Irrigation Notebook: April 1999, Improve Irrigation Earnings

Installing an irrigation system is one thing, but making it profitable for the contractor is another. Knowing how to make the installation a win-win situation in terms of effectiveness and profitability for everyone involved, from the contractor to the client, is a must. A few key criteria that contractors should be aware of during installation to ensure its profitability includes efficient crew sizes, pricing structure and maintaining those necessary profit margins.

PRICING PRIORITIES. The pricing of any job is a key to making it profitable. Different contractors may price installation based on several factors, including material, labor and even the actual site as well.

"We usually price by head," stated Michael Schmitt, Water Wise Systems, the irrigation division of Environmental Industries, Calabasas, Calif. "This can be based on the type of head and how long it will take to install it. For example, we may charge based on the number of heads, valves, backflows and pumps. A smaller installation of about 10 to 12 valves may fall into the price range of $10,000 to $15,000 or even less."

Joe Cortopassi, vice president/general manager, Green Turf Irrigation Company, Maryland Heights, Mo., countered with a material and labor-based pricing method. "We see too many contractors only price by heads and then they don't take into account other variables such as soil conditions and hand digging for example. However, pricing by heads only can be useful in estimating."

For Mark Wagner, pricing depends on the site. "We usually price by how long the installation will take," noted Wagner, president, Wagner's Landscaping, Aston, Pa. "If the installation is on a hill, it will take longer than if it's on a flat site."

After pricing is set, a crew needs to be assembled. Deciding how many crew members to put on an installation can vary from job to job depending on the job's size and all of the components involved, noted Schmitt.

"First, we get a bid, then we give an estimate on the job," Schmitt added. "Once we are done with the pricing, we break it into hours required to complete the job. Once we know this, we can divide it up by hours to come up with the right amount of crew members for the job."

Cortopassi agreed that price depends on the job size. "For an average residence, you can have three to four crew members on a job. Any more than that and the crew would probably be inefficient. A large job – either residential or commercial – can maybe use five or six workers. However, this many employees may not always be available to dedicate to one job."

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"We have two- or three-man crews normally," Wagner explained. "This size works well for less than 1-acre jobs."

Even beyond having the right size crew, it is important to have properly trained people. "Good irrigation workers are often hard to come by," Schmitt asserted. "You can always get people to just dig holes, but sizing everything properly and building the components correctly is much more difficult."

A HIGH RETURN. Contractors seemed to agree on the profit margin to expect from irrigation installation services. According to Wagner, contractors should look for 30 percent in profit earnings from the installations.

"You would like your gross to be above 30 percent," Cortopassi recommended. "Net profits may be around 25 percent, but you would like to see them around 28 percent. On smaller jobs, the margins are finer."

"I certainly think it's safe to say that irrigation installation jobs can yield contractors a higher profitability than other services," Schmitt commented.

Wagner agreed that irrigation should be among a contractor's most profitable services, adding that his irrigation service has greater profitability by about 50 percent over the other services he offers.

Because of the earning potential with irrigation, it is Cortopassi's main line of business. "We offer drainage, lighting, some landscaping and other services, but irrigation is our main line of work. We also have an irrigation service department, which gives us the ability to do installations and then have the customers for life."