While you have many choices when customizing your new landscaping business, there are certain tasks you’ll need to do no matter which services you choose to offer. These tips can help you do them well.
Whether you’re providing a simple service like pruning bushes or you’re installing an elaborate three-level deck, people will want to know upfront how much a job will cost. As a result, it’s imperative to develop good estimating skills right from the start. The trouble is, estimating is a science, and it’s easy to make a misstep that could cost you plenty in terms of time and resources.
There are a number of software packages (like CLIP and LandPro Systems) developed specifically for landscapers that you can use to help you make good estimates. But here’s a general overview of how to go about making an educated guess on your own.
Your mission is to determine what your costs will be, then add in a profit. Your costs will include everything from materials (plants, mulch, topsoil, etc., which you’ve marked up from your wholesale or retail price) to labor (both your own employees and subcontractors), equipment (yours and any you rent) and your general business overhead (anything you plan to claim as the cost of doing business, such as home office expenses, gasoline, etc.).
Your estimate should outline the exact services you’re offering, materials you’ll provide and anything else pertinent to the job. The standard in this industry is to provide an estimate free of charge and it’s what we recommend.
Once you’ve secured a job, put the terms of the agreement in writing. This not only protects you, but it’s also a requirement in many states. A written bid is also helpful because if you’re ever asked to provide any additional services while you’re on the job (something that happens all the time), you have every right to charge extra because those services aren’t spelled out in the terms of the original agreement. At the very least, get your customer’s signature on a work order at the start of the job. That will prevent any misunderstandings later and gives you a legal leg to stand on in the event a client defaults on the financial terms of the agreement.
Landscaping experts recommend having a standard contract even for maintenance jobs. As with a bid, these contracts also give full details about the extent of the service you’re providing. The only time you really don’t need to have a formal contract is when you’re providing one-time or basic services, such as sprinkler head repair or seasonal cleanup. In that case, you can simply present a bill when the work is finished. To estimate this type of job, use the time and materials basis method, which means you estimate the time, multiply that by your labor rate (actual + profit margin) and add in your materials costs to arrive at a reasonable rate.
Finally, to make an accurate guess on what to charge, be sure to make a site visit. Consider every aspect of the topography when you scope out the area, including grade, type of soil and structures and other features (decks, rock gardens, etc.).
Of course, before you can give an estimate, you have to come up with a price you can use as a baseline. Landscaping professionals recommend coming up with an hourly rate, both for yourself and your employees. But you won’t be sharing that rate with your customers — it’s for your eyes only, so you can figure out how much to charge for a job.
There are many ways to determine your rate. First, compare your prices to those of your competition. Enlist the help of friends and family to help you contact companies in your target market area that offer services similar to what you plan to offer. If you’re doing business in an area that has a lot of subdivisions with similar-size homes and lots, the process will be relatively easy.
Another good way to determine your rate is to figure out how much it would cost you to, say, install sod (materials plus labor), and then divide that amount by the number of hours it would take you to complete the job. Add a profit margin and you’ll have a number you can use.
Finally, you can figure your rate based on how much money you’d like to make in a given year. For example, if your goal is to make $40,000 during your first year in business, you need to earn approximately $3,334 per month ($40,000 divided by 12). If you want to work 35 hours a week, a four-week month would be 140 hours a month. Divide $3,334 by 140 to arrive at a rate of $23.81 per hour. You can mark that cost up (or at least round it up), then add in your profit margin. Naturally, your cost of doing business, which includes materials, tool costs and office administration costs, would be billed to customers in addition to this hourly rate.
In the end, it doesn’t matter how you arrive at your rate as long as you make enough money to meet your monthly obligations. When determining your rate, think about how much you need to pay the business bills and cover your personal expenses (including the mortgage, health insurance, and other household bills). When you can pay all the bills and still have some cash left over to funnel back into the business or salt away in a business account, then you’ve priced your services appropriately.
In the early days of running your business, it’ll be easy to figure out where you need to be on any given day. But when the phone starts ringing, you may find yourself scrambling to coordinate jobs, and unless you have a good system for tracking those jobs, you could miss an appointment — and lose a customer. Therefore, you might want to invest in a software package designed especially for landscapers to help you track your business. Once you’ve entered data into these programs, you can print out a schedule for the day that you can carry with you in your vehicle. Always remember to build travel time into your schedule and use an online mapping site like Google Maps to plan your route for the day.
When you have more work than you can personally handle, you may need to take the plunge into hiring employees. Here are the types of employee you may find you need:
- General landscaping assistants for mowing, maintenance and installation assistance.
- Licensed chemical applicator for both fertilizing and pesticide/herbicide applications. Most states require licensure or certification for workers who apply pesticides and herbicides.
- An estimator for doing site visits, sizing up the work and generating estimates for customers.
- General office staff for handling office administration when you get too busy to do it yourself.
If you don’t really need permanent staff or don’t want to take on the big expense that comes along with hiring full-time employees, contract out the services you can’t handle yourself to carefully selected subcontractors. For instance, you could subcontract out the building of a deck to an experienced carpenter, engage the services of a landscape architect to handle the design of a whole-yard installation or pay a licensed chemical applicator to handle all your pesticide/herbicide applications. Your customer doesn’t have to know you’re using a subcontractor — and in fact, it can be even less transparent to them if you give your subcontractors a T-shirt or baseball cap with your company name on it to wear while on the job.
When you subcontract services, your subcontractors will bill you and then you should add a markup of 15 to 25 percent to the bill you send to the client. This isn’t gouging — it’s a way to cover the overhead and administrative costs you incur in the course of doing business. Just be sure to screen your subcontractors carefully before hiring them. Anyone who does work for you is a representative of your business and can help or hurt your reputation depending on the quality of work he or she does.