Time is your inventory. You charge for time, improve efficiency to save time, and pay technicians for how productively they use time.
Are you protecting your time by managing expenses, pricing properly and paying a fair wage?
“Time is our inventory just like electronics are inventory for Best Buy,” says Adam Linnemann, president, Linnemann Lawn Care in Columbia, Ill. “How does Best Buy protect its inventory? They have a point-of-sale system, a security person at the door and cameras. They watch over their inventory. We need to watch over our inventory so we must make sure we are charging as much as we can, reducing non-billable time, and ensuring (your) team is recording time properly and not taking advantage of time.”
You know the old saying, time is money. Unfortunately, many lawn care operators find this out the hard way when they treat a service as a loss-leader to win work (bye-bye, profit) or fail to budget accurately and wind up spending more than they make.
“When you don’t plan or budget, then emergencies can pop up and you are not prepared or don’t have the funds to deal with it,” says David Jennett, president, Green Valley Pest Control & Lawn Care, Creston, Iowa.
Lawn care pricing can be different than landscaping services like design and installation. You’re dealing with different materials and a different division of labor – usually a technician and a truck rather than a three-man crew. The billing cycle is also different and based on a lawn care program vs. more frequent visits for mowing or week-long projects for construction. While all landscape services are selling time, the nature of lawn care does call for some specific planning.
As you study the benchmarking charts on page B4 of this guide, also take into account this boots-on-the-ground insight from lawn care professionals who explain how they buy materials, price services, pay their people and increase fees.
Investing in inputs
In early winter, Dayna Macbeth, operations manager at Fit Turf in Denver, Colo., sends a letter to area vendors and suppliers. “I reach out to those I’m interested in doing business with and let them know about the products we’d like to use,” she says.
Macbeth collects estimates and compares them. “I have them compete, in a way,” she says. “I might say, ‘I’d like to order this weed control from you, but it’s $5 more per gallon, so we might end up spending a couple thousand more dollars if we buy it from you.’ Often, I am able to get them or a territory boss to decrease the price.”
This year, Fit Turf saved $3,000 on seed because of Macbeth’s due diligence.
“You have to ask, ‘Are you willing?’” she says. “Even if a price is $0.10 less per pound, we will save money as a company.”
Early ordering helps Linnemann save up to 20% on lawn care materials costs. He attends supplier shows, where he has opportunities to pre-order product for the year. “We look at what we used in the past and what we will need for the upcoming season, and we get those prices locked in,” he says.
Linnemann estimates spending about $80,000 per year on herbicides, pesticides and grass seed. In spite of the early order commitment, he is not required to pay for the products until shipments are delivered. He receives materials as needed throughout the growing season.
Also, because Linnemann worked out 60-day terms with his supplier and doesn’t pay for pre-ordered materials until they ship, he can collect on service invoices and apply those dollars toward his bill rather than using a line of credit. “By allowing us to invoice customers and collect payment from them in a timely manner, we can cover the expenses easier vs. swallowing that (materials) invoice in upfront charges,” he says.
Again, the message is: Just ask.
“Sometimes, all it takes is asking if a vendor is open to giving you extended terms, and this can make it easier on your cash flow,” Linnemann says.
As for Jennett, he purchases fertilizer pre-emergent in winter and pays a lump sum. “Our spray herbicides, we buy as needed,” he says. The same goes for grub control.
Equipment is “ride it until it dies,” Jennett says, relating that the company focuses on the oldest pieces of equipment each year.
Linnemann adds, “Make sure you are recovering your equipment cost so you can replace it one day.” By building equipment costs into pricing, you’ll be prepared to replace trucks, spreaders, sprayers, hoses and reels and ride-on machines.
Price it right
How much do you earn per 1,000 square feet of property serviced? That’s how Macbeth and Fit Turf Founder/President Paul Wagner look at pricing.
“The biggest mistake most lawn care companies make is underpricing, and some companies will use lawn care fertilization as a loss-leader – once they get the customer, they sell other services,” Wagner says.
“Lawn care needs to be profitable,” he continues. “So, in our market, we like to make $14 to $15 per 1,000 square feet with a 20% profit margin.”
To determine how much he charges customers for lawn care, Linnemann gathered the production rates for 100 properties of different sizes. “We measure those online and get the square footage, then we track how long it takes us to treat each property,” he says. “So, if a yard is 10,000 square feet and it takes us 30 minutes, we’ll back that out and say, ‘How many thousand square feet can we do in this amount of time.’”
Basically, Linnemann takes an average of these production times and assigns a price per square foot. Then, he adds in materials cost, equipment costs and drive time, also figuring in the company’s overhead. By using landscaping software, as long as the “input” numbers are accurate, the output provides pricing that meets the company’s profitability goal.
Jennett relies on an Excel spreadsheet to compute expenses and figure out a fair price for lawn care services. The formula includes: materials, average labor cost and material costs.
“As lawn size increases, the price per square footage goes down because we recognize efficiencies and the cost of doing business,” he says.
“When you don’t plan or budget, then emergencies can pop up and you are not prepared or don’t have the funds to deal with it.” David Jennett, president, Green Valley Pest Control & Lawn Care
Pay to win good people
Good help is hard to find. And depending on the market, great help can be challenging to afford. But just as important as understanding that lawn care is about selling time, it’s also about delivering quality – and that takes talent.
“This is an expensive market,” Macbeth says about Denver, adding that Fit Turf pays slightly higher than competitors. Lawn care technicians are paid about $20 per hour, and tree care specialists earn between $19 to $30, depending on their qualifications.
“We have an incentive-based pay structure for technicians,” Macbeth says, noting that they are paid hourly but can get unlimited overtime as long as they are efficient. That pay comes as a bonus. The company also offers a “welcome back” bonus. “If you complete a full season with us, at the end you will receive $1,000,” she says. “After winter, if you come back, you’ll get $500.”
A referral program pays technicians $300 for every quality recruit that is hired. Fit Turf pays out $150 after the new hire and $150 more if the team member is still on board after three months.
Another opportunity to earn and deliver high-quality service is to receive online reviews from customers. Technicians are equipped with review cards that say “thank you” on the front, and request feedback on the back. “Any time a technician gets a verified five-star review with their name in it, they get $50,” Macbeth says.
Last year, one team member earned $200 within several weeks. Also, technicians can earn a 10% commission on field sales in their name. “We have a unique pay structure for our area,” Macbeth says, noting that anyone who works for the company for five years or longer gets 100% of their health insurance premiums covered, with a value of $400 for individuals and $800 for families.
“This is really great for retention,” Macbeth says. “It helps us hang on to the great guys we have on our team.”
To gauge an ideal pay rate for his region, Jennett calls other company owners in his area to find out what their average hourly wage is. Because many of these owners are lawn care customers, they have a relationship that is open and don’t mind sharing this type of information, he says. “There are a couple of manufacturers in town we get a hold of, and employers like fast-food restaurants and service industry like plumbing and electrical,” he says.
Linnemann determines pay rate based on certifications, work ethic, employment history, flexibility and availability. For each additional license, technicians can earn about $1 more per hour. The company covers training materials and testing. “They simply need to ask and get signed up,” Linnemann says. “We pay for everything, so it’s a matter of them wanting to excel in the industry.”
Overall, from purchasing materials to pricing and paying people, Linnemann says accuracy is key. He says, “The biggest thing for us is the software we use has a budgeting tool.”