If you’re like a lot of landscape companies, then chances are a good chunk of your revenue is being hijacked by landscaping overhead. Certainly, a lot of that is to be expected. There are always going to be overhead costs associated with doing business that you can’t avoid. Paying the mortgage on your facility building, investing in office supplies, and paying for insurance are all necessary overhead expenses that you can’t do much about.
But that’s not true of all of your overhead. Not only can some landscaping overhead costs be better managed, but it’s also possible to recover some of those costs. The key is to pay closer attention to your budget and to employ tools that will set you up for success. In a cutthroat business like landscaping, every dollar counts toward your bottom line.
Here are some expert tips for recovering landscaping overhead costs when it comes to pricing.
Know your Numbers
First and foremost, if you want to have any chance of keeping your landscaping overhead in check, then you must know your numbers. There simply isn’t a way for you to manage cost—or recover any of it—if you don’t know exactly what those costs are.
Of course, it doesn’t do much good to know your numbers after the fact. If you’re not looking at your numbers until the job is done, then it’s too late for you to make any impactful change. But if you’re able to watch each item on your budget, ensuring that your overhead costs are remaining on track, then you’ll be able to prevent costs from spiraling out of control or make changes when you need to.
Limit Equipment Downtime
Nothing takes a chunk out of your revenue like having a piece of machinery go down. And since you can’t account for equipment going down in your pricing, the best thing you can do is try to prevent it from happening in the first place.
Yes, equipment maintenance and downtime costs do come with the territory. But doing a better job managing your equipment and keeping up with routine service can go a long way in limiting downtime. Set up a system so that you can be sure your equipment is being serviced in a timely manner that will help prevent it from breaking down.
It may also benefit you to build one aspect of your company culture around respecting and caring for the equipment. After all, the better your people treat their machines, the better they are going to hold up. When operators are careless, you ultimately pay. So, it benefits you to come up with some ways in which you can encourage employees to take better care of the machines they utilize.
Don’t Oversimplify Your Estimating
There is a lot more to coming up with an accurate estimate than arbitrarily setting a rate-per-hour to charge or simply doubling the cost of materials. Sometimes landscape business owners say they just “know what to charge” because they’ve been doing it long enough. But when you oversimplify the estimating process, you are at risk of leaving out a variety of operating costs that might also impact your profitability.
The only real way to know exactly what your costs are for a job, and what you should be charging is to track everything. If you want to recover overhead costs, then you need to know every single item that is factored into your ability to get that job done. Once you know all of that data, only then can you make an accurate decision as to what you should charge.
Build Necessities Into Your Proposal
Being more cognizant of costs is definitely vital as you compile a proposal. Failing to build necessary line items into your proposal is one way to take a major revenue hit and fail to recover any overhead on your project.
Contractors tell us there are certain line items that they tend to forget. These are items such as getting a dumpster on site, renting port-a-potties, or even paying for permits. They are items that could be considered part of the “general conditions bucket,” and unfortunately they’re often an afterthought. Once the proposal is created and agreed to, these become expenses that the contractor must eat.
However, if you’re utilizing landscape sales and estimating software and working from a template, then you can have those items automatically pop up during the proposal creation so that they aren’t forgotten. These “additional costs” can add up and recovering them can be critical to the bottom line.
Make Sure Your Proposal is Adaptable
How often does it happen that you get a client who accepts part of the proposal, but not the whole thing? If it happens even once and you don’t properly adapt your proposal to the changes, then you may be failing to recover costs. This is an area where, once again, things tend to go awry when it comes to general conditions (like the addition of a dumpster or port-a-potties). That’s because, on a typical proposal, everything is built into a lump sum.
For instance, say you generate a proposal that includes a patio, a fire pit, and a pool. If the client accepts the proposal for the patio and the pool but decides not to include the fire pit, you must be certain that removing that portion of the proposal doesn’t mean you’ve almost removed some of the general conditions that still apply. And if you did accidentally remove them, you must remember to add them back in.
Creating proposals in a spreadsheet can be complicated but if you’re using smart software, that allows you to take those general conditions and ensure they apply to all portions of the proposal, then you can be confident your proposals will adapt as needed.
Equip Yourself with the Right Tools
At the end of the day, confidently recouping overhead costs can only be done with the help of tools that allow you to track data in real time. It’s surprisingly common for landscape business owners to underbid their jobs and it all comes down to simple mistakes that could have been avoided with a tool like landscape business software.
Landscape business software will allow you to know your numbers, to track data in real time, to estimate accurately, and to generate proposals that don’t fall short. It can even help you set up reminders for routine equipment maintenance that will prevent you from ever forgetting to service a vehicle or piece of machinery again.
In the end, the choice is yours. You can continue to do things the way that you always have and hope that you’re doing well enough to squeak by. Or you can have access to all the data that you need to be certain that you’re recovering landscaping overhead costs and being profitable.
If you’d like to be more certain that you’re recovering landscaping overhead costs with the help of Asset, then give us a call at 800-475-0311 or contact us for a free demo.
Image Sources: Level Green Landscaping