Too many lawn maintenance contractors “wing” it when it comes to determining how much to charge for their services. Calculating an accurate hourly rate is essential if you are going to cover all of your costs and earn a reasonable net profit. Editor’s Note: You can see the worksheet for these scenarios by visiting bit.ly/lawnwebextras.

I’ll use both a bottom-up and a top-down approach to determine how much to charge. By bottom-up, I mean that I’ll calculate all of the field costs (field labor, labor burden and equipment) for this service. Then I’ll add general and administrative overhead and a reasonable net profit margin.

By top-down, I mean that once I calculate what I think is a reasonable hourly rate, I’ll then ask if my market will accept that rate. Will the market support such an hourly rate?

How it works in the field.

First, we calculate how much we need to charge for a day for this package (see my MS Excel worksheet “181.0 Two man mow crew.xls”). The costs for this scenario are as follows:

• The average wage for the crew is $16.00
• Overtime adds 10% to this figure or $1.60.
• We apply a 10% risk factor to the hourly rate or another $1.60.
• Total cost per man-hour is $19.20 (16 + 1.60 + 1.60).
• Labor burden (FICA, FUTA, SUTA, payroll taxes, insurances for workers’ compensation and liability, paid time off, etc.) adds 20% to this cost or $3.84.
• The truck and trailer costs $15 per hour or $120 (8 hours x $15) per day.
• The general and administrative (G&A) overhead cost per man-hour is $12. We use a unit cost per man-hour of $12 because applying G&A overhead as a percent isn’t accurate.
• We desire a minimum 10% net profit margin (NPM) for this package. A 10% margin is equivalent to an 11.11% markup. You calculate the 10% margin by dividing the break-even point (BEP) by one minus the desired NPM (1 - .10 = .9).

Next, we add up all of the costs:

• 8 MHrs on site + 2 MHrs mobilization per person at $19.20 per man-hour totals: $384.00
• To this we add the 20% labor burden or $3.84 per man-hour: $76.80
• Next we add the field equipment costs by multiplying the average run-time hours per day by the cost per hour (CPH) for each machine.
• 5 hours for the 48-inch ride-on mower @ $12 CPH: $60
• 3 hours for the 36-inch walk-behind mower @ $6.50 CPH: $19.50
• 1 hours for the 21-inch push mower @ $5 CPH: $5
• 5 hours for edgers, trimmers, blowers, etc. @ $4 CPH: $20
• Total cost for field equipment: $104.50
• Eight hours of truck and trailer time @ $15 per hour totals: 120
• The total direct costs (TDC) are $685.30
• Add the G&A overhead cost at $12 per man-hour (20 x $12.): $240.00
• This gives us our break-even point (BEP): $925.30
• We then add a 10% margin to the BEP ($925.30 ÷ (1 - .1)) = ($925.30 ÷ .9): $102.81
• Our daily revenue goal for this crew is just over $1,000: $1,028.11

Analyzing our daily revenue goal.

This two-person crew needs to generate just over $1,000 per day in 20 man-hours to achieve a 10% net profit margin. This is a little over $500 per day per person. If this crew can cut an average of eighteen lawns per day, the average price per lawn at 10% NPM is $57.12. At 15% NPM, the average lawn price would be $60.48.

Many (probably most) contractors would have a minimum one man-hour charge to drop their tailgate. In our scenario, it would probably be $50 or 55.

A 20% benchmark for “windshield” time (load/unload, drive time, etc.) is a good goal for such a crew. This translates into an 80% curb-time (time on-site) benchmark.

If you felt confident about your daily amount of curb-time, you could charge a curb-time rate.

To calculate your curb-time rate, simply divide your daily revenue figures by the average curb-time man-hours per day.

• Curb-time Man-hour TDC is $42.83
• Curb-time Man-hour BEP is $57.83
• Curb-time Man-hour 10% NPM is $64.26
• Curb-time Man-hour 15% NPM is $68.04

I’d argue that given the costs in our scenario, a bottom-up analysis of the rates that we’ve calculated shows that they are reasonable and accurate. You have to apply them to specific markets to determine if they will fly in a given market.

Of the many ways we reshaped our organizations last year, the most important turns out to be how we focused on helping our people and our communities thrive through crisis. The attention we gave to health, safety and well-being – and the high level of communicating we did with employees and customers – made every company one where people came first.

There are countless reasons people-first engagement needs to continue as we move into a post-pandemic reset. Boosted morale, a cohesive culture, everyone connected and aligned with digital processes and systems and improved protocols for service delivery, safety and hygiene.

Once people experience engagement, no one wants to give it up. Keeping teams and customers engaged will not only be essential in this new year, but a key metric for ranking organizational health overall and future success.

Many companies approach ‘happiness’ as a benchmark or rely on happiness, i.e., happy customers/happy employees, to improve retention. But happiness is not the same as engagement. Happiness is an abstraction and subjective. Engagement is based on how much people care.

For example, a company that focuses only on happiness does, in fact, generate high levels of optimism; but optimism does not necessarily translate to caring about the wider business or contributing to the bigger picture. Sometimes an employee is happy if they simply take home a paycheck. Engaged employees, on the other hand, do whatever it takes.

A lot of companies spend valuable resources on ‘touchy-feely’ things to foster happiness. Everyone loves good barbecue or a gift. But afterwards, are people left with feelings of engagement or are they merely satisfied in the moment?

People-First Engagement leads to boosted morale, a cohesive culture and improved team organization.

The difference matters. Engaged people drive innovation and are in it to win it. Disengaged people – customers and employees – have an 8-to-5 mentality and do not seek involvement or inclusion.

An example of a disengaged customer, for example, is one that may decline to participate in a service feedback survey. They don’t care enough to further your performance by giving you information you need to improve. For maintenance companies, customers that invest in frequent enhancements is a sign of engagement, as are renewals with price increases.

If your team relishes challenges and jumps in to drive revenue, it’s a sign of good organizational health. On the contrary, if they complain that goals are not realistic, assuming that they are attainable, this is not a good sign.

Many owners sense a loss of urgency in their team. I think some of this is a normal evolution of business maturity, but it is an early warning of declining company health. It is a result of complacency. It’s probably a time to make sure you have some young talent coming up to push those that are starting to get too comfortable.

If engaged people will consistently push your business forward, where do we find these people? Better yet, how do we create and inspire them? How can we lay the foundation for engagement, and shape the experience people have with our companies that not only benefits them, but is a return on investment for us?

Engagement pulse points:

1. Improve satisfaction. Coincidentally, this will also increase happiness and morale.
2. Communicate. Involve people in outcomes, problem-solving and planning, and include them in things that matter.
3. Delegate. Give people room to work and think in the way they work and think best.
4. Create a continual, consistent feedback loop; make recognition and course correction a conversation.
5. Make training, career growth and professional development a priority.

Quite often, I get calls from landscape company owners telling me they feel stuck. For example, this past week, an owner told me he started his business 15 years ago and felt like quitting.

He said he was exhausted, not physically but mentally. His sales were projected to be around $1.5 million and “I’m running around like a nut and can’t take it anymore.” He sounded really frustrated. He said, “if this continues, then at the end of the next 10 or 15 years, I’ll be ready for the funny farm and my company won’t be worth anything. I would have worked all these years and have nothing to show for it. Can you help?”

Why is this happening to him? Wow, where to start! There are numerous reasons. Let me give you some.

No vision, no end goal.

“If you don’t know where you’re going, you won’t know when you get there.” This is my version of what the great Yogi Berra said. Funny but, oh, so true. My friend, Ret. Commander Mary Kelly said, “Vision is like having a picture on the box of a jigsaw puzzle. If there was no picture, can you imagine how difficult it would be to put the puzzle together?” Her point is, operating a business without a vision is like trying to put those puzzle pieces together without a picture; not only do your people not know where they’re going . . . you don’t, either.

The other saying that comes to mind when thinking about “vision” is from the Stephen Covey book, “The 7 Habits of Highly Effective People.” The second habit in his book is “begin with the end in mind.”

In other words, know where you want to end up and then plan out what needs to be done to get there.

So, if you’re a business owner reading this, ask yourself: Do I have a vision and know where I’m going? Do I know what type of company I’m trying to build? How large, how profitable, what type of work are we best at doing? If you don’t know, it’s not too late.

Burnout can be caused by not thinking of your end game. Having a long-term plan and sticking to it can keep you engaged in your business.

Get out of the swamp.

I use this metaphor because it’s appropriate for many business owners, including myself when I had my company. I was stuck in the proverbial swamp trudging around and around for years not knowing what was going on with other companies outside of the swamp. Not until I went to my first national trade association convention and met owners with much larger companies did I have my eye’s opened. The exposure to these awesome people who were non-competitors, and who shared with me whatever I wanted to know, was totally amazing. That first convention was in the early ’90s and I haven’t missed a year since. What friends I made over the years! I just wish I had started earlier.

Get outside advice.

Another thing that changed my company and helped me get out of the swamp was hiring my first consultant. I felt just like the company owner I described above when I hired my first consultant . . . frustrated, running around like a nut and preparing myself for the funny farm! The experience was amazing; he was amazing. I learned so much and it was incredible. From then on, I became a firm believer in hiring consultants because they helped me understand my finances, operations, marketing and planning. I really became conscious of what I didn’t know. Shortly after his first engagement, my company began to grow and prosper twice as fast as before.

Worth your time.

If you feel you’re in the swamp I described above, think seriously about the items I mentioned. Take the time and learn all you can about the landscaping business.

Learn all you can about people. I’ve said many times that we are not in the landscaping business, but in the people business doing landscaping.

Read trade journals, like this one, from cover to cover every month. Be curious. Read business books, attend seminars and network with other company owners. Learn how to grow and maximize your profits. If you do these things, you will feel in control of your destiny and you’ll get great satisfaction from building a great company you will be proud of.

Becoming a better delegator was at the top of Paul Welborn’s list of changes he wanted to make about himself. Looking back, he has seen a lot of progress in this area while leading Mississippi-based Lawn & Pest Solutions.

“It has really made a difference for us in our growth this year, but also helped some people grow in their positions and take more responsibility and take some things off of me that enabled us to move forward like we wanted to,” he says.

Welborn says two things helped him become better at delegating – reading Patrick Lencioni’s books “The Advantage” and “Five Dysfunctions of a Team,” and the discussion at an offsite meeting with his leadership team. “My team called me out and said, ‘All right, you want us to take on more, but you have to let us take on more,’” he says.

“I have been doing this for 20 years and there’s a lot of different aspects of the business I have a hand in. It was just hard to let go, not because I didn’t have good people.”

Prior to the meeting everyone took personality tests, and the group discussed each person’s results.

“We’d said we wanted to be open, but really looking at those specific personality components, it helped everybody open up,” he says.

Welborn said that the leader should go first to set the tone on how the conversation should happen.

“You point out some personal faults as the leader of the group and you say that we’re not making fun of anybody,” he says. “This is so we can get closer. The icebreaker of it is you tell something from your childhood that you feel like has shaped you. That really got everybody to open up and we found some stuff we had in common.”

As Paul Welborn and his team at Lawn and Pest Solutions set their sights on 2021, they are going to have a lot of more room to envision next year. The company recently purchased a new facility, to which Welborn said he didn’t hesitate purchasing, even with the economic uncertainty due to COVID-19.

“I knew if we’re going to keep growing, we had to have more space,” he says, adding he hopes to be moved in by March 1. “We need to get in there before we hit our full stride in the spring.”

It’s going to be an important year for Welborn. He wants to make a big push into the Memphis market, something he wanted to do in 2020 but tabled it.

There are some small procedural differences in the two states, but “there’s not anything we can’t get past,” he says. “It’s just going to take some extra effort to make sure we’re making each state happy in that regard.”

He also wants to fully implement the company’s career ladder, which he started this year.

“I can make a ton of excuses, but coronavirus hurt us because we had less face-to-face with the guys,” he says. “We introduced the career ladder to our technicians, and we’re 50% of the way there. We really should have fully implemented that this year.”

The Harvesters’ Take.

Paul and his team at Lawn & Pest Solutions blew the doors off the budgets we agreed on one year ago. Their total sales were $1.74 million at the end of 2019. Based on their past growth we set total sales goals at $2.25 million for 2022, but they did that number this year. I asked Paul how in the world they achieve such sales and profits and he said, “We just followed the playbook y’all wrote for us.”

Then he added that he realized how important good communication was with his people. Paul even did a one-day retreat with his five managers and this really helped in understanding each other and his goals and vision for the company.

He also mentioned that our suggestion of joining Harvester Fred Haskett’s peer group really helped him to grow as a leader. Because of Paul’s new “people awareness” he realized he needed another salesperson to help achieve his new growth goal. This helped significantly in the added sales.

He also had one “event” with his team each quarter this year. A ping pong afternoon, swimming/cook out picnic and skeet shooting. He said all of the combined has made a real difference.

In all areas of the company, from human resources, finances, operations, company culture and growing his people, they improved. As an added bonus, Paul purchased a four-acre facility with building during the summer to accommodate his growth well into the future.

They are certainly poised to be a very significant company and we wish them the very best.

Taking care of business

David Hawkins Jr. says that while he’s never worked for anybody else, working with the Harvesters during the Turnaround Tour went as seamlessly as it could’ve given the pandemic.

He’s accustomed to constantly dealing with insurance companies, clients and even employees. Working with consultants was the easy part.

“When you’re in business, everybody’s your boss,” he jokes.

Of course, only working for himself means that things at Hawkins Landscaping can be slow to change. Hawkins acknowledges this, saying that one of the reasons he even signed up for the Turnaround Tour was to get some unbiased insights into how he can improve his company. After all, in his official application to join the Turnaround Tour, Hawkins had to identify his company’s biggest mistake.

Hawkins wrote, “Quite a few… hard to pinpoint just one!”

“I’m good at selling and working on the mechanical stuff out in the field,” Hawkins says, “but I’m technologically challenged. That’s why you need to get some of the good people working for you. And even though I’ve been doing it a long, long time, you can always learn if you have the right attitude.”

Hawkins says he signed up for the Turnaround Tour in part because he knew the Harvesters had consulted with some larger companies before, and he wanted to improve his company’s systems and budgeting process. He feels that now, at the end of the Turnaround Tour, they’re in a much better place.

“I already knew (some of this), but it’s like anything else, when they point it out to you, it makes it more obvious,” Hawkins says.

The coronavirus pandemic certainly forced his hand into some quick lessons. It’s gone well for Hawkins Landscaping – COVID-19 brought “a lot of opportunity” with clients stuck at home and wanting to rework their yards. The company did have to tweak their planning with the Harvesters though, who were pushing for the recurring revenue and security that often comes with more commercial clients.

However, the pandemic shut down many of the offices and spaces where the commercial work existed, drying up that client base a bit before they even took the plunge. Plus, with some of the larger companies moving into town, Hawkins believes it was always going to be a tricky situation to navigate.

Now though, Hawkins says they’ve fallen into some high-end residential work that they’ve really liked. And when those clients sign up for an installation job, they often sign up for maintenance work as well. Hawkins says his team has readily upsold into supplemental services, too. They’ve even started dabbling in pool installations with a subcontractor, and they’re planting more trees than ever before. One client recently signed up for a $125,000 design job.

“It’s a one-stop shop. We won’t be the cheapest, but we’ll be fair,” Hawkins says. “To a certain degree, we can name our price and do a really good job. They won’t complain about the price too much if you make it look nice. If they’re spending that type of money, they want someone good to take care of it.”

Prep for the winter has already begun, as they have roughly $40,000 in material waiting to go in inventory that they didn’t use during last year’s mild winter. Plus, Hawkins will continue reevaluating his systems and budgets that the Harvesters pressed during the Turnaround Tour.

In all, Hawkins fared well on the Turnaround Tour and amidst a global pandemic – now it’s up to him to continue the work.

“You know you’re in the big times when all the big players are coming to town,” Hawkins says. “Keeping those relationships strong with clients is important to me. Everything centers around the relationship here.”

The Harvesters’ Take.

Where we started 2019: Revenue $1.5M in Installs and $450K Maintenance @ 42% Gross Margin

Goals for 2020.

Revenue: Installs $1.6 Million / Maintenance $600K @ 45% Gross Margin

Results.

Revenue: Installs $1.8M and Maintenance $500K @ Overall Gross Margin of 45%-plus.

The Turnaround Tour in Action.

The Harvesters met with the team members every 3 weeks throughout the year to review the progress being made towards the goals. We focused on several systems and processes to help the organization become more efficient and achieve their goals.

We spent a great deal of time encouraging the team to consider a more balanced approach in revenue by building the maintenance side of the business to complement their residential install department and to also consider entering the commercial maintenance market segment. Only time will tell to see if this team can make this transition.

Key areas that were put into place to help accomplish the goals:

• Established a clear definition of roles of the family members in the business
• Installed a budgeting process that projects revenue and gross margin in real time
• P&L Format in place that accurately tracks revenue and gross margin by revenue streams
• Marketing and Sales Campaign in Place
• Including a Selection Criteria
• Outreach to targeted customers
• Offer maintenance service to all install projects
• Testimonials from happy customers
• Offer up lighting and sound to the offerings
• Specific install process in place with a step by step process

Challenges: Family Business: Legacy Transition.

There was much discussion in this area. As with most family businesses there needs to be a legacy transition plan in place. Here are just a few questions we addressed. What lies ahead in the future? Should we downsize our property and consolidate some expenses? How much longer will the patriarch be involved? When and how will the transition to the next generation take place?

Have a Plan.

The Harvesters recommended that a 5 -year plan be put into place for the legacy transition of the business from David – dad to David – son. This is an area all family businesses should consider well in advance of the actual transition. After several meetings with the Harvesters and family members along with some great spirited “open dialogue,” the Hawkins now have a framework of a game plan with several options to decide on.

Thankful and thriving.

Despite all the challenges 2020 and COVID-19 caused, Frank Leloia Jr., of the New Jersey-based Custom Landscaping and Lawn Care, says the company is rounding out the year on a high note.

He credits this to the help of Bill, Ed and the entire Harvesters team.

“Since they’ve come on last winter, I think we’ve doubled the size of our commercial business in the first year,” he says. “We’ve got some big contracts that came through plus there’s still a lot more pending.”

Leloia says they’ve added 14 commercial accounts and that brings Custom Landscaping a bit closer to having a 50-50 split of residential and commercial work by 2022 – a goal set for them by the Harvesters.

While prioritizing new commercial work wasn’t always easy, Leloia says that even when the Harvesters pushed him and the team hard, he knew it was coming from a caring place.

“They pushed us down the commercial path, while still being respectable to the fact that we were, and are, predominately a residential business,” he says. “They were always very respectful and to the point.”

In addition to adding more commercial accounts, Leloia spent this year focusing on making HR improvements, reviewing the company’s financials more and getting a handle on time management.

“We’re improving on all those areas,” he says. “We know our numbers better than we ever have before. And that’s great because that’s helping us make better business decisions as we go. Time management has been going good, too.”

Leloia expects to finish the year at about $8.5 million in revenue, and says the future looks even brighter.

“We’re all more confident in what we can do as far as growing the business, and we feel like we have even more traction to do even better next year,” he says. “We’re going to just keep following with same game plan and keep growing the commercial end of the business. We’re also in the process of hiring a field supervisor as well as another account manager. We’re confident and we’re very motivated to keep going and growing.”

The Harvesters’ Take.

Frank and his team at Custom Landscaping worked aggressively throughout the year on the key focus areas in the Playbook we created for 2020 and beyond. There were five main areas, gross margin improvement, marketing/sales, retention/recruiting programs, training/safety and HR. Let’s look at them one at a time.

To improve their gross margin, which ultimately leads to their net profit, we need to know what they are. To do this Frank hired the quick books expert we suggested, to separate the profit centers. For the first time moving forward all the managers in the company knew if they were winning or losing each month. Frank said this was “huge”.

At our advice, Frank engaged Harvester Steve, an HR expert, to review the company’s employee handbook. Steve worked with their folks and brought it up to date, including their I-9’s. As part of this process they also created a retention and recruiting program. As a result, liability was substantially reduced, and the company lost fewer people than ever before. Along with this the company’s safety program was reviewed by Steve and their team and they now have a weekly safety program.

To improve sales, Frank hired a full-time business developer to grow the commercial side of the business. So far, their sales efforts have resulted in the awarding of three very large contracts. These new accounts will close to double the commercial department’s sales for next year and they just began.

All in all, the company will surpass the 2020 budget we set and will have revenues greater than $8 million dollars with a substantial profit.

Despite the very challenging start to the year with 26 employees contracting Covid-19 and two ending up in the hospital, Custom Landscaping had a banner year with higher sales and profits than ever before and major positive changes in all their departments. As far as the Harvesters are concerned their success should continue for years to come.