.
At Jobber, we’ve found lawn mowing jobs cost $25–65 per hour, $0.01–0.05 per square foot, or $50–100 per acre on average. Scope of work details include the size of the yard, grass conditions, climate, and local weather conditions. Also find out how much competitors in your area are charging. If you’re offering the same services as another lawn care business, try not to charge too much more than 15% above their price. That’s usually the tipping point for potential customers to choose the cheaper option.
Other guidelines from Jobber include:
Lawn aeration. The average cost ranges from $120–140 for the median 8,500-square-foot yard, or $0.02–0.10 per square foot. Core aeration: $7–25 per 1,000 square feet, or $40 to $80 an hour. You can charge less for your service if you own an aerator machine—that can cost $200–300. Or, factor in rental costs of $40–90 a day into your price. Liquid aeration: $4–13 per 1,000 square feet, or $20 to $40 an hour. You can charge less for this service because you’ll only need a bottle of liquid solution to aerate soil, instead of a machine. Liquid soil loosener costs $25–60.
Lawn weed control and fertilization. Average cost is $91. Calculate the cost of the lawn fertilizer you’ll use for the job based on the square footage of the lawn. A typical 40 to 45-pound pack of lawn fertilizer costs $40, which covers around 15,000 square feet of grass. That would put your fertilizer costs at $23 for an average 8,500 square-foot lawn.
Power raking and dethatching. Average cost is $15 per 1,000 square feet, or $215 for one to two hours of dethatching. To stay profitable, consider charging a flat fee or a starting fee for your power raking services (e.g., a minimum of $130 per job), then charging per additional hour or added square footage. Factor in the cost of a power rake, which can cost $65–97 per day to rent or $100–300 to purchase.
Other average prices include: debris removal at $75 – $150; leaf removal at $200- $400; and garden clean ups at $60 to $150.
Along with estimating labor needs, the potential cost of materials is an important part of pricing projects. While there are common materials that are used across jobs, their quantities will vary depending on the project. To accurately determine the amount of materials needed and the total cost of materials, it is vital that you collect an accurate scope of work before the project begins.
Overhead & Markup
Labor and materials make up the costs that are associated with the project at hand, but there are other costs that need to be added to the pricing estimate. Overhead fees, which include office rent, telephone and internet bills, insurance, and other costs for business operations, need to be factored into each project to maintain the landscaping business. To estimate how much needs to be included in the quote for overhead costs, you must be aware of your weekly overhead costs and determine the hourly overhead cost.
Next, the hourly overhead cost will need to be multiplied by labor hours needed for that specific project. Incorporating overhead costs into the price of each project is important to landscaping businesses remaining profitable, and is a vital step in determining the cost of a project.
In addition to overhead costs, you will need to take the total cost of the project and determine the profit margin and markup percentage. To clarify, your margin (see “The Gross Margin Checklist”) is your net sales revenue minus the labor, material, and overhead costs. The higher your margin, the more money your business retains. You’ll usually see profit margins expressed as a percent- age. The formula is: Profit ÷ Sales x 100.
Your markup is the dollar amount you add to your cost to arrive at a final, profitable price. Markups are also expressed as a percentage. The formula is: Profit ÷ Cost x 100.
In most cases, you should look to achieve a 10 to 15% margin for commercial landscaping projects and a 15 to 20% margin for residential landscaping projects.
Here’s an example of a profitable pricing formula:
(Labor hours x hourly labor cost) + over- head + equipment + taxes + profit margin
The Year Ahead
In 2022, the Green Industry managed a variety of challenges. These challenges have reshaped the way the Industry operates and have required adaptation. As we head into 2023, you will need to take these disruptions into account when making decisions, especially when pricing projects. By creating a scope of work, factoring in all costs, and using operations management software, you can offer accurate pricing quotes, ensure appropriate profit margins, and deliver excellent customer service.
Cadeau is Chief Revenue Officer at Jobber. Jobber is a Cloud-based field service management software that helps small and mid-size businesses organize their entire operations, from scheduling jobs and managing crews, to invoicing customers and collecting payments. Jobber’s platform streamlines and automates daily operations. For more information, visit getjobber.com.
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