We received a great question about pricing lawn and landscaping work in 2023. We thought it would be a good idea to share the question and our answer with our readers. Due to the sensitive nature surrounding pricing work, we chose to keep the company name confidential.
Here’s the question:
Tony, I have a question for you about what you are seeing in the pricing department for Landscape companies, if you don’t mind. We raised prices 7% across the board last year, and do an annual small price increase historically. But coming into this year, we feel like we have raised prices so much. How much are you seeing other raised their prices going into this year? We are going to be in the $90s per hour for mulching and weeding if we keep going up. If you have time, I’d love your thoughts. Thanks, Robby
Here’s our answer:
Thanks for your questions about pricing. That’s not any easy/fast question to answer (completely) via email.
However, I will answer part of your question and then share an important resource for further study on the subject of Pricing Lawn & Landscape Work in 2023.
First, I seldom recommend an “across the board” price increase. I recommend that you only raise prices on the bottom 20% of recurring revenue accounts at a time. Since these accounts are the “bottom 20%”, they typically require larger price increases than “inflation rates”. We typically see price increases from 10% to 100% within the group of the bottom 20% of customers.
If you have a customer list with 200 accounts, we need to figure out the 40 accounts that are costing you money. Raise those accounts as mush as you need to in order to meet your profit goals.
We’ve reviewed several hundred customer lists over the past years. In almost every case, the Pareto Principle applies. The Pareto Principle, also known as the 80-20 rule, says 20% of your accounts are losers. But in the same customer list, 20% of your clients are exceptionally profitable accounts. We don’t need to raise prices on exceptionally profitable accounts that might be paying $100 to $150 per hour for your services. We don’t want to take a chance on losing those exceptionally profitable accounts. Are you with me?
If you raise prices on an account that is COSTING you money and they decide to disengage your services, you are winning in three ways. First, you stop the bleeding caused by an underpriced job. Next, you open up your schedule to service a profitable account. Finally, in the unlikely chance that you are unable to replace the account with a winner, you have opened your schedule up to do a better job for your super-profitable accounts.
The only way to know the difference between a loser and a winner is by carefully tracking the labor hours used versus the labor hours budgeted on an account by account basis. We call this job costing. This in ONE of the six success skills wealthy landscapers master to drive profits higher and higher year after year.
Next…a 7% price increase in 2022 is 1.7% BELOW the USA recognized inflation rate of 8.7% in 2022.
A 7% price increase in 2022 would be well-below the price increases we have seen in our client base the past year.
You may already know this, but I’ll share the data to put this 7% increase into perspective.
- Wages have grown 5% per year in landscaping companies since 2015.
- Since they invented Covert-19, wage increases have been larger than 5% while weekly work hours per employee have gone down.
- Wages grew 10% in 2022.
- Fuel prices increased 100% between 2020 and 2022.
- Food prices increased 14% in 2022.
- Work Truck prices have increased 14% per year over the past three years. We share the details and calculations by clicking here.
So…I’d expect you are suffering from significant profit margin compression in 2022.
Let me share a conversation we had a couple of weeks ago with one of our top clients. He and his wife began the journey to become an exceptionally profitable landscaping company when they joined our coaching program in 2017. The conversation went like this:
Tony: What’s the single most important lesson you’ve learned over the years we have been working together?
Landscape business owner: I had no idea how much pricing power I had within my client base. I only wish I had learned this many years ago. If you would have told me I could raise prices this high and still keep my clients, I would have never believed you.
Tony: It’s not easy for a young (30-40 year old) landscape business owner to realize just how much money a 50 to 85 year old buyer can afford to pay for services. And until you sit quietly and see how much it REALLY costs you to operate your company, you get your mind poisoned with the thought that what your competitors are charging matters to your customers. It may matter for a few of those who drive hard bargains. But the kind of folks we work with in this industry are typically in the top 10% of income or wealth. So price is far less important to your customers than it is to YOU.
So Rob, here’s what I recommend you do BEFORE you price your next job:
Watch the Lawn and Landscape Pricing Guide 2023 Webinar by clicking right here. The webinar is FREE, but registration is required. Here’s an outline of the topics we covered during the webinar:
- Lawn & landscape wages in 2023
- How to give wage increases in 2023
- The 4 most popular benefit plans for 2023
- Pricing lawn maintenance jobs in 2023
- Pricing landscape jobs in 2023
- A Unique Approach for Profit for 2023
WATCH THE RECORDING HERE
Thanks again for your question!
Tony Bass, founder
PS – Everything that happens in your company – from operations to marketing to employee hiring – is subservient to how your price your work. The single most important skill you will ever master is how to Price Right. Gain an advantage by joining us for the Pricing Guide 2023 webinar by clicking here.