Paving for Profit
The word “landscape” is no longer merely just about dirt. In the 21st century, landscape contracting companies are also putting more emphasis on hardscapes, those hard-topped surfaces of all kinds that are part and parcel of exterior environments. For example, patios, driveways, walkways, and barbecue pits are frequently found outside both single-home and multifamily dwellings.
You’ll also find the same features around commercial buildings, although often on a much larger scale.
There’s money to be made by landscape professionals in hardscapes of all kinds, but the design and installation of paver stones probably tops the list. That pavers are so popular is a small wonder, since they’re such an aesthetic improvement over a drab concrete slab that has all the curb appeal and comfort of a prison bed.
With all this money on the table, it’s a bigger wonder why more landscape contractors don’t include paver projects on the list of services offered.
Just like other areas in the landscape arena, such as grading or drainage, it is important to learn how to install paving stones properly. However, once you and your crews get up to speed on how to do the work, just as important—and the main focus of this story—is how to estimate costs and make bids that both win the contract and give you a good shot at making a profit. Bid well, and your bottom line can be black indeed.
“There’s real money to be made in the paver business,” maintains Rich Goldstein, president of Green Meadows Landscaping in Oakland, New Jersey, and a board member of the New Jersey Landscape Contractors Association. “But so many guys are making bids in ways that don’t take notice of the two common factors in every paver job. One is that every paver project is different. Second, that we in the paver business are making our money not from selling materials, but from selling labor.”
The key to a profitable paver project is to carefully estimate your costs —both fixed and overhead—for the project, then build in a reasonable profit. Only when you have a handle on fixed and overhead costs can you make a bid that is both successful for the customer and successful for you, says Terry Morrill, CEO of Pacific Outdoor Living in Sunland, California.
It is imperative that you understand that mistakes made in underestimating both material and labor are costly. This has been the pitfall for many a landscape company. Working with a take-off sheet, whether it be on the computer or on paper, is a must. It is on this take-off sheet that all your costs should be entered. If you diligently figure in every cost attributed to the potential project, you’ll arrive with a final estimate that should be fairly accurate. From that estimate, you will eventually make your bid on the project.
When estimating a paver installation, you need to understand that there will be additional costs that are unique to paving stones. Keep in mind there may be a permitting phase, since local governments may require paperwork to be filed and/or the site to be inspected.
Steve Jones, president and founder of Pavetech, in Prior Lake, Minnesota, reminds contractors to be aware of such minutia as weight restrictions on local roads and byways, and “eyesore” regulations that might well affect how and where your jobsite materials can be stored. The cost of permits and the time involved in getting them should certainly be included in your costs and put in a line item on the take-off sheet.
Then, there is what Goldstein calls “the mobilization” phase, which includes assessing the equipment you need on hand to do the job. Paver projects require a lot of different tools. Some of it you may own already, such as shovels, brooms, spades, rakes, and sledgehammers. Some of it you might want to rent, if you don’t have it on hand, such as a rototiller or a powered plate compactor that you’ll use to compact both the substrate and the pavers once they’re installed. You’ll also want a couple of stone cutters. One would be guillotine-style; the other a masonry saw with a diamond tip blade for more irregular paver cuts.
Included in mobilization are the logistics of transportation, including the trucks you’ll need getting to the jobsite, and to remove soil and rock from the jobsite to the dump. Also included in mobilization, before a single shovelful of dirt is turned, is the assembling of the materials that you’ll be using on the actual project.
Those materials won’t simply be the paver stones that you and the client have decided will be used, but also potentially tons of substrate and quarry aggregate, on which your pavers will rest. There is a geotextile lining, as well as whatever kind of sand you’ve selected to go between the paver stones once they’re laid. Finally there’s a slew of other materials that you’ll use in the project. Those materials range from the mundane, like string, to the specialized, like sophisticated landscape nails for edge restraints.
You’ll be using these materials in different quantities on different projects, since each project takes on its own personality. All these materials should be accounted for in your costs because they will affect the bid price for the project, and the project’s ultimate cost.
Finally, we’ve saved the most important area in estimating—cost of labor—for last. It is the most difficult part to calculate. If you plan on using three crew members to do a specific job, and you believe it will take them three days to complete that project, you can compute their hourly wage by the hours they work, and there is your number.
The problem usually ends up being that you underestimated their time. To complete this particular project, it actually takes the crew three and a half days. Three men, one half day each, equates to an additional day and a half of labor costs that was not figured into the job. That extra cost now comes off the bottom line.
When estimating a project that includes installing paving stones, take extra care. Goldstein points out that cleanup can be quite extensive, including seeding, mulching, and actual traditional landscaping. Those costs are all part of any project, and they vary from job to job.
Everything fits into overall costs, even excavation equipment you might already own. As Goldstein says, “If you rented that equipment, you’d certainly charge the customer for the rental. But it’s easy to overlook any charge to the customer when you already own the equipment. Yet some cost should be associated with it.”
He thinks that the common paver project estimating and bidding errors happen when contractors bid by what Morrill calls the “Unit Pricing System.” In unit pricing, the contractor simply makes a bid based on a persquare-foot basis, as in, “I can do this job for you for 10 bucks a square foot.” They reach their per-square-foot number based on a crude estimate or experience.
“The ‘Unit Pricing System’ is popular,” Morrill admits, “but popular does not equal profitable. By my estimation, only in 60 percent of the cases will the price offered be in the right ballpark to cover costs and a reasonable profit. The other 40 percent of the time, the United Pricing System price will either be too high or too low. The job will either be overestimated or underestimated.”
The pitfalls are clear. A Unit Pricing System bid that’s too high for a simple job will mean that you’ll be undersold by a competitor who’ll still make a nice profit on the job. A Unit Pricing System bid that’s too low will mean that you may well get the job . . . but you won’t make any money on it, because your costs—both fixed and overhead—will exceed your bid.
Although unit pricing has gotten more common during the recent recession, Goldstein believes, it’s because contractors want to keep themselves busy and because customers have come to expect it. Yet he sees it as a recipe for severe difficulty. “Square foot pricing is an illusion. There’s no such thing as effective square foot pricing that carries from job to job. Jobs are just too different.”
Instead, to estimate well, you need to think of everything. Morrill says that even when everything is thought of, it might not be thought through as carefully as it should be. He finds that where contractors err in their estimating, it is on the labor side, as opposed to the materials side. It’s not so hard to figure out how many pallets of paver stones you’ll need for a project; it’s more of a challenge to pin down all the labor variables.
“How many linear feet are you doing? How many cuts? What kinds of cuts? How much training does each crew member have going into the project? Can you get a truck in to where you’re doing the work, or will you be loading and unloading with dollies and wheelbarrows?” Morrill ticks off some of the labor issues. “Are you going to be working a street where you need to hire a flagman—don’t laugh, I’ve seen it required. How far are the stones going to be stored from where they’re going to be laid? How’s the drainage?” To help think of everything, Jones has a six-page paver project inventory sheet that he urges professionals to fill out as they head into any paver project. You can see it at http://www.pavetech.com/pdf/JobInfoSheet_DailyReport.pdf on the Pavetech website. He also runs a school for pavers, where estimating and bidding is taught, along with the fine points of paver project operations.
These are all risk factors on a job. Though it’s wellnigh impossible to think of everything, the more you can anticipate and think of, the better you can estimate your costs and shape a bid that makes money.
Morrill is in full agreement with Goldstein in the assessment of what paver contractors are essentially selling.
“What we’re really in is the labor business,” he declares. “Yes, there’s a way to make some profit by marking up the cost of the paving stones that you’re going to lay, but if you want to make a profit that way, you might as well be in the retail business. What we’re actually selling is our skills and our labor.”