How Much Should I Charge For Aeration
Any question you ask you do not know the answer to, is not a dumb question. There will be as many answers as plugs on a lawn. I will ask you, what have you learned about making money by asking another business person how much you should charge for your services? How has your business benefited by charging someone else’s price? A better question would be, how do I calculate how much I should charge for aeration and make plenty of money?
Your business is no one’s business but your own
That does not mean it is not good to network with fellow contractors. But when you want to copy prices, or chop a price you learned, you are delegating your business success to someone who may be right, or wrong. And they definitely do not know anything about your business operation, clients or sales.
How do you find out how much to charge
When all the confusion and misinformation dust clears, we can distill how much to charge down to one simple premise. You are not selling aeration. You are reselling time you purchased from your employees by the hour, plus your own time if you work on the client properties too. The old adage “time is money” is the only thing that matters in a landscape business.
OK, so how much do I charge
OK, so how much does your time cost? There is no easy formula for pricing core aeration. Some math and homework will be required. Charging 2 or 3 times what you charge to mow is not a math formula because it has nothing to do with the time you buy from your employees. To determine your hourly costs, you must look at all of your business expenses for a year minus the cost of materials, subcontractors and special one time or seasonal equipment rental. You remove those costs because they should be getting put into each job you need them for. Your remaining costs plus a fair market value for your personal field time, plus tax and insurance factors for your wage, get divided by the number of working payroll hours you purchased, plus the number of hours you directly supervised or worked with your crews on street. Labor, equipment and overhead expenses divided by payroll working hours. The answer is your cost per man hour for every working hour of every working day. It is not the cost for time you spent at the client’s property.
We know the cost, now what
In the professional landscape world, aeration is sold by flat rate based on size of the property serviced. You need to know how long it will take to service a given size property to establish your rate structure and you will need to add a profit to your cost factor. Remember your hourly costs occur all day long, not just at the client’s curb. Therefore you need to add a travel time factor and prep and load factor to your curb production time. If you are a small contractor I recommend you add a minimum 11% markup to your expenses if your full personal compensation was included in your expenses. If only your personal onsite hours were included, you may wish to use a 25% markup to pay yourself for all your office, sales or other non job site hours that you perform. If your business is doing $400k per year, that would earn you $80k in compensation and company profit plus your fair market wage from job site work. Yes, you need that much money to support your wage, retirement funding and company cash box to support growth, major repairs and equipment replacement.
What about that aeration rate structure
Your smart phone stopwatch, time records and some experimentation are the basis for every service you sell. When I was in contracting, I found in my area and type of properties, there was a baseline time and size for every service. Every property has a certain slow element or minimum time for a portion of it, no matter the total size. For me that size was generally 3,000 to 5,000 sq. ft. That was a front yard, to maybe a front and side yards approximately. It was going to take us the same amount of time to drive to a job, unload and service the first 3-5K sq. ft. no matter whether the back was 3, 7 or 20k sq ft. To get started you can give away a few aerations to friends, family or best clients and time the different areas such as fronts and sides, and open backs of different sizes. You can also take mark out paint and delineate common area sizes on large turf areas you may have access to. We created mock up curb strips, various dimension front yards, side yards, etc. to build our rate sheet. We built our rate sheet on 2,000 sq. ft. increments over base footage and reduced price on those 2k units as properties got larger. Once you get to a certain size lawn you achieve maximum efficiency and can not lower prices any more unless a more productive piece of equipment is purchased. Then be aware of what that efficiency costs you. You may get 30% more done, but it may cost you 10% more to attain that efficiency. Do not discount your advantage away. When measuring, always round up to the next 2k multiple, meaning 8,543 sq. ft. becomes a 10k aeration job. Just sell the job with out mentioning size or justifying anything to the client. That distracts from the decision to buy or not buy, as well as introducing possible objections that have no business being part of the decision.
Are there other pitfalls to pricing
If you are a relatively new business or a small owner operator there are pricing traps to avoid. Do not leverage your current low operating costs to create low aeration pricing because of the following 3 traps. 1) You will never be able to fund growth or incur larger company expenses if you do not budget for them now as if they were real. 2) Low prices can permanently mess up the market place for you and the industry leaving everyone struggling for a profit and only the customer with a benefit. Remember why you went into business. 3) Artificially low prices will be a relationship disaster when you give in and have to raise prices to stay in business and be financially secure.
For help with determining and applying business costs and sales prices, or bidding or estimating any landscape service, call me for a no cost consultation.