Landscape & Irrigation

October 2017

Landscape and Irrigation is read by decision makers throughout the landscape and irrigation markets — including contractors, landscape architects, professional grounds managers, and irrigation and water mgmt companies and reaches the entire spetrum.

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www.landscapeirrigation.com Landscape and Irrigation October 2017 13 Develop production cost per man hour from your P&L statement and payroll reports. Make sure you only use production labor and production equipment costs. Include the hours you do field work or directly supervise job sites. Do not include subcontractors or job materials. Add up the rest of your non-production expenses such as phones, rent, marketing, business licenses, office help, software purchases or subscriptions, etc., to determine overhead. Add together overhead, full labor costs (payroll plus labor burden) and production equipment costs, then divide by the number of crew payroll production hours, plus your own field hours. This will give you a simple calculation and result for overall cost of operation per crew hour. It's not the ultimate answer to knowing your numbers, because not every crew may be the same size, and some may use grossly dissimilar equipment resources, and/or require differing amounts of supervision on your part. If you do not have some of the listed items in your overhead expenses, find out or estimate what they cost and include them. This will ensure you have enough money in the future to add these expenses as you grow, and not create sticker shock for your customers with a big price hike. Plan and build for the future as if you own it now. Success means ditching denial and fear Too often in my 45 years in the green industry I have personally heard, or read in industry forums, contractors saying they can't bid, charge or get "that much money" for a given service. There are only three reasons that could be: your work isn't worth more money; you are trying to run a business in demographics that don't support your services; or you have never asked or bid a service at a higher, more profitable price. Let's throw reasons one and two out the window on the assumption your work is industry best, and your clients have plenty of discretionary income. Having calculated your production costs and times, then comparing them to what you are charging for some services can be a shocking revelation. The first tendency is to deny the calculations and justify by thinking you made a mistake, or that a professional like myself doesn't know what they are talking about or how it is on the street. The second tendency is being fearful of losing clients or bids because your new and proper pricing is too high. Your cost numbers are not lying. Your old pricing methods that lack a system are leading you off course. Charging what you hear the other guy charges or making something up out of thin air or gut instinct is not a pricing and success system. How to avoid the fear factor of charging more money Have confidence that it is highly unlikely every job you price is priced wrong. Before learning what your costs are and comparing costs versus revenue on your jobs, you simply didn't know the difference between a profit maker and a profit taker. If you use your new cost information and look at some past bids, you may have also overbid some jobs that could have been done profitably for less money. When you come to grips with your numbers being right, and fear of the unknown is the only thing holding you back, success can be ridiculously simple. Raise prices on your money-losing clients and services without apology or justification, and let the chips fall where they may. Define your profitable customers and services, then target those types of clients and push those services. Most often, contractors are pleasantly surprised at how few clients quit or complain when they are delivering great customer service and quality work. They knew you were too cheap to start with. Get financially healthy and live. Harold Fox was a lawn care and irrigation contractor servicing residential and commercial clients in southern New Jersey for 43 years. He is a past president of the Irrigation Association of New Jersey. Fox sold his company and retired in 2015. He can be reached at harold@haroldfoxllc.com.

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