Inflation is taking a huge hit on businesses all across the country, but landscaping companies are really feeling the pinch. Tools and supplies are 5-10% more expensive than they’ve been in recent years; and with supply chain issues, some equipment is nearly impossible to find. Rising fuel prices make operating machinery more expensive than ever, and the labor shortage combined with demands for higher wages have left a lot of landscaping companies barely hanging on by a thread.
There’s no question that we are in a very volatile marketplace right now. Inflation is at a 40-year high; hovering around 9%, it’s dug its nasty claws into every landscaper’s bank account. It’s obvious that lawn and landscaping companies who don’t increase their prices enough are going to wind up in trouble. Consider this your wakeup call. Whether you like it or not, your prices must go up.
Do you have a profit strategy to cope with inflation? This isn’t the year to do what you’ve always done. A situation like this calls for a new approach.
Are You Pricing Your Landscaping Work Properly?
Landscape business owners are notorious about putting off price increases in fear of losing customers. It’s a common problem across the board. Most landscaping companies only raise prices by two to five percent every few years, and the average lawn care business consistently under prices approximately 20% of its jobs.
Far too many landscaping companies are influenced by their local competitor’s pricing, but a race to the bottom isn’t a competition you want to win.
In order to accurately calculate what your prices need to be, it’s important to make sure you’re charging for everything that costs you money.
Every new estimate must factor in the exact number of labor hours needed to drive to and from a job, cleaning up after the work is done before the crew leaves, loading and unloading the truck at headquarters and on site, and disposing of job waste. Labor is your greatest expense and omitting even a few of these tasks from your job estimates can cost you a fortune over time.
Just as you have an hourly rate for labor, it’s important that you establish hourly rates for each piece of equipment and include those in your job estimates. Since equipment typically makes up 10% to 15% of the cost of providing landscaping services, leaving it out of your pricing can destroy your bank account. But equipment should never cost you a penny! It’s not overhead; it’s a direct job cost that can be passed onto your customers just like a bag of mulch or a pallet of pavers would be.
Every estimate for your landscaping services should have a detailed budget for every piece of equipment needed for the job. This isn’t a set it and forget it price though. Business owners should be talking to suppliers about anticipated pricing and availability. You’ll need to consistently raise your equipment rates because when you do finally replace your old equipment, there’s a good chance it’s going to cost you a lot more than it did the last time you bought it.
But how do you raise your prices without shocking (and losing) your customers?
First of all, raising your prices is not about trying to milk every last penny out of each customer. If you want to stay in business while the cost of fuel, labor, and equipment are rising all around you, you have to know your numbers and confidently communicate your rates no matter what your competition is charging.
Your customers know the cost of everything is going up, so why would landscaping services be any different? Even though you need to increase your prices, there are ways to do it while keeping your services affordable and without losing a bunch of customers.
After you’ve established your new pricing, begin quoting those new rates to all new inquiries from new leads. They won’t feel the hit and you’ll instantly get a raise!
Then, look at your existing customers who are hard to please and/or slow to pay. If higher prices are going to scare anyone away, let it be them. Simply notify them that due to inflation they’ll see a slight increase on next month’s invoice.
Finally, make a plan to slowly raise your prices for the rest of your existing customers. This can be a small quarterly increase. You don’t have to do it all at once. The most important thing is that the customer experience doesn’t decline as their price goes up. Keep their trust by continuing to do great work and thoroughly communicating with them. Every visit is another chance for you to meet and exceed their expectations.
Now’s the time to really dive into your business and see where you can make adjustments.
As hardworking landscapers face these inflation hurdles, it’s not just about what money you make, but what you keep. That means you'll have to do more than simply raise your prices. The most profitable landscaping companies have profit strategies that include bundling services, budget billing options, and cutting expenses where possible.
There’s no one size fits all approach to success, and that’s why being a part of an ACE Peer Group is so valuable. As an ACE, you’ll have an all-access pass to an executive coach with proven success in the green industry. Being a part of a group with other successful, motivated business owners sharing their own best practices and ideas will help you reach your business milestones faster than you ever thought was possible.
If you’re interested in joining ACE Peer Groups, you’re invited to ACE Discovery + Summit, a special event for prospective members. You’ll have the opportunity to experience firsthand what a typical Peer Group meeting entails, get to know some of our existing ACE members and alumni, and learn from our executive coaches who will dramatically broaden your perspective about what’s possible for your business.
Join us for ACE Discovery + Summit