Say you bid a patio job, with a 20% landscaper profit margin built into your price. The customer signs. Your crew finishes, the check clears, and the job feels like a win.
Then you close out the year, and your Profit & Loss statement shows 6% net profit.
Where did the other 14% go?
Well, some of it covered overhead costs you never added to your pricing. Some paid crews who worked past their estimated hours. Some paid for hours your team spent filling out paper timesheets, waiting on late material orders, and driving to get supplies. You just didn’t notice.
Actually making money with your business starts with setting your landscaper profit margin, and building it into your pricing. Then you need to protect that margin throughout the season, so what you quoted shows up in your bank account.
What’s a Healthy Landscaper Profit Margin?
I tend to use three benchmarks for landscaper profit margin:
- 10% net profit: This is your lowest acceptable floor.
- 15%-20%: This is the goal for most landscapers.
- 20% and up: Enough to fund fast growth without debt.
Use these benchmarks to set your own goal profit margin. Note that I’m referring to net profit here, not gross profit.
Gross Profit vs. Net Profit
Gross Profit describes what’s left after you’ve deducted your labor, material, and subcontractor expenses from the revenue the job generated, but before you’ve paid your overhead expenses (like marketing, insurance, your owner’s salary, utilities, etc.).
Net profit is what you have left after you also pay overhead. At this point, there’s no bills left to pay.
Depending on your business model, your company could have a high gross profit and a low net profit. Or even a low gross profit and acceptable net profit.
For example:
Business 1 shows 50% gross profit, and 5% net profit.
I’ve seen this one in real life. The company carries too much overhead for its size, like having too much admin staff, or too high of an investment in trucks and other equipment.
At $1M in revenue and $500K of overhead costs annually, Business 1’s overhead expenses are just too high. In order to justify that cost, they’d have to make closer to $1.5M-2M in revenue.
Then there’s Business 2, which brings in $500K in revenue, with 35% gross profit and 15% net profit.
Business 2 keeps overhead low, and uses technology, automation, and systems to run a pretty efficient operation. They’re actually in pretty good shape.
See the difference? One model has overhead so high that it kills their chance at making an actual profit. The other is a much smaller operation, but because they also keep operating costs small, they pull in a higher (and healthier) profit margin.
Why Does a 10% Landscaper Profit Margin Set the Floor?
On a $500K business, a 10% margin comes to $50K in profit. Make a handful of estimating mistakes, and that profit gets wiped out. It also leaves little cash to reinvest, so a business operating at this level either stalls on growth, or runs on debt.
Generally, I prefer growth paid for with cash.
At 15% to 20% landscaper profit margin, you’re able to take some of that profit home while leaving money in the business to fund growth. Above 20%, you can grow faster, because you have the cash to pay for the staff, equipment, and marketing that fast growth requires.
The Market Sets Your Ceiling
Your direct costs, plus your overhead costs, plus your ideal landscaper profit margin (with 10% as the minimum) set the minimum price on any quote. You can’t charge less.
The market and what it can support sets your maximum. If you bid a job at 25% profit margin, and it sells, you haven’t hit your ceiling yet.
Why Your Year-End Profit Comes In Below Your Quoted Margin
You can build a 20% landscaper profit margin into every quote and still finish the year at 3% on your profit and loss statement.
So where does that profit go? A lot of the time, it leads back to overhead expenses that didn’t get factored into pricing.
A Startup Example
I recently met with a set of new landscaping business owners in their second or third season. They’d added up their costs, their overhead, and stacked their chosen landscaper profit margin on top.
But when we went through their overhead expenses, line by line, their actual overhead costs came out at almost double their original figure. The profit they thought got built into their quotes went straight into covering the overhead costs that didn’t get accounted for.
Some of their jobs broke even. Some lost money. Your landscaper profit margin only becomes real profit when your costs are accurate.
By the way, if you want to find an hourly labor rate that actually accounts for all your business’ costs, check out our free AI labor rate calculator here. Just take a few moments to input some basic info about your job and your goal landscaper profit margin, and it’ll find the ideal hourly rate based on those costs in minutes.
Keep Your Overhead Numbers Current
Any time you buy new equipment, add office staff, or raise your marketing budget, your overhead changes. Keep your pricing the same as overhead climbs, and your landscaper profit margin will get smaller and smaller with each new quote.
Review your budget at least once a month. Keep your costs and overhead expenses updated, so your next quote always goes out based on your current numbers.
What Labor Overruns Cost You
The dreaded labor overrun will eat your profit and drain your bank account if you’re not careful.
Labor is (usually) the biggest cost on a job, and it’s always the hardest to estimate, so going over your estimated hours on labor cuts into your landscaper profit margin more than any other problem.
Going a day over on a job here and there might not seem like a huge cost…until you add up a full season worth of overruns.
The Math on Two Extra Days a Month
Say you run one day over what you estimated on a job, twice a month. So across a 10-month season, you end up with 20 days of overrun in a year.
20 days of work that you didn’t budget for. 20 days of extra wages that you have to cover, not the customer. 20 extra days of overhead expenses. 20 days your crew could have spent on other jobs.
And anybody who’s done this long enough knows that once you fall behind, it can be tough to catch up.
Track Hours by Job, Every Day
Every job you estimate bids a set number of labor hours, and you price the job based on those hours. When your labor hours run over, the extra wages for your crew come directly out of your profit.
To see whether a job stayed within the estimated hours, you need a record of every hour your crew worked on that job. Have your crew track their time every day, assigning each hour to the correct job.
Getting that data takes discipline from you as the owner, so hold your crew to it.
Run Job Costing on Every Job
Daily, job-level hours give you what you need to run job costing, the practice of comparing the hours you bid on a job against the actual hours the job used.
Your P&L only shows the year’s total profit. Job costing shows you which jobs made the profit you priced for, and which jobs lost it.
Just take two minutes to compare estimated against actual hours on every job you take on. If the job ran over, find out why. Then use what you learned to price the next estimate you do for a similar job.
If you skip job costing, then the estimating mistake you make on a job will show up on your next bid, and the one after that, because you never caught it.
At Tussey Landscaping, where I worked for 15 years, we used job costing to see where we went wrong and where we went right on our jobs. Along with budgeting, it stabilized our pricing and profitability.
Track your time. Run your job costing. Use what you learn to sharpen your future estimates. Keep doing that consistently, and you protect your landscaper profit margin through the busiest part of the year.
Too Slow? There Goes Your Profit
Slow processes cost you money every day. But if you’re too used to them, you might not even notice. Every extra hour you spend on a job because of a slow or inefficient process comes straight out of your profit.
Once we had budgeting and job costing in place at Tussey, we focused on tightening up our systems and processes. Doing that helped us protect our bottom line as much as budgeting and job costing did.
Workflow fixes add profit without any change to your landscaping prices, making it easier to hit your landscaper profit margin goal.
Workflow improvements fall into two groups:
- Logistics: Things like developing a process for ordering materials on time
- Technology: Something like upgrading from paper time sheets to having crews track their time in a landscape scheduling app
Get Off Paper
As a service tech, I ran my schedule, to-do list, and billing from a notepad and my memory. I constantly worried that I’d missed or forgotten something.
Crews logged hours on paper timesheets, with no record of what, exactly, they’d worked on each day. Later, we wrote daily man-hours in pen on the outside of each job folder.
Those folders got rained on and dropped in the mud, but designers and salespeople had a rough idea of how long the work took.
Our schedule lived on a huge whiteboard in the shop. The owner would update it by photographing the board, erasing everything, and writing it all out again. Moving the schedule to an online calendar let us view and change it whenever it was needed.
Order Materials the Day a Job Sells
As we grew, we ran into trouble getting materials delivered to job sites when crews needed them to keep working. We bought a single-axle Peterbilt and trailer to haul more of our own materials and give us more planning flexibility.
Pickups at the landscape center still wasted crew time. Crews waited in crowds. Some days, we arrived to find out nobody had ordered the materials for the job.
We made two changes:
- We ordered materials the moment a job sold. On a job sold two months before its start date, a backorder of a few weeks no longer caused a problem.
- We had the supply center deliver materials to our shop as soon as they came in.
Those two changes were among the most effective moves we ever made.
We stopped finding out at the last minute that materials hadn’t come in, and crews stopped waiting at the supply center. With everything already at our shop, we hauled materials when each job needed them.
When site access was tight, we brought materials in stages. When we needed to move a job by a month, we already had the materials on hand.
Keep in mind, though, that a delivery truck isn’t cheap. It adds serious overhead, and I wouldn’t recommend one if you’re just starting out. We bought ours once our delivery problems started to cost more than the truck would.
Take some time to evaluate the processes your business has handled the same way for years. Figure out how many hours each one wastes. Every hour you save lowers your costs and moves you closer to your goal landscaper profit margin.
Keep the Profit You Quote
Set your landscaper profit margin goal at 10% net profit minimum, 15%-20% as your target, and above 20% if you want to grow faster without debt. Then run your business so each job meets that goal.
Review your overhead costs every month to keep your pricing current. Have your crew track time to specific jobs every day. Run job costing on every project you take on, and correct your next estimate when a job runs over. Replace slow processes like paper timesheets and last-minute material orders.
And find the right tools to help you organize crews, run job tracking and job costing, and get full visibility into what’s working, and what’s not. That’s why we created SynkedUP, a landscaping software built specifically by contractors, for contractors looking to protect their landscaping profit margin.
SynkedUP is a centralized, AI-forward automated system that takes your company’s real job data and plugs it back in to help you find production rates, build and send estimates and proposals, and generate reports so you can see where a job is losing money while you still have time to course-correct.
It’s easy, intuitive, and it’s already helped over 700 landscaping businesses. Want to see what our tech and tools can do for YOUR business? Book a call with us today to learn more!
