Photo: Aspire SoftwareGo with your gut” is often a good piece of advice in business and in life. But it’s not the best approach when it comes to pricing and selling work in the landscape industry. Surprisingly, however, that’s how many companies operate today. Landscapers often make assumptions about costs when bidding, without clear visibility into job cost data. They fail to realize that basing their current bidding process on previous job data creates inaccuracies, causing them to consistently leave profits on the table.

Ultimately, the goal is to have accurate, real-time data so you can quickly pivot if you detect a problem, says Aspire Senior Implementation Manager Jon Gohl.

“For companies that do understand these costs, with software they can see how they performed last week on their weekly mowing visits—or any project for that matter,” he says. “If they went over on hours, for example, they can act proactively to get the project back on track. They’re able to right the ship quicker because they can see what’s happening now vs. finding out at the end of the process what went wrong.”

The top two cost areas where landscapers can improve their profitability using software are labor and materials, according to Kory Beidler, solutions engineer for Aspire Software.

Labor cost visibility

Composite labor rate is one area where landscapers often rely on their perceptions rather than data, Beidler says.

Graphic: LM Staff“You have to know what your average labor rate is with burden for the different areas of your business,” he says. “A lot of companies don’t fully understand these costs.”

For example, a landscape company may say its average labor cost is $17 per hour. But the owner doesn’t have a handle on whether that really means $15.50 for maintenance and $18.50 for construction. Those nuances can play a big role in determining whether you win a bid or if a job is profitable in the end.

Ideally, your software program will allow for multiple labor rates, including built-in markups, when estimating.

“In a business management platform like Aspire, when you put together a bid for any division, it’s going to adhere to the profitability rates you’ve set for your company,” Beidler says. “Some guys talk about 50 percent gross margin. My question is, ‘Does that actually give you the profit you want for that estimate?’ Many will say ‘I’ve always done 50 percent and we’ve been okay.’ Well, you’re okay, but you’re only making 4, 5,
or 6 percent net profit. You should be making 10, 11, or 12 percent, so you’re leaving money on the table.”

Charging “what the market will bear” rather than factoring in your actual labor costs is another pitfall Beidler has observed.

“Whatever that number is, if you’re just using these perceived competitive market rates without having real-time job cost performance data to know whether you’re pricing your work profitably, it’s potentially costing you money,” he says. “You may as well not do the work if you’re not going to be profitable.”

Material cost visibility

Graphic: LM StaffWhen it comes to material costs, many landscape companies rely on in-house spreadsheets, supplier catalogs, or ballpark costs when estimating. The problem with this approach is material prices often change more frequently than landscape companies’ internal price lists.

A software program like Aspire that captures your material purchasing costs eliminates the need to look up prices and manually enter them, Beidler explains.

“When you do material purchasing in Aspire, the system is learning your purchases,” he says. “As you buy and confirm vendor invoices, it knows you paid $22 per plant or whatever the case may be. We have a button that allows you update your costs to reflect what you’re actually paying for this stuff.”

Real-time changes

Once you know the labor and material costs are accurate in your system, the next step is tracking the job cost performance data and using it to make proactive business decisions.

“One thing Aspire does very well—and what drives a lot of profitability for our clients—is showing estimated vs. actual costs all the way down to the service-line level,” says Gage Roberts, senior sales consultant for Aspire. “With mowing contracts, specifically, hours are huge. You have to manage estimated vs. actual hours granularly.”

The ability to access this data in real time is the key, Aspire experts say.

“You don’t want to wait to have folks in the office crunching numbers on paper,” Roberts says. “You also don’t want to have to tell the system to query things or run a report. In business management software like Aspire, you simply click on it and it’s there.”

In Aspire, key information is also available in dashboards that allow managers to pivot if necessary.

Graphic: LM Staff“I can look at the data and say, ‘Wow, we’re losing on this job every week—maybe we shouldn’t re-sign it, or maybe we need to raise the price because we’re consistently going over hours,” Gohl says. “When you really know what you need to charge, you understand when it’s time to walk away from a job vs. losing money on it or how low you can drop the price and still make a profit.”

Roberts agrees that the ability to access and analyze information so you know if—or when—to change course is the primary benefit of a software system like Aspire.

“If you’re waiting till the end of the job or the year to figure out if you’re doing things well, you’re already past the point when you can make decisions to improve,” he says. “On the other hand, if you can do that while a job is in progress, you can still take action to change the direction of the job. There’s never a better time to fix a problem than the moment you’re in. Yesterday’s gone and tomorrow’s too late.”

Consistency pays off

The benefits of user-friendly software extend beyond costs and profitability.

“It helps ensure consistent estimating across the board, which allows you to scale and think outside the box when it comes to hiring,” Gohl says. “In my former life working for a landscape company, we hired a guy from Enterprise Rent-A-Car who had great sales and customer service skills. He didn’t know anything about the industry, but we could teach him how to measure and because we knew the costs were right in our estimating system, we knew his estimates would be assembled correctly.

The Aspire landscape management platform offers the cloud-based, end-to-end functionality contractors need to gain full visibility into their business, make better decisions, and increase profit margins. Aspire is trusted by more than 34,000 users in over 800 locations to manage nearly $3 billion in industry revenue.

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This page was produced by North Coast Media’s content marketing staff in collaboration with Aspire. NCM Content Marketing connects marketers to audiences and delivers industry trends, business tips and product information. The Landscape Management editorial staff did not create this content.