If you want to build a profitable landscape business, this is the number one thing to keep an eye on. It will make or break your business.
If I could only watch one number in my business and I had to operate everything else about my business by gut feeling, but I could only have one metric that I could look at constantly to course correct and make sure we’re moving in that right direction, it would be my per man hour rate earned per man per day. You might think about that as job costing.
For every single job, I would want to know, did we achieve our per man hour rate? This does require that you first know how much you need to make per man hour. Your per man hour rate’s going to vary by service. Maybe for lawn mowing, you need to make 45 a man hour. For bed and bush work, you need to make 50 a man hour. For irrigation, you need to make 75 a man hour. I’m not saying those are the numbers, but let’s say that’s the scenario.
You first know what it is. Then for every single job, every day, I want to know, did we achieve 45 a man hour when we were mowing. For ABC Acme Corporation, did I make at least 75 per man hour. For the irrigation work we did, meaning, depending on how many people we had on the property, did each person make at least $75 an hour? If I had three people mowing, did each person make at least $45 per man hour? Then, when I find that I have problems, I can course correct.
The logic behind this being the most important number is that if you get the most basic part of your company correct, meaning the jobs, you’re selling the work at the right price and then you’re executing the work within budget, you’re earning 45 a man hour, or 75 a man hour, whatever that rate is, if you’re getting that right for every job.
When you’re wrong, meaning, you’re not earning it, you go back and raise prices or you quit doing that job. You make adjustments to how you’re selling the work so that you’re selling at the right price, that you’re estimating correctly. If you do that, your company will be profitable.
Generally, now clearly, you can screw it up by buying too much equipment, having too many fixed overhead expenses. There’s clearly ways you can screw it up, but generally, if you get it right at the most basic level, at the job level, you will be successful. You’ll make it. Again, there are exceptions. There are other factors, but that is to me the most important thing.
Now, the way you do this, it’s really simple. For every single job, you track the start and stop time of every job, who is working on the job, and how many people are on the job. You have to do a little bit of number crunching. You have to divide that time by the rate for the job and you have to know how much it paid and you got to take materials out of it. You got to figure out how to labor level. Are we making the target per man hour rate?
This is a reason why I’m a big fan of mobiles because a lot of companies are trying to write in using the good software. A lot of companies try to write this on paper and doesn’t get recorded, they never use it, so they don’t have this data available to them and then they’re flying blind. The companies that are tracking it, measuring it, watching it daily, and using that metric to guide their companies, naturally tend to be the more profitable ones.
If you can only have one number everyday, track your start time and your end time at every job. How long were you on the job site? How many people worked the job? Then do the math to figure out what you made per man hour. Based on what your goals are, or what you need to be making, you’ll know for every job, everyday. Are you hitting your goals? Are you missing your goals? If you’re missing them, make the corrections.
