You hire a new crew lead, and know exactly what to pay them. You price a maintenance contract, and can estimate how long it’ll take down to the man-hour. Then payroll runs, and the one crew member without a set wage is…you. So you take the money left over at the end of the year, and call it your landscaping owner salary.
You wouldn’t be alone, either. Plenty of owners pay themselves this way. Instead of setting a rate for your own work, you just take your pay out of what the business hasn’t spent.
It might seem like a decent, fair strategy, until you actually get to the end of the season. If the season’s been a slow one, that means less money for you. Even at the end of a good, profitable season, once you cut your paycheck, you’ll have nothing (or less) left to reinvest into your business.
The main problem with this is that it treats your landscaping owner salary and the business’s profit like one pool of money. That’s just not a sustainable way to run a business. You, the owner, and the business you own are two separate entities.
You need a regular landscaping owner salary for the hard work you do every day, AND your business needs to make a profit AFTER it pays you. Those are two separate numbers, coming from two different places.
You need to keep them distinct because the work you do and what it costs has to be figured into your pricing. If your hourly rate doesn’t factor in paying your landscaping owner salary, the client gets your work for free, at a rate that doesn’t have your contribution figured in.
Once you set salary and profit apart, you can figure out what your role is worth, separate your personal and business accounts, and build a budget that prices your jobs to cover both.
Two Ways to Pay Yourself: A $1M Example
Imagine a landscaping business that brings in $1 million a year and finishes each season with about $100K in net profit. The owner can establish their landscaping owner salary two ways, with two very different results.
In the first, the owner skips a salary entirely, and takes the $100K in profit home as their pay. Every bill gets covered, and the owner gets paid, but the business itself is left with zero profit and zero cash to show for it.
In the second, the business pays the owner a $100K salary first, then finishes the season with $100K net profit on top of that pay. The owner gets a fairly-priced salary for the work they did every day, and the business keeps a profit after covering the landscaping owner salary cost.
In the first scenario, owner pay and profit get collapsed into one number. Funding the owner empties the business. The second setup keeps them separate, so the owner gets paid, and the business closes out the year with $100K. You can use that money to pay for your next move:
- Hire an office administrator to take all the paperwork off your plate. This buys back your time to lead the company and build better systems.
- Pay cash to replace old equipment, skipping the interest a loan would charge.
- Fund a marketing push that brings in more work over the next year.
When you use the first method, and pull your landscape owner salary out of your profit bucket, you’re giving the business your labor for free. The business controls how you spend your time, and forces you to take your pay (because just like everybody else on your crew, you still need to eat) directly out of your profit.
The second puts you in control. You set the plan, and you use it to lead your business.
How Much Should Your Landscaping Owner Salary Actually Be?
Your landscaping owner salary should reflect the market value of the work you do and the responsibilities you own. So if you do the work of three people, your business should pay you the salaries of three people. That might sound unreasonable or ridiculous at first, but it’s just math.
When your business pays you less than the actual worth of your work, it gets your labor at a discount. What if one day you decide to step back from the business and hire people to replace you? The money needed to cover those roles won’t be there.
Work out the actual salary number by listing the roles you’re currently taking on, and what each costs to hire. An owner basically running the whole operation might be covering three roles:
- Office administrator: $40,000
- Ops manager: $80,000
- Salesperson: $100,000 with base plus commission
Add those three up, and you get $220K. That’s what the business would have to pay to replace the work you did every day, so that’s what your landscaping owner salary should be.
Maybe you, personally, would be just fine living on $50K a year. That’s great for you, but you cannot make that figure your salary. The business should budget the whole $220K, so your pricing reflects the market value of the completed work.
Now, whether you actually take home all $220K or leave part of it in the business is up to you. But it is your money, and the business has to plan around that amount so your rates stay connected to real numbers.
All of this works differently for businesses with absentee owners. An owner with no day-to-day duties does take the business’ net profit as their reward. They don’t get a salary; the people actually running the daily operations of the company do.
A working owner earns a salary for the work they do, and they also decide what happens to the net profit, just like the absentee owner does. Leave it in and reinvest it, remove it, or do some of both. It’s your call.
Set Your Finances Up to Pay Yourself Correctly
So you’ve figured out your landscaping owner salary should be $220K.
Now what?
Knowing the right number won’t help if the money runs through one account, and you have no visibility into what’s going where. Start by separating your accounts, then build your salary into your budget as a cost.
Separate Your Personal and Business Accounts
Keep your finances clean by keeping two separate bank accounts: a personal and a business checking account. If you’re living out of your business checking, that’s the first thing you have to fix.
It’s impossible to tell exactly where the money is going when the business and the owner live out of the same account. Two accounts let you see where the money is, which is the only way to confirm that you received your landscaping owner salary and still turned a profit.
Build a Budget That Includes Your Salary
Now you need a company landscaping budget that helps you confirm that your work gets priced correctly. Start by listing what goes in, category by category:
- Labor. That includes the wages you pay your crew plus payroll taxes, workers’ comp, and any benefits you offer like health insurance, retirement contributions, and PTO.
- Materials. The plants, mulch, stone, soil, and supplies each job consumes.
- Equipment. Mowers, trucks, and trailers, plus fuel, repairs, and the money you set aside to replace each machine when it wears out.
- Overhead. Rent, insurance, phone service, and the office costs that run whether or not you book a single job that week.
- Your salary.
Your budget takes these costs and uses them to find one crucial number: The labor or man-hour rate you need to charge for your work.
Getting that number right keeps the business profitable after paying every bill, including your landscaping owner salary. If you don’t include your salary as a line item, you’ll end up pricing your work too low. Then the business will earn enough to pay every bill, with no profit left over.
When you put your full salary in the budget, your rates will rise accordingly, so you can pay yourself and leave profit on top. If you want to see the numbers for yourself, try SynkedUP’s free labor rate calculator, which takes your costs and uses them to calculate the man-hour rate you need to charge to make your ideal profit.
Get Paid, Make Profit
If you’re wondering how to fairly pay yourself for the work you do, start here. Separate your pay from the company’s profit, set your landscaping owner salary at the market value of the work you do, and price your jobs with a budget that carries your salary as a line item. If you do, you’ll have a steady paycheck for your hard work, and the business will turn a profit on top of your pay.
Those steps are all easy enough, but the math behind them (and there’s always math) takes hard work. You have to list out every single cost, set your salary at market value, and calculate the labor rate and overhead markup that covers everything. Do it manually, and one wrong number puts your salary or you profit back at risk.
We created SynkedUP, an all-in-one landscape management software, to run that math for you. The system takes all of your job data and centralizes it into one accessible, automated system. Then you plug that data back into the software to get the numbers you need to run your business.
Enter your costs and get your rates back out, with drag-and-drop estimating, templates, and production rates that turn into a bid with a few mouse clicks. If you want to get find the right price even faster, just ask our new AI assistant for help.
To see how those tools work with your own numbers, book a call with SynkedUP today!
