In the middle of a busy spring and summer, it can be difficult for landscape companies to get a handle on why jobs aren’t quite as profitable as they should be. Maybe you’re not meeting your quoted hours or perhaps you are—but your materials and labor dollars are off.
Here are a few reasons your landscaping jobs could be losing money and how you can rectify the problem.
Your job estimates aren’t accurate or consistent.
For an estimate to be accurate, you need to have an accurate record of labor and materials and other costs related to that estimate.
Consistency is also key. Everyone’s eye is different when it comes to estimating, which could result in a wide range of estimates—and variation kills profit. Using estimating templates for each type of service is a useful tool to ensure your bids are consistent. It also reminds estimators to include line items that could be forgotten, such as cleanup costs, demo costs, and drive time. Plus, your team members don’t have to recreate the wheel every time they start a new estimate.
An item pricing catalog is also a necessary tool for keeping your estimates consistent. Having an accurate and updated listing of labor, materials, rented equipment, subcontractors, and other job costs is key—and it must be used by all estimators to maintain consistency and accuracy from bid to bid
Using kits (or assemblies) is another way to ensure your estimates are accurate and consistent. Kits utilize production factors to inform estimators how much labor, materials, and other items are associated with a particular service, such as installing a paver patio or mowing an area of turf with a specific machine.
Your pricing isn’t accurate.
If your estimates aren’t accurate, you could be losing out on profits—particularly if you’re not pricing your jobs properly.
Maybe you’re pricing your jobs to attain a certain gross margin across the board—let’s say 50 percent. If you’re pricing the job at the end to achieve that 50 percent gross margin, you’re likely overlooking the differences in markups for labor, materials, subcontractors, and rented equipment. It’s important to provide competitive, accurate pricing that reflects the appropriate markups to ensure you’re not pricing your job too high or too low.
Using a pricing markup method like the multiple overhead recovery model will help you price your services accurately. And make sure to include the correct labor costs for the type of crew you intend to use, since that affects labor markups in your pricing—a construction crew is often priced higher than a maintenance crew, for example.
You’re not consistently tracking your job costs, including labor and materials.
If you’re going to estimate and price jobs accurately, it’s necessary to know your actual job costs—most importantly, your labor and material costs.
Timing is everything, and it’s especially true when it comes to your crews. If you’re not recording accurate start and stop times for your crews, your hours are already off when it comes to job costing. In addition to tracking accurate start and stop times, you must also ensure those hours are costed to the correct jobs.
With materials, it’s a similar story. If you created an estimate using an estimating software like Aspire, the job ticket would generate a complete materials list. In order to have accurate material costs, you’ll have to track those materials and allot them to the appropriate jobs.
You lack real-time visibility into your job performance and can’t make changes before the job is complete.
How often are you reviewing your job costs—and is it often enough you can make adjustments to your jobs in progress?
For annual maintenance contracts and longer construction jobs, being able to see your costs in real-time is crucial. If you can tell that your crews are going over or are likely to go over your quoted hours, knowing that information immediately allows you to address the problem before it’s too late.
While many companies become aware of their service performance or department performance after closing the books at month’s end, job performance could be something you’re not tracking. Knowing how your company is performing at the job level is crucial, because it shows you which jobs are profiting and which aren’t.
You’re missing change orders and/or enhancements.
You could be missing out on key sources of revenue—change orders and enhancements. If a client asks your crews to complete a task that should be billed as an enhancement, for example, removing a tree limb, and you’re not pricing the work out as an extra, you’re losing money.
Missed revenue can happen, and often it’s lost revenue that is sold at a higher profit margin. And, to compound the problem, if you’re not properly tracking your hours, the cost of that task could be added incorrectly to a different job.
End-to-end business management software can help solve some of the issues above that could be costing you profits. Your data should be accurate and accessible, and if your CRM, estimating, job costing, and crew management functions are integrated across a centralized platform, it allows you to have real-time visibility into your jobs and how your crews are performing in comparison to your estimates.
Without a reliable system or if you have a collection of disjointed systems, you’re dealing with human error and potentially unreliable data—and your management team doesn’t have trust in those numbers.
And what use is data that you can’t trust?