You can make BIG money owning a landscaping business… IF you know how to price your landscaping services for the maximum profit.
Properly pricing your landscaping services is more difficult in this industry because of the varying services you offer.
In this article, we’ll talk about how you can find the best prices for your landscaping services, so you can maximize your profits.
How Will You Be Charging for Your Landscape Services?
Before we get started on how to price your landscaping services, you need to decide how you’ll be charging your clients.
There are two main ways most landscapers charge for their services: hourly and fixed price.
It’s up to you to weigh the pros and cons before deciding on which pricing method is right for you and your landscaping business.
|Pros of Hourly Rate||Cons of Hourly Rate|
|Your team will feel more pressure to stay on-task since you’re billing by the hour.||If you finish faster than anticipated, you’ll lose money (rather than get rewarded).|
|Gives you more leeway when you don’t know how long a job will take, or the job takes longer than anticipated.||If your clients think you’re taking too long or the job takes longer than estimated, your clients could pressure you to finish faster or argue about the price.|
|Pros of Fixed Rate||Cons of Fixed Rate|
|You can lean on value-based pricing, which allows you to set higher prices.||If you underestimate your labor and cost of materials, you could lose a lot of money.|
|Clients tend to feel more comfortable in knowing how much you’re charging.||When you use this pricing method, you have to know EXACTLY how long EVERY job will take.|
|As you streamline your processes, you’ll get rewarded by finishing faster because you can work on other jobs.||If you hit unexpected obstacles on a job, you could lose money because the job took longer than you estimated.|
Recommendation for Choosing the Best Method
When you’re first starting out and don’t know how long a job will take, hourly pricing is probably your best bet.
Likewise, when you’re more experienced and know how long a job will take, fixed-rate pricing is likely the better method.
Talk to Your Landscaping Client to Find Out What to Expect
Now that you know which pricing method to use, let’s talk about setting expectations with a potential client before you accept or start a job.
Having a conversation with your client helps you to take all of their expectations into account, so you can give them an accurate estimate.
Go to the job site, talk to your client (by phone or in-person), and document every job detail (you can easily keep record of these details in Service Autopilot).
Before you begin creating your estimate, ask yourself questions like:
- Where is the job?
- If it’s all the way out in the boonies, you’ll need to charge more for your time and gas.
- What’s the size of the space?
- You need to know the measurements of the space, so you know how many materials to order.
- Are there any hazards, obstacles, or property damage issues?
- Save these photos in a tool like Service Autopilot and take them into account as you’re determining your price.
- Does the client want the job done by a certain time?
- If the client wants you to finish a job by a certain time (and it’s realistically possible), you should charge more to account for this.
- Is it a standard or specialized service?
- Is the job standard (like sod installation)? Or is it more specialized (like tree removal)? The more specialized the service, the more you should charge.
- Does the client want anything special?
- ALL special requests must be made BEFORE you create your estimate, or you have the right to refuse it later. This way, you know in advance if you can accommodate the request and how much extra you need to charge for it.
- What types of materials do I need to complete the job?
- Take ALL materials and equipment needed to complete the job into account when you’re deciding how much to charge a client.
Find Your Labor Cost
Once you know the full scope of your job, you’re ready to determine your labor costs.
Find your full costs of labor by following these steps:
Step 1: Estimate the Labor Hours Needed to Finish the Job
Using the information from the previous step, you can determine the approximate time it’ll take to complete the job.
Now, you’re going to calculate the total number of labor hours it’ll take to complete the job.
# of Hours to Complete Job × # of Employees to Complete Job = Total Labor Hours
For example: It takes 40 hours to complete the job with 7 employees.
40 × 7 = 280 hours
Pro Tip: Use Service Autopilot to track your time and shortcut this process. Easily find how long it takes each landscaping employee to complete different landscaping jobs.
Step 2: Find Your Hourly Labor Cost for the Job
This is where you add up all of your employee-related expenses. Things like employee wages, workers compensation, benefits, and taxes will all be added here.
$ All Employee Wages × % Taxes, Workers Comp, and Benefits = Hourly Labor Cost
For example: Your 7 employees’ hourly wages (of $14 each) add up to $98. Taxes, workers compensation, and benefits add 20% to this number.
98 × .20 = $19.60
Step 3: Calculate Your Total Labor Cost
Now that you’ve found your total labor hours and hourly labor cost, you’re ready to estimate your total labor cost.
Total Labor Hours × Hourly Labor Cost = Total Labor Cost
For example: You have total of 280 labor hours and your hourly labor cost for the job is $19.60.
280 × 19.6 = $5,488
Find Your Landscape Material Costs
Make a list of all of your landscape materials, then determine how much material you’ll need of each (it’s always better to overestimate), and then add up the cost.
Additionally, you might also add extra fees (on top of the material costs) if a material is uncommon and not sold by your supplier.
For the sake of this example, we’ll say that the total cost of landscape material is $4,000.
Estimate How Much to Charge for Overhead Costs
Once you know the cost of labor and landscape material, you’re ready to estimate your landscaping business’ overhead costs.
Overhead costs include things like landscape software (like Service Autopilot), equipment, truck, office rent and utilities, insurance, marketing costs, etc…
Any money you spend to operate your landscaping business is considered an overhead cost, and you should charge your clients for it.
Many landscaping business owners underestimate (and even forget!) their overhead costs. In order to maximize your profits, you MUST properly calculate your overhead costs and price accordingly.
Here’s how to find out how much to charge your clients for overhead costs:
Step 1: Add Up Your Weekly Overhead Costs
For the sake of this example, we’ll say it’s $4,000 a week.
Step 2: Find the Total Number of Weekly Labor Hours
For this example, we’ll say it’s 280 hours a week.
Step 3: Calculate Your Hourly Overhead Cost
By calculating your hourly overhead cost, you’ll know exactly how much you have to charge per hour JUST FOR OVERHEAD.
Weekly Overhead Cost ÷ Total # of Weekly Labor Hours = Hourly Overhead Cost
For this example, this is how we’d calculate this number:
4,000 ÷ 280 = 14.2857… ≈ $14.29
In other words, you’ll have to charge an extra $14.29 per labor hour to cover this cost.
Step 4: Calculate How Much to Charge for Total Overhead Costs
In this step, we’re going to calculate how much you’re going to charge your client for total overhead costs for the entire landscape job.
Hourly Overhead Cost × Total Man Hours for the Job = Total Overhead Fee
14.29 × 280 = $4,001.20
Estimate the Total Cost of the Landscaping Job
Use the Labor, Material, and Overhead costs we calculated above. Simply add these numbers to estimate the total cost of the landscaping job.
Labor + Material + Overhead = Total Cost
5,488 + 4,000 + 4,001.20 = $13,489.20
Side Note: If you’re hiring a subcontractor, then you’ll want to add that cost to this number.
Add Your Percentage of Markup to Calculate the Total Price of the Landscaping Job
Finally, you’ve made it to the last step! The only thing left to do is to add your markup percentage to the number we calculated in step 5.
Now, we’re going to use your margin to determine the markup price for the job.
Margin vs. Markup: A Brief Refresher
Margin (AKA gross profit margin) is essentially the profit you get from your services. Typically, profit margins are expressed in percentages.
Find your margin percentage using this formula:
Net Sales Revenue - (Labor + Material + Overhead Costs) = Profit Dollars
Next → Profit ÷ (Sales × 100) = Margin Percentage
Markup is the dollar amount you add to the total profitable price. Much like margin, markup is also expressed as a percentage.
Find your markup percentage using this formula:
(Profit ÷ Sales) × 100 = Markup Percentage
Complete Your Landscaping Price
The lawn and landscape industry’s profit margin widely varies between 5-20%.
That said, I’ve discovered that many successfully established landscaping businesses aim for 50% gross profit margins.
As you decide on your ideal gross profit margin, I want to give you a word of caution… When you’re first starting out, don’t price yourself out of the market.
Startup landscaping businesses have a lot to prove and a reputation to build, so make sure your services are worth the 50% gross profit margin before you set it that high.
A general rule of thumb for a good margin is between 15-20% for residential jobs and 10-15% for commercial jobs.
Now, let’s look at an example of how you calculate this…
If you choose to start at a profit margin of 20%, then add an extra 5% to your markup percentage to make it 25% (this will make more sense as we calculate below).
In order to calculate your new total, we’ll take the number you got from estimating the total cost of the landscaping job and use this formula:
(Total Job Cost × Markup %) + Total Job Cost = Final Landscaping Price
(13,489.20 × .25) + 13,489.20 = $16,861.50
Therefore, to calculate your profit for the job, you can use this formula:
Final Landscaping Price - Total Landscaping Cost = Profit
16,861.50 - 13.489.20 = $3,372.30
And if you want to make sure you’re still meeting your profit margin of 20%, use this formula:
(Profit ÷ Final Landscaping Price) × 100 = Gross Profit Margin
(3,372.30 ÷ 16,861.50) × 100 = 20%
And voila! We’ve now set our price to reflect a 20% gross profit margin.
How to Quote a Landscaping Job and Follow-Up With the Client
Now that you know how much to price your new landscaping job, it’s time to start your quote.
As you create your landscape quote, be sure to include things like:
- Contact information
- Company name and logo
- Deposit cost (if any) to purchase materials
- Descriptions of each service with the price
- Date, the client’s name and contact information
- Quote expiration date (since material costs fluctuate)
- Call-to-Action (outlines the next step you want them to take)
Creating professional estimates can be a major time-suck, so it’s important that you have the right software to back your landscaping business and streamline the process.
With Service Autopilot, you’ll get:
- Estimates from anywhere
- Instant professional estimates
- E-signatures with IP address time and date confirmation
- Access to the Marketplace to choose “done-for-you” templates
And it doesn’t just end there, with Service Autopilot the list of possibilities are absolutely endless.
Follow the Money: Follow Up on EVERY Estimate
Once you’ve created and sent your landscaping estimate, don’t forget to follow up!
Sometimes, you might have to follow up with each potential client multiple times before they convert. The key is to consistently follow up with them.
Just remember, the longer it takes you to follow up on an estimate, the more time you’re giving your competition to steal your potential client.
Clients like punctuality, professionalism, and credibility. Your estimate followup is your chance to prove these things to them and justify your higher prices.
Estimates are a time-consuming task, and it’s almost impossible to follow up on every single estimate.
… Or so you thought.
With Service Autopilot, you can set up customized Automations that automatically follow up on ALL of your estimates FOR YOU, every time.
All you have to do is create the Automation and watch your estimates go on autopilot!
Plus, you can create Automations for other things too (like payments, invoices, past due reminders, automated surveys, and more).
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Set Your Landscaping Business Up for Success With Profitable Pricing
The prices of your landscaping services can make or break your business. This is why it’s so important to focus on getting your prices right from the very beginning.
Once you have your pricing structure properly set up, just about everything else in your business can fall into place.
By reading this article, you’ll have all the tools and information you need to start generating profitable services RIGHT NOW!