Managing landscaping business expenses well comes down to one uncomfortable truth: every dollar your business spends that you didn’t plan for comes directly out of what was supposed to be your profit. That’s a hard hole to dig yourself out of once you’ve found your way in. Overhead expenses will keep coming in, and they don’t care if you managed to sell enough work to cover costs or not.
This is a solvable problem, and there’s no time to lose on solving it! Yes, as an owner-operator, you already have five fires to put out and your phone’s ringing nonstop. But you have to focus on and solve the fire that matters the most. Some dumpster fires you just need to let burn while you focus on the most important one.
Staying profitable is mostly about knowing your numbers. That means building a landscaping budget that covers every expense before the season starts. Once the season is running, it means checking what you actually spend against that budget.
Catch an issue early, and you protect the profit you earned. Let it slide, and you lose that profit to cover the damage.
What Counts As a Landscaping Business Expense?
Landscaping business expenses fall into two main buckets.
Direct Costs
The first bucket is your direct costs. Direct costs are tied to a specific job, and you only pay them when you win the work. Pavers, stone, and joint sand for a patio. Plants and lights for an install. No job, no bill. They rise and fall with the work you take on.
Direct costs also include your labor costs. Of all your direct costs, labor is the most important, because it’s the hardest to control. It’s the hardest to predict. It also attracts dramatic overruns much more easily than other direct costs. One of the hardest things to estimate accurately on a job is labor, and that falls into the direct cost bucket.
Overhead Costs
The second bucket carries your overhead expenses. These are the bills you pay whether or not you actually sell a job. Insurance, marketing, vehicle payments, utilities, and so on. Even if you book zero jobs next week, you’re still going to need to cover these costs.
Of these two costs, overhead is the more consistently risky cost bucket. Direct costs appear when you’ve taken on the work that creates them, so they don’t stack up while you wait on sales. That doesn’t mean you should neglect your direct costs!
But sale or no sale, overhead will always keep running in the background. Your insurance premium ticks up. You add a truck payment. None of it waits for a job to justify it, which makes overhead the more likely expense bucket to slip past your budget, if you’re not watching for it.
When you look at your landscaping business expenses and ask where the profit leaks started, overhead is almost always the answer. That’s why the rest of this article will zero in on overhead costs. Get those numbers right, and you take away the biggest threat to your profit.
Build a Budget that Accounts for Everything (And Then Some)
Every overhead dollar you don’t include in your budget gets paid out of your profit. So the goal when you build your budget should be simple: give every landscaping business expense a line. Miss one, and you’ll still have to pay it.
The obvious overhead expenses rarely get missed. You remember your insurance, your rent, your phone bill. The costs that get forgotten are the ones that don’t land in your inbox every month. Here are the landscaping business expenses that get missed the most often:
Owner’s Pay
Your salary is an expense, just like what you pay your office admin and your foreman. If a hired manager did your job, you’d budget their wage without a second thought. You need to do the same for yourself.
Leave your salary off the budget, and your pay becomes an afterthought, funded by whatever profit gets leftover. In a lean year, that leaves you underpaid for a full season of work. The profit the company earns and what you make for running the company are two different things, so budget for them separately.
Unbillable Labor
You can’t bill a customer for every hour you pay your crew. Drive time between jobs. Loading up in the morning, and cleaning up the shop at night. Your crew standing around while a delivery runs late. An hour spent driving back to fix something on a callback. You pay full wages for all of it, and none of those hours can go on a job invoice.
If you don’t budget those wages, you’re understating how much it costs to run your crew. Then your pricing gets built on a labor number that doesn’t really exist. Estimate the unbillable hours as honestly as you can and budget the wages behind them, so the full cost of your crew is on the books before you price a single job.
Rising Costs
Costs you already carry tend to climb. Your insurance renews at a higher rate. The cost of fuel goes up. A vendor raises material rates.
You can’t build this year’s budget on last year’s landscaping business expenses, because if you do, you’ve already locked in a shortfall on every one of these line items. Pull last year’s figures forward as a starting point, then add the increase you can see coming, so the budget reflects where each bill is actually headed.
Shop Rent (Even in Your Own Garage)
Working out of the garage at home doesn’t make the space free. That square footage has a value, and your business is using it. If you rented equivalent space across town, you’d pay for it every month. Put a fair number on the space you’re using and give it a line in the budget. It keeps your real cost of operating visible, and it means the day you outgrow the garage and rent an actual shop, the expense is already built into your pricing.
Equipment Depreciation
Every piece of equipment will eventually wear out and need replacing, and the replacement bill tends to land all at once. Factoring in depreciation lets you spread that cost over the years you use that machine.
As each piece ages, set money aside. That way, the replacement costs won’t blindside you when that mower or steer skid finally gives up the ghost. Budget for wear and tear, and when it’s time for new tools and equipment, you can be excited, instead of worrying about spending money you didn’t plan for.
All The Small Things
This section is a catchall for all the little landscaping business expenses that often fall through the cracks. Once you add those small costs across a year, they add up to real money.
It’s a good idea to give your small expenses a line in the budget anyway, even a rough one, so the total doesn’t surprise you at year’s end. We’re talking about things like:
- Employee uniforms and boots
- Donations to the local ball team
- Registration, travel, and hotels for an industry trade show
- An impulse marketing buy that definitely seemed worth it in the moment
Budget High, and Give Yourself Some Breathing Room
List every expense you can think of, and then take one more step. Budget on the high end. If you think insurance will run you $8,000 budget $9,000. You want to create a budget that can absorb a bad break without eating your profit.
You’ll also want to think long-term when you budget out your landscaping business expenses. If you know that partway through the year you’ll buy a new truck or hire a new employee, go ahead and build room for that expense into your budget now. Field workers are the one exception to this rule. Don’t add those to your budget until you cut their first payroll check.
Check Your Actual Landscaping Business Expenses Against Your Budget All Season Long
A budget you build once and never open again goes stale fast. That’s not a tool, that’s a worksheet. Your landscaping business expenses drift from your plan the moment the season starts. The only way to catch that drift is to compare what you actually spend against what you budgeted, and to do it while there’s still time to react.
Say you budgeted $18,000 for equipment repairs and maintenance this year. It’s the end of May, five months in, and you’ve already spent $10,000. Divide that $10,000 by five months and you’re running about $2,000 a month. Multiply by 12 and you’re on pace to spend $24,000 by year’s end. That’s $6,000 over what you budgeted. And that extra $6,000 comes out of your profit.
And that’s just one line item. Get two or three line items running over at the same time, and you get dumped right into every owner’s worst-case scenario: a full season of hard work with nothing to show for it.
The problem extends to your pricing as well. Your quotes get built off your budget. Once your real overhead climbs past your budgeted overhead, quotes start going out way too low. Every job you win at that too-low price digs the hole a little deeper. You stay busy, the work keeps coming in, and you’re still falling behind.
Picture a contractor who doubles his gross revenue in under a year. Great problem to have. But that same contractor skips a budget check. By mid-season he hits a cash flow crunch. His overhead grew right along with the business, but he kept pricing quotes off the original, inaccurate budget. Every job he booked got underpriced.
To figure out the problem, the contractor compares his real spending to the budget behind his quotes. Once he does, he spots the gaps between estimated and actual landscaping business expenses immediately. So he updates the numbers, and the next quote he sends goes out priced against reality. Cash flow problem solved.
None of this takes much time. Just take your actual profit and loss statement and set it next to your budget every month or two. Small gaps are easy to fix when you catch them early. Wait until the cash dries up, and your only option is firefighting. Reviewing your landscaping business expenses on a regular schedule keeps a minor overage from turning into a lost year.
And if you need a second set of eyes on your budget, SynkedUP can help! We offer a free mid-season budget check-in for current customers. If you’re not a customer yet, you can schedule a consultation to talk through your numbers and get pointed to the right resources. Either way, you walk away with a better idea of where your money is going.
Manage Your Landscaping Business Expenses With SynkedUP
Staying on top of your landscaping business expenses comes down to two habits: building a budget that accounts for every cost before the season starts, and checking that budget against what you actually spent while the season runs. One gets your numbers right, and the other keeps them right.
Manage these two things, and you get the payoff of the profit you were already working toward. Every dollar you plan for is a dollar that won’t slip out of your take. That profit is the whole point of knowing your numbers. You put in the work, you priced it right, and you keep what you earned.
Don’t wait for cash flow problems to force the issue. Set your budget high, build in your breathing room, and put an hour on the calendar every month (or every other month) to compare it against your actuals. That small habit helps protect a full season of hard work.
As vital as it is to know your numbers, keeping track of every figure, rate, cost, and measurement can get really complicated, really quickly. We built SynkedUP, a landscape estimating software, to help contractors know and organize their numbers using their actual job data.
The system centralizes that data and lets you plug it into production rates, build out budgets that account for their landscaping business expenses, cost jobs, and produce professional estimates in minutes.
Every day, SynkedUP gives contractors insight into their operations that gives them the power to protect their hard-earned profit. If you want to see what it can do for your business, reach out to book a demo.
