It’s critical to correctly estimate landscaping jobs if you want to run a profitable business. According to statistics, most contractors only profit from three of five jobs.
According to Total Landscape Care, they lose money on one and break even on the other. You’ll make a profit on every job you do if you learn to bid on landscaping work accurately.
In this article, we’ll discuss the following:
- Understand the Scope of Work
- Estimate your Labor Cost
- Estimate Total Material Costs
- Estimate Your Overhead Fees
- Calculate Your Total Cost
- Add Your Markup Percentage for Profits
Understand the Scope of Work
If you’re serious about estimating a landscape job accurately, you need to understand the full scope of the work.
Visit the site, speak to your client on the phone and in person, and keep track of every job detail. Here are some questions you should ask yourself during these initial stages:
- What is the job location? The more remote the job site, the more you’ll have to charge to cover fuel costs.
- How big is the yard? Measure the yard, so you know how many materials you need to order.
- Is there any existing property damage, safety hazards, or accessibility issues? Do a thorough walk around and take photos of the property. You can save these photos to your client’s profile for future reference.
- Is there a time constraint? If the client absolutely needs the work done within a tight timeframe, you can charge more for the service.
- What services am I providing? Is it something standard, like removing sod, or more complex, such as building a retaining wall? The more specialized the service, the more you will charge.
- Does my client have any special requests? You need to know ahead of time if your client wants something your usual supplier can’t provide. e.g., a unique lighting fixture that costs more than the one you’d usually buy from Home Depot.
- What types of materials will I need for the job? You’ll learn more about common landscaping materials in step 3.
Estimate your Labor Cost
Calculate your labor cost for the job by multiplying the number of hours needed to complete the job by your hourly labor rate.
Estimate the number of labor hours required to complete the job
Use all the information gathered from step 1 to determine how long the job will take. Multiply this figure by the number of people on the job to get the labor hours. For example, if six people take 40 hours on the job, that’s 240 labor hours.
Calculate your hourly labour cost
Factor in employee wages plus extras for taxes, worker’s compensation, and other employee-related expenses.
While the hourly wage will differ by state—California, for example, has an average hourly wage of $15.11 and Florida, $12.13— let’s keep things simple for this example and use the national average of $13.73.
Add a percentage for taxes, workers’ compensation, and benefits. This percentage will vary for your specific business, but 20% is a reliable marker.
Your total hourly labour cost is $16.47 ($13.37*20%).
Estimate Total Material Costs
List all the materials you need for the job, attach a corresponding cost, and tally all costs for the grand total. Common landscaping materials include:
- Compost
- Floodlights
- Cement
- Lawn turf
- Gravel
- Boulders
- Landscaping rock
- Timber
- Fertilizer
- Trees
- Plants
- Mulch
The materials you need will vary by job, and the quantities will depend on the size of the yard. So, refer back to the measurements in step 1. For this example, let’s assume your total material costs are $3,500.
Estimate Your Overhead Fees
Overhead fees include office rent, advertising, legal fees, telephone and internet bills, utilities, insurance, accountant, and landscape business operations tools. Basically, all of the things you need to run your business that isn’t directly tied to a particular job.
It’s easy to underestimate or even forget your overhead costs, but you must charge enough on each job to cover these costs and remain profitable.
Here are four steps to help you calculate the portion of overhead costs you need to recover for each job:
- Calculate your weekly overhead fees (let’s assume it’s $1,000).
- Determine the number of weekly labour hours worked (for example, 100).
- Divide weekly overhead cost into hours worked for an hourly overhead cost ($1,000/100=$10 ). This means that for every labour hour you need to charge $10 to cover that cost.
- Multiply the hourly overhead cost by the number of man-hours for the job ($10*240=$2400).
Calculate Your Total Cost
Add your labour, material, and overhead costs to get the total cost for the job:
- Labor: $3,952.80
- Material: $3,500.00
- Overhead: $2,400.00
- Total costs: $9,852.80
Add Your Markup Percentage for Profits
The final step in estimating a landscape job is to determine your desired profit margin and add a corresponding markup percentage to the total cost determined in step 5.
Let’s take a second to define those terms.
Your margin (also referred to as gross margin) is your net sales revenue minus the labour, material, and overhead costs calculated above. The higher your margin, the more money your business retains. You’ll usually see profit margins expressed as a percentage. The formula is Profit divided by Sales times 100.
Your markup is the dollar amount you add to your cost to arrive at a final, profitable price. Markups are also expressed as a percentage. The formula is Profit divided by Cost times 100.
So, how does this apply to your landscape job estimate?
A general guideline for pricing landscape jobs is to aim for a margin of 15 to 20% for residential jobs and 10 to 15% for commercial jobs.
In order to achieve those kinds of margins, you need to mark up your total cost by a percentage greater than your gross margin. For example, if you want a 20% margin, you’ll need to add a 25% markup.
Let’s look at our sample job, and let’s aim for a 20% profit margin.
You’ll need to charge a 25% markup, which means your final selling price will be $12,316.00.
To get this number, we take your costs from the previous section (labour, material, and overhead), and multiply this by 1.25 to account for the markup. This looks like the following:
$9,852.80 X 1.25 = $12,316.00
The selling price ($12,316.00) minus your costs ($9852.80) gives us your profit. Your profit will be $2,463.20.
To verify that your profit margin is indeed 20%, plug the values into your profit margin formula:
Profit ($2,463.20) / Price of the Landscaping job ($12,316.00)* 100
Your calculation should confirm that the profit margin is indeed 20%!
FAQs
How Much Does a Landscaper Charge per Hour?
A landscaper charges $45 to $75 per hour, according to Fixr. The price range is the same for new landscaping and landscaping maintenance.
How Much Does Landscaping Cost Per Square Foot?
Landscaping costs $5 to $35 per square foot, according to Fixr.
Here’s an additional landscaping price guide: the national average is $13,200 for a 1,200-square-foot yard. This can go as low as $1,320 for simple sod installation and as high as $29,200 for designer landscaping and hardscaping (man-made features like walls or paths).
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