Update your hourly rates

I first covered this topic almost three years ago in the August 2015 issue of Lawn & Landscape magazine. Due to the dramatic increase in labor costs throughout the country, it’s time to revisit hourly rates and what makes sense for your business. Keep in mind that the cost of labor has increased anywhere from $2 to $6 per hour the past three years and that for every $1 increase in the cost of labor, the contractor has to raise his price to the customer $2-3 per hour.

A mistake that many contractors make is to charge the same man-hour rate for maintenance crews as well as construction ones. This misunderstanding often results in maintenance rates being too high and construction ones being too low. CPAs often add to this confusion when they help their clients calculate these average rates without understanding some of the subtle reasons why they should not be the same. Let me explain why your construction hourly rate should be 20 to 25 percent higher than your maintenance hourly rate. I’ll calculate hourly rates for both a two-man maintenance crew and a three-man construction crew using a one-day scenario and an Excel worksheet that I developed for such calculations. You can calculate your rates by substituting your costs in these scenarios.