When it comes to determining pricing for your landscaping services you should be prepared to do a bit of homework. Starting a landscaping business isn't as simple as buying all the equipment. Sure commercial zero turn radius lawn mowers are sexy, but there are several variables other than your enjoyment of the work you should to take into consideration. Here are 3 important areas to research:
- Your competition's pricing in the area
- Making a comfortable profit margin
- Seasonality of the business
Check Your Competition's Pricing
One of the easiest ways to come up with the pricing for your services is by checking those of your competition. Businesses that are already operating in your area should have a pretty good idea of what people will pay for a given service.
Most likely they will have already come up with packages that make sense based on common features across yards in the area as well. This might include weeding for areas with lots of flower beds, fall leaf cleanup in areas with lots of deciduous trees, and sprinkler winterization in areas that experience deep freezes through the winter months.
In most instances you won't be able to check a competitors website or call for pricing. Lawn care businesses will generally want to give you an estimate based on the size and makeup of the yard. This means you might have to request one for your own house or for a friend's in order to get actual pricing.
Good companies will provide you with a written proposal that clearly explains all the services to be performed during the visit. This proposal should shed a great deal of light on how you should price your own services.
It may seem disingenuous to put them to all this trouble just for market research, but most landscaping companies don't make a sale with every estimate they hand out.
For an even more information you can hire them to perform their recommended service. While it will cost you some money it will give you a firsthand look at their work, customer service, and their USP (unique selling proposition).
Deciding Which Services to Offer
Many small landscaping companies want to start out offering every possible service they can. However, there are some very practical reasons to avoid this as you're first staring out.
Additional services often requires additional licensing, equipment, or possibly even more staff. A good example is irrigation and sprinkler systems. While this can be a very profitable business in itself, it often requires being licensed. It also requires additional equipment. This means more costs, storage requirements, and potentially transportation needs.
The same goes for building retaining walls or other structures that require permits. All of this can slow you down. This is tough in the beginning phases of a business because you need cash flow.
For that reason it can make sense to just start off with services that revolve around lawn care and maintenance. Sure the numbers might be smaller at first, but if you sign up a couple dozen clients for bi-weekly or monthly service you can create a very steady stream of incoming revenue.
Once you've mastered managing these clients you can begin bringing on additional services. You can even market them to your existing client base. This has the added benefit of making the selling process much easier. It's much easier (and cheaper) to turn existing customers into repeat buyers than to acquire a new customer.
Then once you've mastered one additional service you can begin to offer more.
Keep in mind that just because you don't offer a particular service doesn't mean you can find someone who does and offer them a referral for a fee. Just try to avoid going with someone who directly competes with your services. You don't want to lose any customers in the process.
Ensuring Your Profitability
It's not uncommon for small business owners to forgo taking a salary when first starting. But even if you don't initially take a salary you need to include this cost when determining how to price different services. You may be OK with not taking a salary, but you can rest assured that no one you hire as an employee will.
Many landscaping businesses operate on margins of between 10 and 20 percent. This means that after all expenses (including paying YOURSELF) you should have 10 to 20 percent of your revenue left over as profit.
Businesses exist to make a profit. Unfortunately, with all the things that are required to start up and operate a business it can easily start COSTING you money if you're not careful.
From the very beginning you should have a laser-like focus on making sure your business is as lean as possible. Every cost should be analyzed to insure that it is absolutely necessary for you to operate an efficient operation. It is much easier to start out with this mindset than to try to adopt it at a later date.
While equipment (zero turn radius mowers, blowers, electric push mowers, trimmers, and other equipment), vehicles, and gas will be a big chunk of your expenses, payroll is going to be your largest expense.
While you might only pay your employees $11 an hour you will still be responsible for payroll taxes, unemployment, and social security taxes based on that $11/hr. This can translate to more like $14/hr depending on the state and local taxes in your area.
How Much to Charge for Your Landscaping Services
When estimating a job for a potential client you need to take into consideration all of your expenses. This becomes much easier if you have a solid understanding of your hourly operation costs.
Operational cost should include payroll (including travel time), equipment and vehicle fuel, equipment usage (wear and tear), and overhead.
Overhead should include any of the following:
Once you have a solid grasp of your overall operational cost, you need to price your proposal to cover all of these costs plus your profit margin. If you're running a lean operation this should put you right in line with or cheaper than your competition.
Determining this cost can be time consuming and tedious, but once you have a number you can very quickly build highly competitive proposals that insure your overall profitability on every job.
Landscape Estimating & Business Management Software
One of the first things to look into as you're growing your business is software to streamline estimating, invoicing, and crew management. Software might sound like a luxury, but time is your most valuable asset as a business owner. The less of it you have to spend on creating estimates and invoices the more time you'll have for sales.
There are a number of landscape management software bundles out there that handle all of the important information you'll need to track. This includes:
- accurately estimating new jobs
- invoicing for work
- tracking employee time on jobsites
- customer relationship management
- GPS tracking of crews
- Equipment maintenance schedules
- lead/sales management
- marketing tools like email and sms messaging
Getting a grasp on all of this early on ensures that you're responsive to customers and maintaining profitability. It's easy to allow things to fall through the cracks when you don't have rock solid processes in place. The right software will allow you to track everything that happens in your business.