You’re grinding hard, you’re proud of the work you do for your clients, and your business is growing. You’re in a good spot, but you also know you need to get a real handle on your numbers so you can finally graduate from the “I just check my bank account balance to see how I am doing” stage. Maintaining systems and processes using landscape business software is one of the best ways to get there.
But it’s easy to build something up in your head so much that you start to dread it, which turns into an endless cycle of avoidance and delays. This is where the excuses come in. “I’m not a numbers guy.” “My bookkeeper does everything for me!” “What does know your numbers even mean?”
Clarity brings focus, and focus makes those lame excuses fade away. So let’s shine a light into that dark corner, and explore what it means to know your numbers, and how landscape business software can help you do it.
Knowing your numbers comes down to three habits: Building overhead into your rates, tracking time and expenses on every job, and job costing when the project wraps.
Get those numbers in place with the right tool behind them, and unlock the clarity that will help you get even better at running your business.
Build Overhead Into Your Hourly Rate
One of the top ways hardworking landscapers get robbed of their profit is by not having a system in place for tracking their overhead expenses.
Does your business currently charge an hourly rate that covers all of your costs, without cutting into your profit margin?
Are you sure?
A lot of experienced landscaping contractors price jobs and labor using their best educated guess. They’ve done this service before too many times to count, so they remember back to previous, similar jobs, and price based on that. That estimated figure might seem like a solid one…until you get to the end of the year and have no cash to make it through the winter.
No matter how much experience you have under your belt, you can’t know your numbers unless you actually do the math. How can you be sure that your rates cover all your business’s costs (without sacrificing profit) if you don’t know what those costs are?
A good place to start is with your labor costs. Generally, an employee costs you 20% more than what their actual wage is. Start with the hourly wage, then add up overtime and payroll taxes. Now you have what one hour of your crew’s time actually costs you before anything else.
Then comes overhead. Too many owners overgeneralize when they get to this step. They say something like, “I have about $200K a year in overhead expenses,” without doing the actual math. Then they literally pay for that overgeneralization, right out of their profit.
Overhead costs are all the costs that your business needs to stay open: shop rent, insurance payments, marketing, the landscape business software you use, and so on. You can’t charge a customer directly for overhead expenses, so you have to recover those costs on every single job through your pricing markup, often called an “overhead recovery markup.” If you don’t, you end up eating those costs.
Calculate your full overhead expenses for the year. Don’t leave anything out. Then divide them by the total hours you pay out in that year. As an example, say you carry $200,000 in overhead and run 6,000 payroll hours in a year. Do the math and that’s $33.33 you need to add to every hour, just to recover overhead.
Once you add that $33.33 to your hourly labor cost you have your breakeven, the point where you’re covering your costs and nothing more. Take your breakeven, add your desired net profit margin, and you have your hourly rate.
That math creates your floor. Price above it all you want, but the moment you charge below it, you’re paying for the privilege of doing the job. The only thing that caps your ceiling is the market, so you can keep raising your rate until customers start saying no.
The math itself is straightforward. Keeping that math current is where things can start slipping. The moment your insurance climbs or you add a truck, your overhead total changes, and the rate you built using last year’s overhead is already wrong.
If you want to find your number today, SynkedUP has a free hourly rate calculator you can run in a couple of minutes, no account needed. You plug in your overhead and your hours, and it runs the same math this section just walked through and gives you your rate.
If you want to keep that number accurate all year round, landscape business software is the best way to do that. Landscaping software stores your overhead expenses and your payroll hours, and uses them to calculate your breakeven and your hourly rate in real time as you estimate.
Landscaping software also automatically updates the relevant figures the moment a cost or expense changes, so the rate you quote from is always the real one. From there, every estimate you build is priced off a rate you can stand behind.
Track Every Hour and Expense to the Job
Knowing your hourly rate only helps if you know where the hours actually go. If you’re paying out 40 hours a week to an employee but can’t say which jobs absorbed that time, you’re forced to guess at the actual cost of everything on your schedule.
Using landscape business software to track hours and expenses to jobs removes the guesswork. Your crew clocks in and out of every job from the field, and every hour of payroll gets tracked against the job that used it. The week sorts itself onto the work.
Tracking time to jobs answers the question a bank balance can’t: which jobs ran the payroll up this week? You might sense in your gut that a job ran long, but a gut feeling never tells you what the overrun cost you.
So let’s calculate what an overrun might cost you.
Say you estimated that a job would take 150 hours. The job actually ends up taking 210 hours. That’s 60 man-hours over the estimate. If your breakeven is $70 per man-hour, that overrun ran you $4,200 in straight labor cost and overhead, and that’s before you count the production days you lost finishing it.
Now stretch that out. Sixty man-hours is about two days for a three-person crew, losing you two days of production. Not only do you delay collecting final payment on that job for those two days, but it also loses you two days of production on your next job.
Running over by two days on a job once a month doesn’t sound like the end of the world…until you run the numbers.
Across a ten-month season, two lost days a month totals 20 days in a year. That’s an entire month of working days, gone. You paid for that month of labor, roughly $42,000, and you have no one to bill for it. Worse, those are days you could have spent getting more jobs done, thereby increasing your overall revenue for the year. But because you lost that opportunity on jobs that ran long, you lose the chance to use that time to grow your business.
Tracking time and expenses matters because it turns costs like labor overruns into a number you can act on. When you count the actual hours a specific job took, you can see the estimating mistake or field production issue that caused the overrun, and fix it on the next bid.
If you don’t bother tracking, there’s nothing stopping you from making the same mistake over and over again, and paying for it every time. You can do everything else right, and still get sunk by the one cost you refuse to measure.
Keeping up with it is the hard part. You track every payroll hour to a job, log every receipt and material to a job, and chase down what your crew actually did each day. Then you add it all up at the end. That’s a massive job on top of running the work (your actual job), and it’s going to be the first thing that falls off your to-do list over a busy week.
Landscape business software is built to handle that job for you. Each crew member starts and stops a timer on their phone for the job they’re on, and the app books those hours straight to that job. When someone buys mulch or fills the truck, they photograph the receipt in the app and it files the cost against the job on the spot.
With landscape business software, shop days and rain days get logged to an unbillable category, ensuring that the hours you can’t charge for still get counted. The software maintains this ledger as the crew works. Once a job finishes, its real hours and costs are already added up and waiting for you, with no week to reconstruct from memory.
Compare Estimated vs Actual with Job Costing
Now let’s talk about the third major way landscape business software helps you know your numbers: by assisting with job costing. Job costing is the practice of comparing estimated against actual expenses on every job.
You committed to your estimate when you bid the work; Job costing tells you whether that estimate held. Getting into the habit of doing this on every job helps you learn which work actually makes you money, which estimates you can trust, and where your bids need to change.
Skip this step, and your estimating errors and production mistakes will stay out of sight. You’ll have no idea where that last estimate went wrong, or that it went wrong at all. So you’ll bid the next job the same wrong way, run it the same wrong way, and the errors stack up across every job on your schedule.
Guess where those errors will finally surface. Hint: in your bank account. One day your cash flow will run low, and you won’t have any idea where it went.
Running the comparison itself is not complicated. When a job wraps, add up the actual hours and expenses, set them beside your estimate, and look at where the two split apart. Seeing where those two numbers diverge shows you where the initial estimate missed the mark.
Then you can bid the next one smarter and run it tighter. The hard part is having the actual numbers ready to compare, but landscape business software can help companies collect, display, and track results in real time.
Truly effective job costing comes down to timing. Adding it all up after a job’s already done tells you what went wrong, but at that point it’s too way late to actually for you to do anything about it. You’ve already lost money on the project.
Landscape business software completely changes the stakes, because it lets contractors run job costing while the job itself is still open.
Using the software, your crew can track hours and materials to the job as they work. From day one, the estimate and the actual sit side by side in the report. If a job does cross its estimated hours, or a delay drives costs up, you can see it happening while there’s still time to do something.
At Tussey Landscaping, where I worked for 15 years before starting SynkedUP, if we noticed a job starting to run long, we’d put extra crew on it and finish in fewer days. The overrun still carried a cost, but finishing sooner freed the crew for the next job and saved the production days they’d have to eat otherwise.
You only get that move if you can see the overrun while the job is still open. Using landscape business software to monitor costs as they’re incurred separates a live, actionable report from a shoebox of receipts.
Know Your Numbers, and Run a Tight Ship
Knowing your numbers comes down to three habits. Build your overhead into your hourly rate so every bid starts from a rate that covers your costs. Track every payroll hour and every receipt to the job it belongs to, so you know what each job actually costs. And compare your estimated expenses against your actual expenses on every job, so you learn which work makes you money and which estimates need fixing.
None of these habits are hard to understand. Where it actually falls apart for a lot of owners is the time and effort needed to keep it up by hand through a full season, on top of already doing the work of running the business. That’s the main reason that knowing your numbers stays a lofty goal instead of an actual way to run your business.
Landscape business software helps make the three habits stick. It gets rid of the need for spreadsheets, paperwork, and manual calculations, so you can focus on the work. Meanwhile, the software acts as a centralized repository for your job data.
It holds overhead and helps contractors calculate labor rates and production rates. It logs your crew’s hours and materials to the job as the work happens, and it sets your estimate against your actual while the job is still ongoing. The discipline, the patience and the hard work on yours, but the tracking and the math run on their own. With landscape business software, knowing your numbers stops being extra work and starts being something the business just…does.
We built SynkedUP, a landscape business software by contractors, for contractors, for that exact reason. SynkedUP helps you know the numbers specific to your business. It then takes those numbers and uses them to cost jobs, calculate labor and production rates, and build accurate, consistent estimates on every job.
If and when your numbers change, that’s no problem. We built the software to grow and scale with your business. If you change a single figure on an estimating template, the entire form will automatically update with it.
To learn more about how SynkedUP works and what it can do for your company, book a call with us today.
