Pricing for profit: a landscape for success

Landscapers and professionals in the green industry excel at delivering top-notch services. Yet, one crucial aspect often overlooked is how much to charge for these services. Our landscape company, K&D, was once in the same boat. We had a solid reputation for quality work but we didn't truly understand our numbers. As a result, we consistently undervalued and undercharged for our services.

That all changed in 2020 when we introduced new software and welcomed a talented consultant onto our team. With this new pricing strategy, K&D's profits have soared. We've witnessed a steady increase in both gross and net profits every year since. In 2020, our gross profit margin stood at 42%, and we're on track for 53% in 2023. Pricing has played a significant role in our profit growth as we step into 2024 with record profits and revenues.

Pricing is a sensitive topic with far-reaching implications. It affects your sales close rate, customer retention, overall profitability and more. To take the emotion out of price adjustments, I prefer a data-driven approach. This method entails examining the raw numbers and crafting a new pricing strategy based on the figures necessary to meet your 2024 profit goals. It can be uncomfortable, but the numbers don't lie. Viewing the results objectively helps you identify the necessary percentage increases. I'd love to share the full recipe for obtaining these data-driven results, but there isn't enough room in this column. Luckily, our industry offers numerous resources to help you determine your data-driven pricing for the upcoming year.

Once you've grasped the numbers, it's time to engage in a conversation with your leadership team or coach about the "artistic" side of price increases. My golden rule here is that prices can only go up during this phase: “We never decrease them unless a major market correction, recession, or black swan event occurs.” Various factors come into play during this discussion: backlog, market strength, client decision criteria, and employee pay — particularly in relation to the local cost of living. Once the artistic discussion is complete, it's time for the next crucial step: rollout.

The rollout is paramount because it ensures that the "why" behind the "what" is clear and that your team aligns with the decision. You need to construct a narrative or elevator pitch explaining why the pricing is increasing by a certain amount. Customers should understand that it's not an arbitrary number; it's a result of your company's current financial health and projections. Your internal team should be aware that these price increases enable raises, cost recovery and maintain your strong competitive position in the market. During the height of the pandemic, the media told our story, but as inflation eases, it's vital that you convey a cohesive and robust approach to your decision.

Let’s address a common objection to price increases: "We'll lose customers if we raise prices." My response is simple. When you need eye surgery, do you choose your surgeon solely based on price, or do you look for the best doctor in the market with the best reputation, regardless of the cost? We may not be performing eye surgery, but we're providing a service, and most customers don't base their decision solely on price. If you can effectively communicate your value during the sales process, your pricing shouldn't hold you back from attracting the right customer base. You might lose some clients, but did you really want them in the first place? Or would you prefer a clientele that values quality and excellence?

I hope this article has inspired you to review your pricing and gather your team for an internal review of where you need to be in 2024 to meet your profit targets. If you find yourself with more money than expected, consider giving your employees a raise. They'll appreciate it, and it's sure to enhance the client experience. Here's to a successful season of increases!

Raise the bar is a monthly column by Justin White, CEO of K&D Landscaping, written to help improve professionalism in the green industry. He can be reached at jwhite@giemedia.com.