You already know that labor is one of the most essential aspects of your business. It’s also a key to your profitability. But like many landscaping business owners, you might have struggled with how much to charge for labor. If you’re not charging enough, you know it’s going to seriously impact your bottom line.
In the past, you might have determined how much to charge for labor by gut instincts. Perhaps you are someone who has been in the industry for a long time. You might just feel as though you have a good “sense” of how much to charge. But this is opening you up to risk. At the end of the day, you’re really just guessing—and that’s risky. When you’re using gut instinct, you cannot definitively know if you’re charging enough for labor. This is a way to quickly lose sight of profitability.
Using budgeted vs. actual hours
In order to truly know if you’re charging enough for labor, you need to start tracking hours and formulating a “target cost projection” for each of your jobs. This will become your “budgeted vs. actual hours.”
In other words, how much did you plan to spend on the job vs. how much did you actually spend?
Since profitability boils down to labor hours, you need to stay on top of this information. Ideally, you want to be able to do this in real time so that you can make changes while they still matter. If you know that you are way off track in terms of your budgeted vs. actual hours, you’ll want to be able to “course correct” before it’s too late.
Taking a deep dive into the details
As you look at each job, you also want to be able to dive deeper into the details. For instance, how much unbillable time was spent? You know that not all of your employees’ time can be billed for—but those unbillable hours can really cost you.
How much time do your employees use driving to and from the job site? How much time are they using filling up the truck or stopping for a drink? What about the time that they spend in the yard, loading or unloading materials and equipment?
The key is to make sure they’re using this time efficiently when they can. Plus, there might be some key changes that can be made. For instance, always filling up the trucks at night, so that they’re ready to go first thing in the morning, can be a big improvement. But you won’t know what areas need improving until you dive into each job and how hours are spent.
Using technology tools to your advantage
Being able to dive into the details and answer all of these questions with accurate information comes down to having the right technology. While Excel can be a decent tracking tool, it’s not going to allow you to make real-time changes. That’s why the most effective solution is landscaping business software—particularly that which has a dashboard capability.
With landscaping business software, you will be able to look at those budgeted vs. actual hours in real time, knowing that every single minute of landscape labor matters. Every minute that you lose is one that you cannot regain. You need to be able to make changes in real time and get up-to-the-minute answers to your questions.
At the end of the day, having accessibility to data can make a huge difference in your bottom line. When it comes to knowing whether or not you’re charging enough for labor, you have to be able to look at all of the information on how each of your jobs is performing.
Editor’s Note: This article was written by Nanette Seven of Include Software