Understanding how to price landscaping jobs is one of the biggest obstacles to a profitable landscape business. Many landscapers find themselves extremely busy without the profits to show for it.
There are many variables to consider when setting prices, including billable and unbillable hours, overhead, and labor rates, to name just a few. There are also local competition rates to consider.
For your prices to be profitable, you must account for all time and expenses. But it can be hard to know how to estimate landscaping jobs if you aren’t clear on how much time and material each job will need.
This landscaping pricing guide will show you how to price your landscape jobs correctly and how to estimate landscaping jobs to win more bids.
Flat-Rate vs Hourly Rates for Landscaping Jobs
The two pricing models used most often in the landscaping industry are the hourly rate model and flat-rate pricing. Depending on what’s best for your landscaping business, you may decide to use one over the other or a combination of the two.
Hourly Pricing (Time + Materials)
The hourly pricing (or per hour) model for pricing landscaping jobs bills the customer by the hour at a rate that covers time and materials. The total cost of the job is determined mainly by how long it takes to complete.
Hourly pricing can appeal to some customers because there’s more perceived transparency in the charges. The itemized estimate shows the customer the hourly pricing and material costs. However, the customer will also start watching the clock.
You can have it fast; you can have it good; you can have it cheap. But you can’t have all three.
The hourly pricing model also costs you more in unbillable hours. Every new project requires time spent on creating new estimates and invoices.
The flat-rate pricing model factors in labor cost, materials, and overhead to create a set price. The customer pays a flat rate for the job, regardless of how many hours it takes to complete.
This model allows you to offer a menu of add-ons and upgrade landscaping services that customers can include with the original job. You won’t need to create a new estimate and invoice for each landscaping project, saving you unbillable admin hours.
Pricing landscaping work with a flat rate will also give customers peace of mind knowing how much they can expect to pay when the job is complete. Plus, you know exactly how much money this job will bring to your landscaping business.
Landscaping businesses can see significant bottom-line improvement just by incorporating flat-rate pricing. Investing in landscape estimating and invoicing software can help improve accuracy when you price landscaping jobs.
Having a process to evaluate the issue upfront properly is critical to setting an accurate flat rate. Without a precise evaluation of the problem, you could find yourself working long hours without proper compensation.
Tree service estimate templates follow the flat-rate pricing model as many tree service jobs are quoted as one flat rate.
It’s just as vital that you know what the average times and materials are for each job to determine a flat rate that will be profitable. Complex jobs that require extensive labor and time, and materials are largely unknown; it might be better to use a hybrid pricing model.
Using a combination of the hourly & flat-rate approach for pricing landscaping jobs may help.
You get more accurate pricing without cutting into profits, bringing you closer to your financial goals.
For example, some landscapers use an hourly rate model on large, complex jobs while offering flat-rate prices on smaller, more straightforward jobs like lawn mowing, tree removal, and sprinkler blow-outs.
Using a hybrid model also offers flexibility when pricing landscaping jobs. For instance, regardless of size, all landscape jobs will require a preliminary inspection to evaluate the problem and determine the solution.
With hybrid pricing, you can choose to charge an additional fee for the inspection while waiving it on bigger jobs. It also stops customers from watching the clock and gives you the space to do quality work.
How to Calculate Landscaping Costs
Regardless of which landscaping model you use, it’s critical that you learn how to price landscaping jobs accurately.
Labor costs, the cost of materials, unbillable hours, and additional overhead need to be accurately accounted for and included in the estimate for your landscaping jobs to be profitable.
How Do You Calculate Landscaping Material Costs?
It’s essential to be thorough when calculating your material costs. Start with an itemized list of all the materials and supplies necessary to do the job. To calculate the exact cost of materials, use the following formula:
Total of required materials x Sales Tax at Counter = Total Materials Cost
If the materials to blow out a sprinkler system add up to $26.79 and sales tax in your area is 6%, for instance, your total material cost for the job is $28.40.
When pricing your landscaping jobs, be sure you’ve considered all potential costs. Forgetting to account for expenses will cut into your profit margin and potentially embarrass you in front of the customer.
Here are some possible costs and expenses to include in your landscaping estimate:
- Debris removal from the job site
- Correcting any violations to existing landscaping code in old or neglected properties
- Removing or replacing the sprinkler system
- Providing irrigation devices where required
- Repairing or replacing damage done by tree roots
- The time required to cut down a tree, mulch limbs and branches, and remove the root system
- Digging for access for trees, shrubs, or lawn replacement
- Any required permits
How Do You Calculate Labor Costs for Landscaping?
The first step in calculating landscaping labor cost is determining your hourly base rate. That’s the amount you pay your employees or yourself before adding material and overhead costs.
To estimate your landscaping labor costs, take the amount of money you’d like to earn every week and divide it by the number of billable hours you work.
Weekly Income ÷ # of Billable Hours per Week = Hourly Base Rate
For example, let’s say you want to make $900 in a 40-hour work week. Out of those 40 hours, only about 55% will be billable. The other 45% is spent on unbillable things like driving to jobs and administrative tasks. That leaves you with 22 hours of billable time.
We’ll divide your $900 weekly income by the 22 billable hours and get an hourly base rate of $40.91, which we’ll round up to $41.
How Do You Calculate Landscaping Overhead?
The operating expenses you pay to run your landscaping business are your overhead costs.
Overhead costs can include the following:
- Business equipment such as computers, printers, or cell phones
- Rent and utilities
- Employee salaries
- Permits and licenses
- Safety equipment
- Landscaping tools such as lawn mower, gardening tools, blowers, and edgers
- Vehicles, fuel, and maintenance
- Taxes and business insurance
- Landscaping advertising and marketing
- Landscaping business management software
- Credit card processing fees
- Employee benefits
Calculate your hourly overhead costs by dividing your yearly overhead costs by the number of billable hours per year. The reason we use a whole year to calculate overhead is to address seasonality.
Total Yearly Overhead Costs ÷ # of Billable Hours per Year (Total Number of Employees x Hours They Work Over the Week x 52 Weeks) = Hourly Overhead Costs
For example, if your landscaping business’s total yearly overhead costs are $42,000 and we divide it by your team’s 12,000 billable hours a year, your hourly overhead costs are $3.50.
Once you’ve determined your hourly overhead cost, you’ll use that to determine your overhead expenses per job. To calculate the overhead costs for an individual landscaping job, use the formula below:
Hourly Overhead Costs x # the Hours to Complete the Job = Overhead Cost for the Job
Going back to our earlier example, if removing a tree will take an hour and a half to complete, we’d multiply $3.50 by 1.5 for a total overhead cost of $5.25.
How to Determine Competitive Rates/Pricing
It would help if you struck a balance between pricing to be competitive and pricing to be profitable. There’s a fine line between staying competitive and racing your competition to the bottom of the bargain basement.
Doing Competitive Research
You can use the rates and prices of the competition to measure how reasonable your prices are. However, it might be better to use the competition to assess your cost of operation. If you are way above or below your competitors, then you know you should reevaluate and adjust your rates.
But don’t try to match the competition’s rates exactly. Their costs, overhead, and goals will undoubtedly be different from yours. If you try to fit your prices to the competition rather than your unique process, charges, and goals, you will undoubtedly cut into your profits and affect your bottom line.
Remember that you can set yourself apart from the competition with more than just lower prices. Most people are willing to pay for top-notch customer service and efficient, quality work.
What is the Ideal Profit Margin for Landscaping Companies?
Your profit margin is the money you’ve made after you’ve paid your employees and covered materials costs and overhead.
The average profit margin for a landscaping company is between 45 – 55%. Your ideal profit margin will depend on your costs and financial goals.
How to Calculate Landscaping Profit Margin
To calculate your existing profit margin, start by calculating your net profits by using this formula:
Total Revenue – Material Costs – Labor Costs – Overhead Costs = Net Income
Once you have your net income, you can determine your profit margin using this formula:
Net Income / Total Revenue = Profit Margin
To include your profit margin on the cost of materials for a particular job, use the formula below:
Total Project Material Costs + (Total Project Material Costs x Profit Margin) = Total Project Material Costs
You can begin to set ambitious, achievable goals based on your current profit margin. You may need to determine which profit margin will best help your landscaping business reach its financial goals.
How to Calculate Landscaping Markup
Markup refers to the difference between your cost and the price charged to the customer. Adding a markup to the cost of materials accounts for both overhead and profit. Calculate your markup percentage by using this formula:
(Selling price – Your cost)/Your cost x 100 = Markup percentage
For instance, if you pay $10 for an irrigation part and charge your customer $15 for it, you have a markup of 50% on your materials.
How to Create a Professional Landscaping Estimate
Knowing how to estimate landscaping jobs accurately will make the difference between making a profit and taking a loss.
After establishing how you are pricing landscaping jobs, you’ll still need to determine how much to charge for each project. To create an estimate, follow these steps:
- Total the cost of materials, including parts, chemicals, and disposal.
- Determine total labor costs.
- Calculate the total cost of the project.
- Incorporate profit margin.
- Compare the total to the landscaping pricing guide to stay reasonable.
Once you’ve determined your price for the job, you want to create a professional landscaping estimate.
Presenting a potential customer with a professional-looking, branded document is the first step to establishing yourself as an expert and winning the bid. A professional landscaping estimate should include the following elements:
- Business name and logo
- Business contact information
- Client name and contact information
- A quote/estimate number
- A detailed breakdown of the service you’ll be providing, materials, and costs
- The total cost for the service, including taxes
- The date that the estimate expires
In the landscaping business, time is money. And time spent creating estimates and invoices is unbillable time. Joist, an estimating and invoicing app, allows landscaping contractors to develop and deliver accurate estimates in just minutes.
Our easy-to-use mobile estimating tool will add more billable hours to your week. Joist lets you build custom estimates, invoices, work orders, and more, from any web-connected device.
Need to estimate a landscaping job?
Joist can help.