One of the quickest ways to erode margins on a job is by setting prices without grounding them in your true hourly cost—the rate your budget requires. A lot of contractors lose profits not because of bad work, but because they don’t know their actual landscaping cost per hour. When your hourly rate doesn’t match your actual cost of doing business, you may struggle to cash-flow the slower months, like winter, no matter how busy your peak season is. When this happens, you might be tempted to blame the losses on pricing too competitively…until the season gets rolling in earnest, and money is still tight.
Knowing the true landscaping cost per hour of your business’s labor output gives contractors a steady baseline that protects margins, even when jobs vary and crews move fast. In this article, we’ll show you how to start calculating the landscaping cost per hour for your business. We’ll also discuss how hourly rates guide better estimating and job costing and pave the way for long-term success, and how SynkedUP can help.
What Landscaping Cost Per Hour Actually Means
When we talk about a company’s landscaping cost per hour, what we’re referring to is the real business cost of each hour of work, not just what somebody makes on the clock. Your landscaping cost per hour is a number you use as a base to help you price installs, maintenance, and enhancements, without having to guess at whether a job is “worth it.”
This number is the most useful when it reflects how your company actually runs, not an ideal version of your schedule. To find your business’s landscaping cost per hour, we recommend using a man-hour approach, or the cost per employee, per hour. For example, if you have three crew members working on a job for 8 hours, that’s a total of 24 man-hours.
To find your business’s man-hour price, you need three components:
- Direct labor costs
- Overhead costs
- Your profit margin
The Real Labor Numbers Behind the Work
One of the most common ways landscapers undercharge without realizing it is by pricing jobs based on what the “market rate” seems to be. Many contractors choose a number somewhere in the middle of what their competitors are charging, without fully accounting for what it actually costs to employ their crew. Even if no one is billing at the literal wage rate, labor is still far more expensive than it looks once you factor in payroll costs, labor burden, and overhead.
Accounting for payroll means accounting for taxes, insurance, benefits, and other employment expenses, which can add real weight to your business’s landscaping cost per hour. You also have to consider that even the best teams are going to lose time to weather, training, slow days, and the normal hiccups of a season.
Every location and every business is different, but the true cost of employment is generally about 20% or more than the wage per hour cost. If one employee makes $50,000 a year from wages, but you pay benefits, taxes, payroll taxes, and overtime, employing them is closer to $60,000 a year. If that employee worked 1,800 hours that year, including overtime, that means the direct labor costs are $33.33/hour.
Equipment and Overhead That Ride on Every Hour
Next, you have to think about equipment and overhead costs. A true landscaping cost per hour has to include the gear and support that make fieldwork possible, not just the people doing that work. Overhead is the background cost of staying in business, and the hourly rate is how that cost gets paid back.
When calculating your overhead costs, you’ll need to include insurance, admin time, marketing, tech, as well as equipment costs like vehicles, tools, fuel, repairs, and replacement costs. Basically, every expense that your business can’t pass directly on to a customer or a job on an invoice is an overhead expense. You’ll also want to project for the worst-case scenario when figuring these costs because if you underestimate on overhead expenses, the difference will come right out of your profits.
Companies with more costs and bigger overhead loads usually need a stronger landscaping cost per hour number to stay healthy. Because these expenses will look different from business to business, two companies doing the same type of work might charge completely different rates, and still both be ‘right.’
Now, let’s say that you do the math, and find that your business has $220,000 in overhead expenses per year, with five employees who work 1,800 billable hours per year, for a total of 9,000 billable man-hours per year. Divide the $220K overhead cost by 9,000, and you get $24.44 per man-hour in overhead expenses. When you add that to the $33.33 in direct labor costs from the previous example, the total is $57.77 as your breakeven rate.
Profit Goal
The third and final part of this equation is to add your net profit margin. If you want a 15% net profit margin, take the $57.77 and divide it by 0.85. (For a 10% profit, divide it by 0.90. If you want 20%, divide it by 0.80. And so on.) At 15% net profit, you get $67.96 per man-hour.
For your own business, you could do all this math manually…or you could use SynkedUP’s labor rate calculator.
Non-Billable Time and the Cost of Reality
A business’s landscaping cost per hour rate can get distorted when paid time and billable time are treated like they’re the same thing. Things like drive time, loading, rework, weather delays, and gaps between stops quietly lower the hours where you’re actually earning revenue. It’s also a big reason why you can feel busy without feeling profitable.
A solid landscaping cost per hour respects the truth that not every hour on payroll is going to be an hour billed. When companies account for this truth, they’re less likely to fall into the habit of “cheap pricing” that only looks workable during the rush of peak season.
How a Solid Hourly Number Improves Estimating
When your business’s landscaping cost per hour is rooted in real labor, real overhead, and real equipment use, you’ll find that estimating becomes more consistent across the board. The same type of job will stop producing wildly different price quotes depending on who looked at it or how rushed the quote was.
A numbers-driven hourly baseline makes production rates easier to understand, because you can clearly see how every hour of work translates into real costs and revenue. With that clarity, your estimating templates become far more reliable, reducing the chances of underbidding on repeat job types. It also gives you the confidence to price work accurately and explain those prices to customers without feeling defensive, because you know every number is backed by the true cost of delivering the job.
How Knowing Your Landscaping Cost Per Hour Helps Job Costing and Growth Decisions
Having a solid landscaping cost per hour figure will also help you make better-informed long-term business decisions, and protect future growth. For instance, having a clean hourly cost makes job costing way more useful, because you have a factual basis for comparing what you projected to happen on a job to what actually happened.
Using your landscaping cost per hour for job costing also helps you spot which services consistently perform well, and which ones quietly drain profits. Having this visibility into operations makes it easier to evaluate crew performance, and bolsters smarter decisions about hiring, service mix, capacity, and pricing. When you’re not scaling a pricing model that’s already too thin, growth gets a lot less risky.
Find Your Business’s Landscaping Cost Per Hour and More with SynkedUP
The right landscaping cost per hour rate isn’t about charging high prices, or even the most competitive prices. It’s about charging honest prices that match the real cost of how your business does work, and does it well. When labor burden, equipment use, overhead, and non-billable time are all represented in your hourly number, profit stops being a happy accident, and starts being a pattern.
All of this might sound intimidating, but it doesn’t have to be! Let SynkedUP, a landscaping software built by contractors, for contractors, help. SynkedUP is designed to help you streamline quotes, win and track more jobs, and get paid faster. It does this by storing and centralizing all of your actual job data in one central location. Our automated processes let you use that data as a starting point for calculating actual production rates and estimates, track time, and job cost for every project. With our custom-built templates, you can build accurate, consistent, and professional proposals and send them in minutes instead of hours or days.
SynkedUP also uses real-time job tracking and progress reports, so you’ll never be surprised by reduced margins and hidden costs. Instead you’ll always know exactly where your jobs stand. And if things go off-track, you’ll know when it happens so you can adjust accordingly, instead of after the job is done, when it’s too late to do anything about it. We also offer a mobile app so you’ll always be in the loop, whether out in the field or at the office.
If you’re ready to bring efficiency, accuracy, and clarity to your business, while protecting profits in the process, contact SynkedUP for a demo today!
