BUSINESS
Benchmarking your business
How much do you charge for your services? by Kristen Hampshire, Lawn & Landscape that he could lower the hourly rate,” Huston says. Well, that contractor did, in fact, end up adding many more clients because his market was particularly competitive. “If you know your costs, then you can make those decisions,” Houston says. So, what’s the best way to figure out pricing so you know when to draw the line and know what flexibility you might have to give a customer a break? Huston suggests a bottom-up approach that will give you a minimum price to charge for services. “You’ll have low-ballers in your market that will come up with some ridiculous price and you need to know when to walk away from a job,” he says. A bottom-up pricing strategy tells you:
Graphic courtesy of Lawn & Landscape
Pricing is a constant pressure for landscape businesses, whether you’re
UAC MAGAZINE | SUMMER 2019
operating a lawn care company, design/build firm or commercial maintenance business.
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Pricing is the one common frustration because no matter the market or economic landscape, you’ll always face low-ballers and feel cornered by clients who try to squeeze the profit out of a contract. “It’s important to know your numbers, know where you need to be and know when to say ‘when’ on lowering a price,” says Jim Huston, president of J.R. Huston Consulting. Huston describes a contractor who wanted to lower his hourly labor pay rate by $2 an hour because it would decrease the cost of services by 10 percent and allow him to pick up more work. “We really dug into the numbers and discovered
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How low you can go with pricing
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The bottom-line price you can build up from, and perhaps generously, depending on the market and economy
How much room you have to valueengineer a contract to retain a client or compete against another bidder
Get your break-even Before you can figure your minimum price, you’ve got to have a solid budget that aligns with industry benchmarks. With an accurate budget, you’ll know the costs for labor, labor burden, payroll (taxes), equipment costs, subcontractors, equipment rentals, vehicles and materials. You’ll also know your indirect costs, including general administrative overhead. your break-even point: Add your 4 Find direct costs and overhead. This is your
break-even point – the money you’ve got to bring in to stay in business.
net profit margin: Now that you 4 Add have the break-even point, apply the net profit margin. For example, in today’s
