How Landscapers Should Price, Profit & Grow Their Business
Running a landscaping business can create the illusion that growth is simple. Sell more projects, hire more employees, buy another truck, and keep pushing revenue higher. The problem is that more revenue does not automatically create a healthier business. A landscaping company can generate $1 million, $2 million, or even more per year while the owner struggles to pay themselves, cash gets tight every winter, and margins continue shrinking. That is why understanding your financial numbers matters far beyond preparing tax returns or keeping your books clean. Your numbers should help you decide what to charge, when to hire, how much cash to keep, when to increase marketing, and whether certain services are worth offering at all. In a recent episode of the Landscaper Marketing Show, we sat down with Nick Cobos, founder and CEO of
Saga Accounting, to discuss these exact issues. His company works specifically with landscaping and outdoor living businesses, which gives him a close look at the financial mistakes contractors make as they grow. One issue came up repeatedly throughout the conversation: many landscaping businesses are simply underpriced. If you want sustainable growth, your pricing, cash reserves, margins, marketing, and production capacity all need to work together.
Why Your Landscaping Prices May Be Too Low
One of the most common financial issues Nick sees with landscaping companies is underpricing. Many contractors set their prices by looking at what competitors charge and then pricing themselves slightly higher or lower. That seems reasonable, but there is a major problem with this approach because you have no idea whether your competitor understands their own costs. They could be making excellent margins, barely breaking even, or actively losing money on the exact service you are copying. A better indicator is your own sales performance, particularly your close rate on estimates. Nick suggested that a close rate around 40 percent can often indicate that pricing is in a healthy range, although every company and market will vary. If you are closing 80 or 90 percent of every estimate you present, that may feel impressive, but it could also mean your prices are leaving a significant amount of profit behind. Contractors tend to remember the prospects who say their quote is too expensive, yet they never hear from customers who would have happily paid thousands of dollars more. That creates a distorted picture of what the market is actually willing to pay. Your goal should not be to get every homeowner to say yes, your goal should be to produce enough profitable projects to build the business you want.
Track Profitability by Service, Not Just Across the Company
Looking at the profitability of the entire company can hide serious problems inside individual service lines. Nick shared an example of a landscaping company where roughly half of its revenue came from installation projects and the other half came from lawn care and maintenance. When the numbers were separated, the installation side of the company was producing margins around 27 to 28 percent, while the lawn care operation was losing roughly 7 percent. From the outside, the company appeared busy and productive because crews were working and revenue was coming through the door. Financially, however, part of the business was effectively paying customers for the privilege of servicing their properties. Selling more of an unprofitable service does not solve the problem, it accelerates it. This is why every major service line should have its own numbers attached to it, including revenue, direct labor, materials, equipment costs, overhead allocation, and resulting profit. You may discover that the service consuming the most employees, trucks, scheduling time, and administrative effort is producing the least profit. You may also discover that a service you previously considered secondary is generating your strongest margins. Those findings can affect everything from your advertising strategy to your hiring plans because you can intentionally pursue more of the work that actually contributes to the company.
Stop Selling Labor and Materials, Start Pricing the Result
Landscaping contractors often make the sales process harder by breaking every estimate into detailed labor and material costs. Nick recommended thinking differently about how installation work is presented to homeowners. Your internal numbers absolutely need to account for labor, materials, equipment, subcontractors, overhead, and the profit you intend to make. The homeowner does not necessarily need every one of those numbers separated on the proposal because that can invite them to begin shopping individual components instead of evaluating the completed project. A customer might see the material line, compare it with a retail price online, and decide the markup appears excessive without understanding freight, waste, warranty responsibility, procurement, installation, and the financial risk your company assumes. Instead, the proposal can focus on the finished result and clearly explain what the homeowner receives for the total investment. On the back end, your company should still work backward from the margin it needs to produce and price the project accordingly. If you believe you are targeting a 20 or 25 percent profit margin on your projects but your company consistently finishes the year around 10 or 11 percent, something inside your calculations or operations is wrong. The answer might be pricing, job costing, overtime, material overruns, poor estimating, inefficient production, or several of those factors at once. The important point is that the numbers need to expose the difference between what you think your jobs produce and what they actually produce.
Build Cash Reserves Before Chasing More Growth
Growth costs money, and landscaping companies often discover this after they have already committed to expanding. More projects can require another truck, equipment, additional employees, increased payroll, materials, deposits, marketing, administrative help, and working capital long before all the project revenue reaches your bank account. Nick recommended that landscaping businesses work toward holding at least three months of operating expenses in cash before becoming aggressive about growth. If your company requires $50,000 per month to operate, that would mean working toward approximately $150,000 in reserves. Over time, a stronger target may be closer to six months, particularly for companies dealing with significant seasonality. Until that reserve exists, owners may need to limit how much profit they distribute personally and keep more capital inside the company. The logic becomes especially important for northern landscaping companies that experience a predictable winter slowdown and still carry fixed expenses when production declines. Having strong cash reserves lets you make business decisions based on opportunity instead of desperation. It can also prevent the dangerous cycle where a contractor takes a deposit from one project and needs that money to finish a previous project because there is not enough working capital available. A landscaping company with healthy cash reserves has more room to absorb setbacks, make smart investments, maintain good employees, and enter the next season from a position of financial strength.
Growth Is Not Always the Right Answer
Landscaping owners feel enormous pressure to constantly increase revenue, but growth should not automatically be the next goal. Nick described situations where an owner wants another crew, another truck, or another large jump in sales while barely taking money home personally. In that situation, expanding the company could actually make the owner's financial position worse because every new layer of the operation introduces additional costs and complexity. There is another option that owners frequently overlook: raise prices, accept fewer projects, and make more money from the work you already have. If demand is strong and your schedule is full, higher prices can naturally reduce volume while increasing the contribution from every project your team completes. That can allow you to generate similar revenue, or sometimes even greater profit, while completing fewer projects and putting less pressure on your crews. We have seen a similar effect on the marketing side when a contractor generates more leads than the company can realistically service. Instead of continuing to chase higher volume, the company can tighten qualification, become more selective about projects, and increase prices until demand matches its production capacity. Nick's recommendation was straightforward: if the cost of expansion would leave the company with less than roughly three months of operating cash, focus on profitability and cash reserves before expanding. Revenue growth is useful when the economics underneath it are strong, but growth for the sake of seeing a larger top-line number can create a bigger company that leaves the owner with less money.
How Marketing Should Fit Into Your Financial Plan
Marketing should be treated as an investment tied directly to profitable production capacity, rather than an arbitrary percentage of revenue. Nick's view was that if your marketing consistently generates an acceptable return, your crews have room to complete the additional work, and the company has enough cash to finance that growth, there is little reason to stop spending simply because you reached a predetermined percentage. The opposite is also true because aggressively increasing marketing when your operation cannot handle more work can waste money and damage your reputation. A company that suddenly receives dozens of additional opportunities but cannot answer leads quickly, schedule estimates, staff the projects, purchase materials, or complete work on time has created another problem instead of solving one. This is why we like working backward from business goals rather than simply deciding to spend a random amount each month. If you know your average project value, lead cost, booking rate, close rate, gross margin, and desired revenue increase, you can estimate the amount of marketing required to support that target. You can then compare that number against the company's operational and financial capacity before increasing the budget. Marketing can also give you more pricing power because a strong pipeline removes some of the desperation that causes contractors to discount projects simply because they need work. When you consistently have qualified opportunities coming through the door, you can become more selective about which projects you pursue and maintain stronger pricing discipline. The strongest landscaping companies connect marketing decisions with sales capacity, production capacity, cash reserves, and margin requirements instead of managing each department independently.
How Much Should a Landscaping Business Owner Pay Themselves?
There is no universal salary or distribution number that every landscaping owner should follow because the right amount depends on company structure, profitability, debt, cash reserves, and personal circumstances. Nick described a process where business profit flows through several priorities rather than automatically going into the owner's personal bank account. Taxes should be accounted for first so the company is not surprised when those obligations become due. After taxes, remaining profit can generally be divided between owner distributions, debt reduction, and retained earnings inside the company. Retained earnings essentially become the company's emergency reserve and provide protection during slower periods or unexpected situations. Nick recommended that owners who have not yet built roughly three months of operating cash consider taking only what they reasonably need while strengthening that reserve. Once the business reaches three months of reserves, the owner has more flexibility to increase distributions while continuing to work toward an even stronger cash position. The goal is not to keep every dollar trapped inside the company forever because the business ultimately needs to create financial benefit for the owner. The goal is to avoid taking so much money out during good months that the company becomes financially fragile during slower months. A healthy landscaping business should eventually be capable of paying its owner well while also maintaining enough cash to meet its obligations and fund future opportunities.
Final Thoughts
The financial side of a landscaping business does not need to become complicated, but the important numbers cannot be ignored. You should know which services make money, what your margins actually are, how frequently your estimates close, how much operating cash the business holds, and how much additional work your company can realistically handle. Pricing deserves particular attention because small increases can create significant changes in profit without requiring additional employees, equipment, leads, or production hours. If demand is high and your close rate remains unusually strong, increasing prices may be more valuable than chasing another large increase in revenue. At the same time, profitability gives your marketing more room to work because higher-margin projects allow you to invest more confidently in customer acquisition. Strong cash reserves then give the company enough stability to handle the additional work without constantly worrying about payroll, material purchases, or the next slow season. The result is a business where revenue, marketing, pricing, production, and cash flow support each other instead of competing with each other. The goal should never be to build the busiest landscaping company in your market simply for the sake of being busy. The goal is to build a financially healthy company that generates strong profit, pays its owner properly, protects its employees, and has enough resources to continue growing when the right opportunities appear.
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