Answer: Many landscape contractors fail to correctly calculate their man-hour rate, resulting in either “over-pricing” or “working for a loss.” To figure out what you need to charge to stay competitive while also staying in the black, you need to identify three things: total labor hours you can bill in a month, what your labor costs are per hour, what your monthly overhead is.

Check out this quick video from PRO partner The American Landscape Maintenance Association (ALMA) that talks about how to determine your man-hour rate.

Answer:

The first suggestion is to walk the property with the prospect, pointing out the deviations to spec, and asking if he/she would like you to bid to the services being provided by the competitor, or according to the specs provided in the RFP. Make sure that you point out that the latter will be considerably more expensive, but also state that should the prospect have a budget limitation, you would be happy to design a program specifically to his/her needs.

If a site walk with the prospect isn’t possible, go ahead and walk the site yourself, camera in hand, photograph the deviations from spec, and in your proposal point out the discrepancies (with photos) with a price for duplicating the current service level, plus a proposal at the specified service level. Include a reminder that should budget be an issue, you would be happy to work with the client.

Never criticize a competitor because there is always collateral damage. Simply present you own attributes. When done well, you will always outsell the competition.

Special thanks to consultant Frank Ross of Three Point Group for taking the time to answer this question. For more information visit Three Point Group Consulting.

Answer:

Here’s the thing: You need to figure out your own numbers. If you go ahead and charge $35 an hour when your real cost is $45 an hour, you are going to lose a lot of money.

Start with a simple expense budget. Include your truck, non-working owner’s salary, cell phone expenses, advertising and other basic overhead costs. Understand that these costs will change as your business grows and you spend less time in the field. Remember, most start-up landscapers are working two jobs: one in the field and one in the office.

Here’s an example. Keep in mind that this is only an example using very basic numbers—you need to run your own numbers to figure out your own scenario.

A truck with insurance, depreciation, gas and maintenance is going to cost you at least $8,000 a year. Throw in a mower and other tools and now you are looking at a minimum of $12,000 a year for trucks and equipment. (Gas and maintenance are really variable overhead items, but I am trying to keep this simple.) Of course, you can start out with used trucks and old equipment, but if you don’t put replacement costs into your price, you will never be able to buy new.

Even in a small company where you do the work yourself, you will have at least another $5,000 a year in non-field owner’s salary.

Cell and business phone is another $2,000.

Throw in other overhead costs like business license, office supplies and business insurance for another $3,000.

This puts us up around $22,000 a year.

Suppose you work 40 hours a week and 50 weeks a year. This equates to 2,000 billable hours. If you bill 2,000 hours a year, that’s $11 an hour for overhead ($22,000 divided by 2,000 hours).

Now let’s suppose you want to make $20 an hour. Now your cost is at $31 an hour ($20 an hour for you plus $11 an hour for overhead).

Throw in the seasonality of the business and you really may only bill 1,500 hours are year, making your overhead $14.67 an hour. Now you are at almost $35 an hour.

You are right, it can be difficult to determine what to charge because your competitors aren’t going to tell you. We teach a program that helps with this, and also cover it through our networking groups. Our “Knowing Your Numbers” CDs are also very helpful with pricing. Feel free to give me a call for some free advice.

Thanks to Monroe Porter of PROOF Management Consultants for answering this question. Email Monroe Porter or call (800) 864-0284.

Answer:

The answer would in most cases be no. The clay-face brick for vertical surfaces has not been fired long enough in the kiln to make it durable for pavement use. The face brick would typically start to swell and then crumble in most climates when used for pavements. The exception is always the climate. If dry enough and there is no freeze-thaw at the location they could actually last a long time. There is still a question of aesthetics and labor. To properly clean and set used bricks on edge (the no hole side) you get very little area covered with each brick and time, and even on a DIY project, time does have value. Photos always help in providing proper advice, so feel free to also visit The Hardscape Fourm

Stephen Jones, president of Pave Tech Inc.

Answer:

Business is going to start picking up again next year, but it’s going to be a lot more challenging to earn that business. So when landscapers ask me for help these days, the first thing I tell them is to completely dissect their company and begin preparing for the worst-case scenario. The contractors who did that in the lead-up to this year are the ones who’ve done pretty well.

And it’s not just a review of your business. You need to do a personal review, as well. Many contractors got into this business because it’s easy-access. They are brilliant craftsmen but weak on business skills. This year scared the daylights out of them. They had to lay people off. They couldn’t get loans. A lot of them found out they didn’t have the stomach for all this.

Even though business will improve, there’s another dynamic at play. Both residential and commercial consumers have this certain fear. Am I hiring the right contractor? Am I paying too much? Do I really need all these services? Should I just put this money away in case I need it down the road?

Here’s the bottom line: You need to become a really good salesman. You need to convince customers that they should go ahead with the job—and that you’re the right person for them to hire. Yeah, you’ve always had to do this, but now you have to be really effective at selling service, responsiveness and value. Word of mouth is going to come back into play next year, and consumers are going to want to hear about your responsiveness and value, not just “boy he does good work.”

Aside from improving your selling skills, there are a few other areas I think you should look at.

LEADERSHIP – If you’re like most contractors, it’s going to take a lot of planning and effort to get your company moving forward again. Work won’t be handed to you like it maybe was in the past. Stay positive and keep fighting. You must inspire both yourself and your staff.

GROWTH – Don’t expect the dramatic growth spurts like you may have had in the past. You’re going to have to hustle and start planning for ways to grow right now. That’s why you need a strategic plan (like Jon Ewing just talked about). Where are we and how can we grow moving forward? You may need to try some new marketing tactics in order to find new customers—convincing them that now is a good time to invest money in their lawns and landscapes.

PEOPLE – Be very careful about who you hire going forward. Take your time. You need people who can multi-task and are willing to fight with you, not just collect a paycheck. The good news is that a lot of talented people are looking for work, so the labor pool you have to choose from is as strong as it’s been in a long time.

There’s no doubt that 2009 has been humbling for a lot of contractors. It has also opened up quite a few eyes. Things are going to get better in 2010, but it’s going to be very competitive. Start preparing for that now and you’re one step ahead of the game.

Thanks to green industry consultant Gary Goldman for answering this question. To contact Gary, call (508) 652-9771 or send an email to gmanaf@msn.com.

Answer:

This is a tough question that unfortunately does not have a clear-cut answer, which is why so many lawn maintenance contractors struggle with marketing their services, adding customers and growing sales. There is an entire exercise you should go through to help find the best answer for you. Here it is:

What do you want to be?

• Do you want to specialize in commercial properties?

• Do you want to specialize in high-end residential properties?

• Will you mow, trim and blow? Or will you also do fertilizing, tree and shrub pruning, cleaning gutters? Anything else?

• Do you want to be known for being the best, or being the lowest price?

After you answer all those questions, ask yourself: Who are my target customers?

• Where do they live? The most successful maintenance contractors focus on a very targeted area so their route is tight, minimizing travel costs (drive time, gas, vehicle wear, etc.).

• What are their likes and dislikes? It’s important to understand this so you can figure out how to relate to them better.

• Do they want a real professional, or do they just want someone to come in and make their grass shorter?

• What do they need – and expect – from a lawn contractor?

Now that you know what you want to be, and who your target customers will be, you can develop your marketing strategy. Keep in mind that, whichever business you’re in, word-of-mouth and customer referrals will likely be your most-effective tool.

• You’ve identified your target customers, so go after them. Send them a flyer or put a hanger on their door.

• When you do land a couple of customers, make sure they have your cards to pass along to their friends and family. Ask them if they know of anyone who might also like to hire you.

• Get involved in the community. Many contractors have found that donating time on a project helps get their name out there.

• Yellow Page ads can work for contractors just getting started, but can be costly. Same goes for newspaper ads. Most contractors tell us they get more bang for their buck sticking to direct marketing.

Take a look at the PRO Magazine Business Resource Room’s Marketing Your Business section – you’ll find a host of articles on a variety of sales and marketing topics.

Answer:

When growing sales, landscape contractors have an opportunity to take advantage of certain economies of scale to help improve their profitability. Did you know that if you increased sales by 5%, and simultaneously reduced your direct costs by 2%, your gross margin would increase 3%? Consultant Jon Ewing, a former landscape contractor, says doing so is well within reason for any contractor. Here are six things you should take a look at.

1 – Evaluate the cost savings through using mulching mowers. This is an opportunity to save on green waste costs directly associated with your maintenance projects.

2 – If you do not use slow-release fertilizers, investigate the labor cost savings vs. the increase in material costs.

3 – Make sure that your maintenance crews are routed as efficiently as possible. Any time you save will improve labor costs, not to mention fuel costs.

4 – Revisit all insurance costs. If there is some savings you can realize in your workers compensation rates you should take advantage of it.

5 – Seek every opportunity possible to improve your relationship with your vendors. If they offer early-pay discounts and you have the cash flow to support such a policy, take advantage of it. Some vendors will offer a 2% net 10-day discount. Over the course of a year this can prove to be a substantial savings.

6 – Most importantly, manage your labor dollars. Know where every labor dollar is spent. Determine that every employee adds value to your customers and is an effective contributor to your services.

~ Ex-contractor Jon Ewing, Jon Ewing Consulting Services

Answer:

Many landscapers have had to adjust their course. Many companies that prepared their budgets in the fall of 2008, expecting 7 or 8 percent growth for the year, have had to readjust their numbers. After the perfect storm of October 2008, the bottom fell out and they had to go ahead and come up with a Plan B.

That plan had to look at every aspect of their financial model, including sales and revenue on the production side and all the way through with overhead expenses. Many business owners had to scale their companies back to act like they were roughly 10 percent, 15 percent smaller. They had budgeted for projects and initiatives for the future that they had to just say, “Well, let's wait until the storm passes before we make those investments.” Then they had to just trim the fat, along with those things that don't necessarily affect people on a day-to-day basis, in order to come up with a plan that was essentially much more sensible. Moving forward they are hoping that they don't have to go much deeper.

~ Gary Goldman - landscape industry veteran and business coach

Answer:

There are far too many variables in sod and seed pricing to offer advice. Turf variety, prep time, market trends and several others will affect pricing. You might be able to get a better handle on sod pricing from a local producer, many offer installation services that are very competitive. – Corey Handley, WAC Corp. in Greenville, NC

As for hydroseeding, the price per square foot can vary a lot. I would say that 8 to 10 cents per square foot is the most common. Most contractors will charge a little more for a small job, or charge a minimum of perhaps $250. Many will discount it for a larger job. For jobs exceeding 20,000 square feet, contractors will drop the per square foot price down a penny or two. If the job is an acre or two, they would more likely be in the 6 to 7 cents per square foot range. But there are a lot of other factors that can also affect the price, such as driving distance, availability of water and difficulty of the job. – Ray Badger, Turbo Technologies