Costing Out a Landscape Maintenance Project
It shouldn’t have to be so hard, but for some reason it is. You land a great landscape maintenance job, one that will keep your crews busy for a long time. There’s a lot to do on site, and this could open the door to other, more lucrative jobs. You want everything to go just right. At first, things are perfect. The workers you’ve assigned are providing the manpower needed to get the job done. The jobsite looks great after your crews leave. The client couldn’t be happier.
But then you start crunching numbers and something is very wrong. The client is paying you on time; that’s not the problem. After all is said and done, the money you’re getting for the work is not covering your expenses. You’re either breaking even, or worse, losing money. What went wrong?
Let’s go back to the beginning, when you first bid on the job. Most likely, that’s where all your troubles began.
“I think the biggest mistake is not giving yourself enough time to look at the job thoroughly,” says John Gachina of Gachina Landscapes, Menlo Park, California. “You want to allow enough time to thoroughly inspect the property, to avoid having to rush out and run through the estimate. The best examples are those bids where you never even get out of the car. I call them windshield bids”
While it’s tempting to bid a job by the size of the property, it’s a sure way to get yourself, and your company, into trouble. Size is just one of many factors you should take into consideration before ever submitting a bid.
“The first thing to consider is the analysis of the site, in addition to the size,” says Ron Kujawa of KEI, Oak Creek, Wisconsin. “Is it an average site? Is it extremely easy or is it a difficult site? And by difficult that could mean that there are a lot of trees on the property, or a lot of different beds. There could be some hills and steep areas, and a lot of trimming around ponds and beds.”
“If it’s a plain tree and turf landscape, it might be very simple to do. But an acre is not an acre, is not an acre. You have to analyze a site for the degree of difficulty. If you took a sheet of paper that was the size of a football field, and you laid it flat, it would be very simple to do, but if you were to add angles and undulations, it would become even more difficult.”
The importance of a thorough walk-through of the property cannot be understated. “Before we build an estimate,” says Ken Speers of the Brickman Group, Gaithersburg, Maryland, “we want to base it on an accurate assessment of the physical property. All jobs have characteristics which can affect how the job must be performed, and therefore the estimate itself. Size of the property, density of the horticultural work, maturity of the property, the topography of the property, the plant palette; it will all have an effect on the relative ease or difficulty, and ultimately the time it will take to service the property.”
“Another thing to consider is the location of the job,” says Kujawa. “Does it lend itself to route density, or is it a stand-alone where the travel time to and from makes it impractical to service? If the site is 15 to 20 miles from your nearest account, you probably wouldn’t want to do it. Route density is a big key to profitability. You don’t want to spend a lot of windshield time. Your people should be out there mowing.”
Next, take into consideration the services that you will be providing, along with the frequency. Those services may include irrigation, turf care, shrub and ground cover, small tree maintenance, and pest control. What is the manpower necessary to do the job right? This is an area that can come back to haunt you.
“We had one job earlier this year; it was a bigger project,” says Gachina. “I really wanted the job and underbid it. After about four months, the customer called me and said ‘You just need to have more people out here; it’s not working. Your poor guys are working so hard, and they’re just not keeping up.’”
Even the most experienced professional can underestimate a job. Some companies use a formula to estimate a bid, factoring the size of the site, the amount of workers needed to service the job, the amount of time it will take to do the job, and the profit margin necessary to turn a profit and cover overhead. Others prefer a task-based estimate that assigns a set price for the task performed.
Whatever route you choose, make sure you look at the property carefully before making a bid. Without a doubt, rushing through a bid was cited as the main culprit behind underestimating a job.
“I think that’s where the most common mistakes occur,” says Gachina. “Later on, you find out that there was a courtyard that you didn’t take into consideration. Or there’s a roof garden you didn’t see.” Also make sure that whoever evaluates the property is qualified and knows what to look for. “To do this takes experience and it takes training.”
To ensure the estimate is accurate, Speers recommends performing a production review, by sending second set of eyes to visit the property to verify the overall feasibility of performing the estimate.
“Maintaining a set of factors over time, and re-evaluating those factors from time to time is the backbone of a sound estimating system,” says Speers. “The factors provide our project directors with a benchmark of the labor, material, equipment and subcontractor resources it will take to complete the estimated work. A well-tuned estimating system will then apply the appropriate amount of fixed cost to recover overhead expenses and return profit.”
When bidding a larger, commercial property, it can get a little more complicated. One approach is to pre-qualify the customer, before going out to the jobsite.
“We try to learn some information about the project, the size of it,” says Gachina. “Are they just shopping price or are they serious about making a change? And if it’s a new project and they’re ready to do something, then get a feel for their time frame.”
Looking at the jobsite before making a bid can tell you a lot about a prospective client before you enter into a business relationship with him. Although you don’t want to jump to any conclusions, the condition of a property can often be indicative of how much the property owner values landscaping and its upkeep.
“You’re looking for somebody that recognizes what a good landscape is and they are willing to pay for it,” says Kujawa. “You want to look at the rest of the site, and not just the turf. Is there room for improvement? Is there potential for enhancements that you may be able to add to the profitability of the site? Are there other services? In our case, we offer snow-plowing. We also do sweeping. In other words, how many more services can we provide to this account?”
“When I arrive at a property,” says Gachina, “I’m looking at the buildings; I’m looking at the curbs. I’m looking at the landscape. If the place is well-maintained, there’s a customer I would like to work for. If the paint is chipping off, the landscape looks tired. I’m thinking ‘This may be a low-ball deal.’ Maybe somebody just bought it and they’re going to spend big bucks renovating it, and I want to be the guy doing it.”
While the luxury of picking and choosing what jobs you are going to
take isn’t always possible, there are some key points to consider
when evaluating a job, regardless of size. Make sure to set up an appointment
with the decision maker; otherwise, you’re just wasting your time.
Then walk the property and do an estimate on what it will take to maintain the site for a year, estimating the different tasks and how much time it will take, and the frequency with which they will have to be done. From that, process your costs, come up with a bid, and prepare a contract.
Even if you’ve taken all those steps, mistakes can occur. According to Kujawa, that happens when people bid the job, and not the specifications.
“A property manager or facility manager may have his or her own set of specifications. It calls for cutting the turf at a certain time or a certain height, and edging so many times. And you go there and look at the job, and it’s quite apparent that it’s not happening, for whatever reason. So you bid the job to what you think is necessary to maintain the property, and not the specifications. Well, if they decide to hold you to what you were supposed to bid, and you don’t do it, you could be in a world of hurt.”
But what happens if you make an honest mistake and you underestimate a job? What if your bid turns out to be unprofitable or you end up losing money? What do you do then?
“I’ve done that many times and it hurts,” says Gachina. “Generally, my philosophy is if I make an agreement, and it’s usually a one-year contract, I will honor it for that year. And then after the year, I’ll go back to the customer, and say ‘We’ve been losing money, and it’s my fault. I bid it wrong, but it’s been a year. I lived up to the agreement, but we either need an increase, or it may need to go out to bid. What do you want to do?’”
If your bid was way off base, and you can’t afford to write off the loss, you can approach the customer and explain the problem. Although you run the risk of losing the account, you also stand a good chance of creating an honest, open dialog with a customer who will appreciate your candor.
When setting up a contract, it’s important to take some measures to protect yourself against unforeseen expenses and rising costs. “The first preventative step is a good understanding that costs are never stagnant,” says Speers. “Customers have this general understanding, but need to know that in terms of their contract, price increases are one way to ensure that we can continually provide them the level of service they desire.”
“Negotiating multi-year contracts is one way to make both parties comfortable with what the future is going to bring. In other cases, costs increase in greater leaps and bounds, and for some contracts we will use escalation clauses that are tied to inflation indices. This often takes some of the emotion out of a price increase.”
Another common mistake companies make is stretching their resources too thin and taking on jobs they probably shouldn’t.
“I think you have to be careful when taking on something a little bigger than you’re used to. While it’s exciting, you have to be honest with yourself,” says Gachina. “You’ve got a good business, say eight guys, and this job is going to require five more men. Now you’re going to be growing the company by 50 percent overnight -- can you handle it? If you’re going to fail at it, don’t do it. If you think you can pull it off and that’s what you want to do, go for it.”
Since your reputation is everything, it’s imperative to maintain a good relationship within the real estate and property management community. People will talk about companies that mess up a lot more than they will about the good ones.
“I’m in the San Francisco Bay area,” says Gachina, “which is a huge market, but it’s also a very small village. It’s amazing how small a town this can be, as in any market. The real estate industry is very well connected among themselves. The contractors all know each other. The property management people all know each other. And word spreads. So you really have to protect your reputation. You can take a lifetime to build a reputation, and lose it in a day.”
A large portion of that reputation is established the minute you submit
a bid. People like doing business with people of a like mind. By presenting
yourself in a professional manner, and submitting a reasonable bid the
first time, you are setting the stage for a year-long relationship that
should not only prove to be profitable, but can also help lay the groundwork
for continued growth.