Importance of the B**** Word
Are you scared of using the b**** word?
Not us! We’ve been using the b**** word for years and it has helped our lawn care and landscape company not only grow, but to become much more profitable.
No, no, we’re not talking about that b**** word. We’re talking about BUDGET!
With 2021 coming to a close, NOW is the time to focus on your 2022 budget. Don’t wait until the new year to set your budget, start working on all the pieces now so your prices are updated and set for PROFITABILITY going into the 2022 season.
As industry leaders, we know there is a lot that goes into building a budget.
You’ve got to include:
- a predicted sales amount for the year
- field labor wages
- equipment costs (and the recovery of said equipment)
The two we are most commonly asked about, are equipment costs/recovery and overhead, so let’s dig into those and hash them out.
Question 1: Should I be charging equipment costs on all of my jobs even if I own the equipment and it’s paid for?
YES – you need to charge for your equipment on all your jobs (even if it’s paid for). At some point in the near future, you are going to need to buy that same piece of equipment, so keep charging for the use of it.
Question 2: How do I break down the cost of the equipment in order to charge the customer.
Break down the cost of the equipment into a unit of “per hour” or “per day”. Once you have that break down, then add it to all your estimates and proposals. The recovery cost of equipment is key to be able to scale and grow your lawn care and landscape business.
Question 1: What categorizes overhead?
Overhead is “the hidden costs of doing business.” When you think about overhead think people and things.
- Payroll wages for anyone NOT doing actual billable work in the field (aka. office personnel like admin, sales team, dispatcher, etc.).
- Liability business insurance
- Office supplies
- Shop supplies
- Employer provided meals
- Technology (phone system, computers, printers, etc.)
This list is just an example. We highly recommend taking the time to think through all the little things you pay for and use within your business.
Question 2: Now that I know what is considered overhead, how do I mark it up/charge for it accordingly?
Mark up your overhead in a recovery type system such as MORS (Multiple Overhead Recovery). This can be helpful and will help with pricing your jobs accurately and profitable for growth.
Pro Tip: Understand the difference between markup and margins. Watch this video to learn more. Its a common mistake that can leave $1,000’s of dollars on the table.
Pricing for profit is a must for growth and sustainability. One industry specific software to consider (that has been extremely helpful in our business), is the LMN software. LMN has been instrumental in Linnemann Lawn Care & Landscaping’s growth. It’s why we’ve partnered with them! So we can offer you a FREE LMN account and start setting up a 2022 budget today.