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Running your landscaping business involves the knowledge of a vast variety of subjects, especially when you are first starting. Knowing how to landscape is the first step to creating your own business, but soon you will need to know how to sell yourself, price jobs, and serve your customers among many other things that comes with owning your business.
We want to help with all of these aspects of your business, but to start we want to cover how to price landscaping jobs. This is the number one most asked question and there are so many variables involved with pricing your jobs. It is also the thing that can really make or break your business. Price to low and you can encounter many problems on your job site that will put you in the red. Price to high and you may not land enough clients to keep your business running.
Knowing where your business exists in the market and what you can provide to your customers is extremely important, as well as knowing your overhead costs will really help you decide how to price your jobs. This is what we are going to help with in this post.
Pricing Landscaping Jobs
Pricing landscaping jobs is extremely important to the success of your business both in the short term and long term. Knowing how to price a job appropriately involves preparing some numbers, knowing what your business costs you to run even when you are not working, material costs, and what you want to earn as the owner.
Knowing these numbers is crucial to continuing on to our landscaping estimate template, but we will discuss each of these numbers in detail and how to calculate them in order to estimate jobs. If you want to follow along, download our template below by signing up to our email list and we will send you a free template that we use to calculate our estimates.
How to Estimate the Amount of Time on a Job
Estimating the amount of time a job will take you is the first step in filling in the estimate template. It is also crucial to pricing your job as it will dictate how much you will be paying your employees, how much you will make, and how much the business will make. If the job is completed before this time, you will pocket more money than expected. However, if the job takes longer than you will be out more money.
When you are first starting out or if you are doing a job for somebody you know, make note of how much time it takes you. Separate this into different sections from the excavation, base preparation, laying the interlock or the first course of wall and how much square footage or the length of the wall, and completing the remainder of the project.
Noting how long it takes you and how many people were helping will provide you with how long it takes you to complete a job and how many man hours goes into each part of a project. You can then use these numbers to insert into the estimate template depending on the size of the project.
Material Costs
Material costs come from everything that is installed or things that go in to the installation of the job. This includes the interlock, retaining wall, base material, fabric and geogrid, polymeric sand, edge restraint, softscape materials (soil, seed, sod, plants, mulch, etc.), delivery, disposal fees, and any subcontractors that are involved on the job and what you are paying them.
Typically contractors receive a discounted rate on these materials, though these are not the numbers that we insert into our estimate template. This would not provide our business with any revenue from the materials which would also not provide our business with a buffer just in case we underestimated the amount of materials for a job.
What we insert into these fields for material costs is the retail price which is typically 10%-20% more than the contractor rate. This is enough to provide added revenue or to help just in case more material is required. In addition to this, you could add more of a markup to these prices to add revenue to your business.
Overhead Expenses
An overhead expense is the cost of doing business. These are expenses that even if you are not working, you are still paying. Things like labor, equipment costs, business expenses, and vehicle expenses are paid regardless if you decide to work that day. These make up your overhead expenses and should be added to the cost of any job.
- Labor Costs
- Equipment Costs
- Business Expenses
- Vehicle Expenses
Labor costs include the amount that you pay your employees which also include the amount you pay for insurance and any other expenses that are incurred with your labor. You should know these numbers in order to insert them into the landscaping estimate template.
From there, you can estimate the amount of man hours needed to complete a project which will provide you with your total labor costs for a job.
Equipment costs include equipment that needs to be rented for a job and equipment and tools that is owned. Typically we rent a piece of equipment which before we purchase it. This provides us with a number that we can include after we purchase it as a cost of ownership and maintenance. For example, when we just started our business we rented almost everything including a cut off saw. The cut off saw cost us $65.00 per day to rent. Now that we own one, we still charge this $65.00 per day in our ownership expense of that piece of equipment. This covers us for the cost of purchase, maintenance, and when we will need to purchase a new one.
This can be repeated for every piece of equipment that you own, as well as the tools that you own. You should estimate their duration before you need to replace them. This will all be calculated in your equipment costs for a job. Do not forget that sometimes bad things happen, machines break down, stop working, or even get stolen. All of this should be factored into your lifetime cost of equipment. Also, if you are paying any interest on your equipment, this should be added to your equipment costs.
There is a lot that gets factored into your business expenses, however these generally do not change unless something changes in your business.
Your business insurance, rent if you own an office space or a yard, marketing, and administrative expenses which can include bookkeeping, software, and accounting are all things included in your business expenses. These should be calculated at a daily rate and multiplied at how many days you estimate you will be on site to complete the job.
Vehicle expenses include payments plus interest, insurance, and maintenance costs (can be estimated based on previous years) divided into a daily rate of payment and multiplied by the amount of days that you estimate you will be on your job.
In addition to this, you should estimate the cost of fuel including the commute to the job site, going to pick up materials, and going to dispose of any material.
Earnings
There are two things you need to consider when deciding your earnings. One is how much you want to be paid as a salary and the other is how much you want your business to earn. These should also be calculated at a daily rate and multiplied by the amount of days you estimate you will be on site.
When deciding how much you want to be paid as a salary, you should understand your own personal finances. This should include how much your expenses are plus how much you want to personally save. We will not go into detail regarding your personal finance, as this is not related to this post. However, spend some time on this and choose a number that will cover this, but also a number that will allow your business to continue to earn money itself and continue to grow.
If you invest into your business, your business can continue to grow and you will earn increasingly more money. This brings us to the amount your business should earn. This involves a lot of thought, how quickly you want your business to grow, and the investments you want to make with your business earnings. For example, it is good practice to have enough money in your business account to help you pay your overhead expenses during a market downturn. Also, you should have enough money in your account to put a down payment on any major purchases that you expect in the future. There are other ways to finance these purchases, but having the money in your account will give you peace of mind moving forward in your business.
There is a lot to cover based on how much you think your business should earn on each job, but this should provide you with a lot of thought moving forward. Deciding the investments you want to make and when you want to make them will paint a picture for how your business will grow and how much money your business will need to earn.
Landscaping Estimate Template
We want to help you with your business and making sure that you are pricing your jobs appropriately so that your business thrives. To do so, we have created a landscaping estimate template for your business that we use in our business. It will help you with your future estimates.
It should be noted that though this template has a lot of thought behind it and works for our business, you should be tailoring it to your business and you should understand how your business works and what costs your business incurs on a daily basis. You should also know how much you want to pay yourself from the business and how much you want your business to earn on each project in order to keep it growing in the future.
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