Tips on estimating to boost profits

Mistakes in estimating or pricing jobs can negatively impact profit. So, a few green industry consultants offered their advice on how to improve on estimating and pricing for better profits:

Mike Callahan, consultant and president of Callahan’s Lawn Care & Property Maintenance: Track, track, track. Every time we start and stop a job, we write down the time either on an app or on paper. If we don’t track it, we can’t report on it or improve upon it. Someone told me the secret of growing a business and being profitable is to track everything. Once you know your numbers, it’s predictable and there are averages. Then business becomes easy – it’s a fun math game. If I want to add 100 profitable customers, I’ll look at my numbers from the past month. It might mean that I put out 10,000 fliers, then get 1,000 calls and then win 100-150 new clients.

I made the mistake 12-15 years ago when I hit a low spot and didn’t track my numbers for 12 months. I was running the numbers of my business based on my bank account balance. And this is something we find a lot of contractors do. Our systems and processes were so strong at this point that our cash flow came in before our bills. About nine months after the season was done, I ran the numbers that December only to find we were $75,000 in the hole after those months. If I had been tracking regularly, we would have caught that earlier to turn it around. Those short-term objectives are the best way to go.

Just track every day. Also, you can’t use emotions when estimating or pricing, or you’ll be wrong. When you have hard numbers, they don’t lie. Business needs to be non-emotional.

Adam Linnemann, owner of the Green Experience: Three things on estimating and pricing: 1) screen potential clients to make sure they are a good fit geographically and financially. 2) Don’t be afraid to tell a client no – not every client request is a good fit for your company. 3) Know your numbers – make sure you are charging the proper amount to cover all your expenses, including the cost of goods, direct and indirect labor, and overhead.

Judy Guido, owner of Guido & Associates: Take a look at estimating with somebody else. Also, workflow it to make sure when you are estimating that the most efficient practices are used. Then, look at the type of technology and equipment you are using for a particular job you are estimating – technology can cut out a lot of laborers or labor hours. Assess the type of equipment you are using. Make sure you put everyone’s time in there when you are estimating – even though your maintenance crew may only be three laborers with a truck, account for a manager or someone else who is expected to go to that job. Identify all the tasks and prices attached. Then, have someone take a second look at these numbers, or set a dollar amount where a second set of eyes is needed to double check numbers.