From – Tony Bass
There’s a storm coming. Not a snow storm or a hurricane, but an economic storm. One that you and I have NEVER had to deal with in business.
As I write this message, inflation is growing rapidly and infecting our country. Prices are rising on almost everything. Fuel, food, equipment, and especially labor are going up – BIG TIME.
On February 10, 2022 the Bureau of Labor Statistics released the latest data on inflation in the USA. The report shows that prices have gone up 7.5% since January of 2021.
But when you look at the data from the past four months, you’ll find that inflation rates are actually running at an annualized rate of 8.4%.
Further, the Producer Price index, which is a forward looking report, released on February 15, 2022 shows inflation running 9.7%.
You have to go back in time to the period 1973 to 1982 to find inflation rates this high. Very few of my clients are old enough to have first-hand experience with this type of economy.
So I thought I would send over this summary report on the subject of pricing mistakes and how to raise prices in 2022. After all…your prices MUST go up in 2022.
And…just in case you missed it, we recently released the full video report on the subject titled the 2022 Pricing Guide for Lawn and Landscape Contractors with Q & A. You can get access by following the QR code on this page. Registration is required to access the video, but access is FREE. This is a wake up call for landscaping business owners!
I look forward to hearing from you on this subject.
Part One: Three HUGE Lawn and Landscape Pricing Mistakes
The landscaper at the gas station told me he was charging $45 per hour for lawn maintenance services. So I decided to use his price! After all, he had a nice truck and he’s been in business longer than I have…
Let me get this off my chest right here: $45 per hour ain’t gonna cover your costs in 2022…let alone make you any Profit! Nope…those days have passed us by!
It’s sad really. Far too many lawn and landscape business owners are influenced by their local competitor’s prices. It’s almost like we are in some battle for low-price supremacy.
But in almost the same breath, that same landscaper will tell me they are always being told by their customers that their prices are high. Let me let you in on a little secret…everybody with money likes to build your ego so you will hesitate to raise prices. It’s a negotiating strategy.
Listen, mistakes in pricing work cost hard-working landscapers a bloody fortune every year. In fact, we have proven that 1 in 5 (that’s 20%) lawn or landscape jobs are underpriced. Here’s why…
We’ve uncovered three huge pricing errors as we reviewed the estimates from over four hundred lawn and landscape businesses in North America.
3 HUGE Lawn and Landscape Pricing Mistakes:
- Under estimating labor required to provide the service
- Failure to charge for General Conditions items
- Leaving equipment out of the estimating process
All three of these are HUGE problems…and any one of these mistakes could prevent your company from realizing its true profit potential. So allow me to introduce these three items in a way that you can tell if you are making one (or more) of these mistakes.
First: Under estimating labor required to provide the service
From the E-Myth Landscape Contractor perspective, the job plan helps you prevent mistakes in estimating. It goes like this. When your crew pulls up to the curb to do a job – any job – you must provide a step-by-step list of tasks that shall be performed IF your company executes the job in the correct sequence preventing rework.
The job plan assigns the tasks in the right order…and assigns the labor hours planned for each task. When you include each and every step required to complete the job to meet the specifications you promised the customer – regardless of how small the detail – you will become a more accurate estimator.
And…since labor is the biggest cost of providing lawn and landscaping services, even underestimating labor by just 6 minutes an hour can destroy your ability to become a Wealthy Landscaper.
Every estimate you produce should assign an exact number of labor hours for your team to complete the job. And…each team member needs to know how many man hours they have assigned to complete the job. This is called keeping score on a job by job basis.
At the end of the day, the crew should be able to know if they’ve met goal or fallen short. If you provide route services like lawn maintenance, the crew should know if they won at the end of each visit. How are you doing with this one?
Second: Failure to charge for General Conditions items
There are five BIG General Conditions items that impact your costs to complete each and every job. These five items are often omitted in the estimating process…or…the contractor thinks they can’t charge for these items because they should cover these costs in their overhead or hourly rates. Baloney!
You better get paid for everything that COSTS you money. Here are the big five:
- Drive time to and from a job – labor plus equipment
- Daily clean up of the job site before the crew heads home
- Loading the truck in the morning and unloading the truck in the afternoon
- Unloading the truck at the job site and loading it back up at the end of the job
- Handling and disposing of job waste
General Conditions are things that cost you money. You might call these items Job Overhead. But here’s what we have learned from three decades of lawn and landscape contracting. Job Overhead – created by these 5 items – add from 5% to 25% of the total cost of providing lawn and landscape services.
And since EVERY job is a little different from the last job or the next job, General Conditions must be calculated on a job by job basis. There’s no way to accurately estimate your COSTS to complete a job without a careful consideration of Job Overhead. How are you doing with this one?
Third: Leaving equipment out of the estimating process
Lawn and landscape businesses that GROW learn how to Price Right or they simply grow themselves a HUGE pile of DIRTY DEBT. Let me explain this.
In many cases, the dirty debt shows up in the form of maxed out credit cards, unpaid credit accounts with suppliers and a line of credit that can’t be repaid at the end of the next month. Over time, we call these symptoms DIRTY DEBT. We don’t like Dirty Debt.
In the worst case, contractors get behind on paying payroll taxes and get in trouble with the IRS. These companies require immediate assistance or they will fail. If this has happened to you, here’s what you need to do.
(Scan the QR code to access the video.)
On the other hand, the right kind of DEBT can make a landscaper very Wealthy…
When you acquire equipment to provide (or expand) your services, you are in the Contracting Business! Purchasing, leasing or renting equipment gives you access to tools that make you more productive. In theory, the more equipment you own (lease or rent), the more revenue you can generate. Equipment debt could make you very Wealthy!
Unfortunately, after reviewing the estimates from over 400 landscaping companies, when we first met them, 75% had not established hourly rates for their equipment. And…since they did not have hourly rates for each and every equipment asset in inventory, they did not include their equipment in their estimating process. They were HOPING to cover their equipment costs in that magical $45 hourly rate. Oops…
Here’s what we know. Equipment typically makes up 10% to 16% of the cost of providing lawn and landscaping services.
As we write this message, inflation has dug its nasty claws into every landscaper’s bank accounts. From rising prices on fuel to steel to aluminum, costs are on the rise. Therefore…you need to consistently raise your equipment rates in order to replace your equipment…even if you haven’t bought new equipment in a few years…when you do replace your old equipment, it’s going to cost you a lot more than the last time you bought it!
Equipment is an asset that allows you to make money. It goes UP in cost almost every year.
But…equipment, when accounted for correctly, should NEVER cost YOU one thin dime. It’s simply a pass-through cost like a bag of mulch, a flat of flowers, a sprinkler head or pallet of pavers.
One more important point. Equipment is not overhead. It’s a Direct Job Cost!
Every estimate for lawn and landscaping services should have a detailed budget for the equipment assigned to the job. From your truck to your skid loader to the blower…every piece of equipment must be priced by the hour or you will always underprice your work – Guaranteed! How are you doing with this one?
What Landscapers Can Do to Correct Pricing Mistakes…
If we have exposed you to estimating mistakes inside your company, that’s a good thing. Now you can get busy fixing the problem(s).
Average lawn and landscape companies consistently underprice 20% of their jobs…and it’s costing them a fortune! Pricing mistakes destroy landscapers bank accounts and prevent the accumulation of Wealth. Ouch!
You move through time doing good on 4 jobs…then…BAM…you goof up another estimate and underestimate labor. Remember…1 out 5 jobs are underpriced in our industry…that includes YOUR JOBS!
We can help you figure out if your company is doing a great job, good job or poor job pricing work. You simply need to take the Wealthy Landscaper Productivity Challenge to see how you compare to the top landscaping companies in your area.
The video and guide is found here. www.superlawntoolkit.com/WLPC No charge and you get immediate access…but we do hope you’ll send us a note to let us know what you learn when you’re done. (Scan the QR code to access the video instructions.)
If you think you could improve your Profits, you’re probably right! But take the Wealthy Landscaper Challenge and see how much you can improve.
If you need some help, see our offer below.
Tony Bass, founder
Two ways we can help you become the Wealthy Landscaper in your town.
Take The Wealthy Landscaper Productivity Challenge at www.superlawntoolkit.com/WLPC and see how you compare. We have included the WLPC Guide in your package. Do the exercise and see how you compare. If you need help, scan the QR code above to access the video instructions.
Join us at one of the Highly Rated Profit Builder Training Events. We will teach you how to Price Right, build a company operating budget, establish the hourly rates for your equipment and build an estimating system you can use to Price Right with confidence. www.superlawntoolkit.com/profit-builder
SPECIAL NOTE: We’ve heard from a number of landscapers over the past weeks that they know their costs are going up. But they still fear the process of raising prices. They simply don’t want to “stir the pot” and create any friction with their customers.
So we have included our latest recommendations on identifying the customers you SHOULD be raising prices on in the next few pages.
So please…keep reading and Profit Greatly!
Part Two: Raise Landscape Prices WITHOUT Losing Half of Your Customers…
The PERFECT time is near…
Wealth from landscaping starts with one skill: Price Right! It’s the key to your financial success.
And now…lawn and landscape business owners face this HUGE inflation hurdle.
Unfortunately, many hard-working landscapers hesitate to raise prices in fear of losing customers. In fact one of my clients stated on a phone call this past week, “I’m not sure about the ‘raise prices’ thing Tony, I can’t afford to lose half of my customers.”
Here’s the 4-part plan to raise prices so you WON’T lose half your customers.
FIRST: Raise prices on all new customers effective today. Especially one-time jobs, construction projects under $5000 and ANY PROJECT that’s a first type job. Like if you have never done a water garden and your best client wants one next week. RAISE your hourly labor rate. Just take the rate you are using and increase it 10% right now.
New customers will not notice it. Existing customers love you enough to keep you even if you cost a little bit more. Besides, you need a raise!
SECOND: Raise prices on ANY customer that is slow-paying or a pain in the rear end to work for. If you have a customer that is hard to satisfy…they COST you more money to serve them. Raise their prices 15 to 20% and don’t bat an eye doing it. Got it?
THIRD: NEVER raise prices on existing customers paying you for a monthly service until you can prove you are losing money. This is where job costing comes in.
All successful companies have a way to evaluate the direct cost of a job. Namely, you must track labor hours, your biggest costs.
For example: until you can show me that Mrs. Jones was bid for 12 hours of work and we actually must use 15 hours of work each month, DON’T raise prices on Mrs. Jones.
FOURTH: When you increase the price for an existing customer, ALWAYS offer a prepay discount. We have found that offering a 2%-5% prepay discount results in 15% to 40% of your customers paying you in advance of you providing services. This makes a HUGE impact on cash flow.
The act of offering a prepay discount demonstrates that you are doing everything you can to help keep your costs under control. Even if they do not want to take you up on the offer for a prepay discount, they will appreciate the offer.
Labor is your biggest risk in business. Keep one eye on labor. Track man hours for EVERY job, EVERY visit, EVERY week & EVERY year. This information will be used to make you a Wealthy Landscaper. Only raise prices on full service monthly accounts that are costing you money!
If you have underestimated the labor hours required to service a monthly customer, you MUST raise the price. And here’s another HUGE lawn price goof-up. You don’t have to wait an entire season to make a decision to raise lawn service prices. You have the right to issue price increases as soon as you find out you have goofed.
Many companies reserve the busy Spring season for price increases. Raising lawn and landscape prices in the Spring is a good plan. But remember this…
There’s NO WAY you can build a profitable lawn service business by underestimating the labor hours to complete a job. So please…track your labor hours and see how you are doing compared to the labor hours you estimated for the job ALL BUSY SEASON LONG. Then adjust.
And if you are one of the doubters saying, “Tony, I wrote an estimate for the entire season. I shouldn’t change my price after a few months.”
Remember this…if your crew fails to do a good job…or you fail to show up on time…or if your crew gets caught peeing in the bushes while serving the account…you’ll get fired midseason. If you don’t get fired, you’ll get your butt chewed or suffer through unneeded stress and strain.
Average lawn and landscape companies have under priced 20% of their jobs…and it’s costing them a fortune! Raise the price on under priced jobs…sure…do it in April. But do it again any month of the season if you figure out you have underestimated your labor. Got it?
The fastest way to turn an average lawn or landscape business into a super profitable business is to Price Right. Your confidence to adjust your prices midseason can make you a very Wealthy Landscaper!
If you would like to see how your company compares to the top-profit lawn and landscaping companies in the USA, then take the Wealthy Landscaper Productivity Challenge. The video and guide is found here. www.superlawntoolkit.com/WLPC (The handout is included.)
Tony Bass, founder
PS – Landscape business owners CAN double profits – regardless of their size – regardless of their age – regardless of where they live – if they focus on ONE skill. You must Price Right to become a Wealthy Landscaper.
Take The Wealthy Landscaper Productivity Challenge at www.superlawntoolkit.com/WLPC and see how you compare. The video and instant download show you exactly what to do.
Use your smartphone and scan the QR code to access
the video instructions for the Wealthy Landscaper Productivity Challenge.