If you’re like a lot of landscape business owners you might decide how much to charge for labor simply by using gut instinct. You might have asked around and have a sense of what most companies in the area pay their laborers and you aim to pay your people somewhere in that same vicinity.

Then, after factoring in what you think your overhead recovery will be, you determine a price. Or maybe you take an even less systematic approach and simply take what you pay your laborers and double it.

But when it comes to something as important as your profitability, neither of these approaches are ideal. At the end of the day, you’re shooting in the dark. If you can’t immediately answer the more important question “Will this job be profitable?”, then there is a cause for concern.

You should know exactly what your labor costs are per person on the job and the only way to do that is by tracking everything. But before we get into why tracking data is so important, let’s first look at some common mistakes in determining landscape labor cost.

Mistakes on How Much to Charge for Landscape Labor

Profitability is more complex than most people realize. There are so many factors that can contribute to profit which are often overlooked or forgotten. These often seem small and insignificant but it is often the small things that add up to create a profitability problem.

For example, you might be creating a bid that includes a certain plant material. When that plant is not available, you might choose something that is more expensive but never account for the mark-up. That’s taking a bite out of your profit. Though it may seem like a small piece of the puzzle, if there are a dozen plants or this is a common error you make on multiple bids, that profit loss can grow.

Another common mistake that landscape business owners make on how much to charge for landscaping per hour, is that they charge the same man hour rate for construction work versus maintenance work. The type of work being performed should absolutely change the costs. Specialty trades like carpentry or masonry, which require skilled labor, should automatically be more valuable. But landscape business owners frequently fail to account for the differences.

Take it a step farther and look at certified or government-based work, where there may be a required wage at play. Are you accounting for that difference or are you sticking a prevailing wage across the board? The latter might be having a huge impact on your profitability without you even realizing it.

Remaining Competitive or Remaining Profitable?

We’ve also frequently seen companies continue to raise their hourly rates as a haphazard response to profits not falling where they need to be. While this often seems like the easy answer, it’s also not doing anything to uncover the truth about where profit is going. Having accurate data can help you make educated profit-raising decisions that might be different than just hiking the labor rate up as is so often the response.

Of course, landscape business owners are also constantly conflicted about remaining competitive within the local marketplace while also staying profitable. This is a common concern of owners and often affects how much they charge for landscape labor. We’ve found that owners put a lot of emphasis on what other companies are charging instead of paying closer attention to their own numbers.

When looking at other companies, it’s very likely that you could be comparing apples to oranges as there is no way to know your competitors’ overhead. We have found that in more cases than not, companies are underbidding on jobs and not as profitable as they could be. Unfortunately this is often because they’re more concerned about being competitive than they are about being profitable.

We have found that national averages for how much to charge for landscape labor truly runs the gamut. In looking at two different regions of the country, we found that in one area the average charge for residential design/build work was $60 to $75 per hour whereas on the other side of the country it averaged around $48 per hour.

There are so many factors, even within the local market, that can cause cost to vary. It can be incredibly difficult to uncover your competitors’ true costs and is not the best way to set your own rates. Instead, what you really need to know are your own numbers.

Knowing How Much to Charge for Landscape Labor

Business owners are often shocked to find out that they’re not profitable on a job, even after taking the labor rate and doubling it. They often wonder: how could I possibly be losing money after doubling the rate? But without tracking data, there really is no way to know exactly how much to charge for landscape labor.

First of all, let’s take a look at recovering overhead costs. What is factored into overhead can vary dramatically from one company to the next but may include the office, salaried wages, insurance costs, vehicles, and equipment. You should know exactly what your overhead cost is going to be before making any decision on how much to charge for landscaping per hour.

You should also be able to answer a lot of questions that all wind up impacting your bottom line. All of these factors will play a role in your costs and if you are only looking at the labor component alone, you are missing a lot of profit-related factors.

Questions that you should be able to answer include (but are not limited to) points like:

• How much time was each laborer actually on the job site?

• What was their travel time? Did they go directly to the job site?

• What was the direct labor versus indirect labor on the job?

• What do you pay your supervisor versus your laborer?

• What did you budget for this job and what did you actually do?

At the end of the day, the only way to get the answers to those questions is to track data. Landscape business software will allow you to know your numbers so that you can make effective profitability decisions.

Using Landscape Operations Software to Know How Much to Charge for Landscape Labor

One of the great features of using landscape operations software is not only knowing your numbers but also fully understanding them. By tracking your labor (more specifically, your people) you are going to understand exactly why you aren’t hitting the profitable mark on a job that has fallen behind. Some common scenarios we’ve seen? Well, a lot of times, you just might not have all the information you need. Or maybe you’ve been kept in the dark.

Perhaps your laborers are telling you that they head straight to the job site every day when in reality they’re making a 20 minute pit stop each morning. Even worse, maybe they’ve told you they were on the job site and weren’t there the entire day. Throughout the course of a job you will be able to see whether your laborers are effective in doing their work.

Because landscape business software allows you to know where crews are working and when they’ve logged in (in real time), it’s also easier to hold them accountable for where they need to be- and when they need to be there. In addition, tracking labor hours in real time allows you to keep an eye on the target. You can now be sure that you’re staying on task with budget and make changes accordingly if you’re not. It’s much more effective than waiting until the job is done to find out whether you were profitable.

Of course it’s not always a problem with efficiency. You may find that your laborers are very efficient but your sales team hasn’t estimated an accurate number of man hours required for the job. Maybe you actually need to charge the client more, or standardize sales with consistent landscape estimating software.

As previously mentioned, we’ve found that more often than not, landscape business owners are underbidding on jobs. The most common reason is simply because they didn’t know what it would take to be profitable. But tracking data with landscape business software will allow you to know exactly how much to charge for landscape labor. Coming up with that answer, for each and every job, will be the key to your ultimate profitability.

If you’d like to be more on target with your numbers and know exactly how much to charge for landscape labor, reach out for a free demo of Asset. Or, if we can answer any questions, give us a call at 800-475-0311.

 Watch this Video to See How to Track All the Important Numbers for Your Landscaping Company