Getting The Rates
“How much should I charge my customers? How much can I charge my customers? What is the going rate for a gardener? How can I increase my charges? Can I raise my rates every year? What percentage can I raise my rates?”
These, and so many similar questions are asked by virtually every contractor, especially new and smaller firms. Most of these businesses operate in the world of general gardening, mainly carrying out maintenance on a regular basis supplemented with small construction or landscape works. Basically, this is the format for every firm in the early days. You may even find some design work creeping in, with a few extra sales e.g washing line, barbecue or low voltage lighting.
Let’s begin with the basics. How much do you NEED to earn? Only you can answer that question. Only you know how much you need to contribute to the family budget.
Certainly, before you chose to become self employed, earning your living as a gardener, knowing the vagaries of the weather and seasons, particularly in your region, you should have written down your financial requirements, and arrived at a minimum figure you have to earn each week/month.
Annual rechargeable hours.
You will have learned very quickly, that you will not be able to work fifty two weeks a year, indeed you should base your annual income needs on working no more than forty five weeks per annum. By the time you reduce the year by wet weather, days the van won’t start, Bank holidays and family holidays, plus sickness and the unexpected necessary down time, you will only work for some 1,800 hours per year. This is 45 weeks x 40 hours of rechargeable time. Time you are able to claim monies from your clients, not time spent away from home, especially if you have to split your day between more than one client, with some distance between the sites.
Let us assume that you need £15,000.00 p.a. to pay the rent/mortgage, school expenses, electricity, heating bills, food, clothes etc; the basics for your family, nothing to do with running the business.
Add to that sum, the cost of running your transport, fuel, tyres, tax and insurance, rental of yard space, works telephone, advertising/printing; every possible item that you need to operate as a contractor.
Add again, an annual sum, say £2,000.00 to cover the cost of buying and replacing/maintaining tools – especially powered equipment.
Your annual financial needs are now more likely to work out at nearer £25,000.00. Add again, a percentage for covering legal necessities such as National Insurance, Public Liability and Employers Insurance, personal tax on your income, and before you know it – you are now facing a £30,000 annual income requirement. NOT TURNOVER – actual money gained from your 1,800 hours rechargeable income each year.
Arriving at your minimum hourly rate.
Assuming a realistic figure of £30,000.00, divided by 1,800, we arrive at the sum of £16.66.
To put this sum into context, I frequently hear of gardeners trying to raise their rates to £15.00, when their competitors are charging only £10.00 or £12.00!
How can they survive? The simple answer is that they cannot, and will not, so why try to compete with them on the road to ruin? They may go on for years, loading more and more onto their credit cards, until matters catch up with them, and they go under.
You simply cannot earn only £15.00 per hour when your outgoings are £16.66.
Why not simply give your customers money for employing you?!
Increasing your charges.
With a marketing campaign, which will be covered in several different ways in separate features, you will begin to set your firm apart from those whom are doomed to failure or stagnation.
Do not forget, you must increase your rates to keep pace with inflation, otherwise you will fall behind, and the differentials between income and need will erode, taking you back into deficit. Assuming an official annual inflation rate of 2.5%, the £16.66 becomes £17.07 – which just goes to prove how important it is to recognise the necessity of annual increases.
Annual inflation is something that every client understands. They may not like it – but they understand it, and the reasons for the increase. There is another factor that creeps into play: as you become more and more skilled, and therefore more valuable to your clients, you should expect to raise your rates to take this skills level increase into your equations.
When your clients employ a mechanic, or an electrician, or other specialist tradesperson, with years of training and a specific range of tools, they expect to pay at least £35.00 – £60.00 per hour, and do so, without raising an eyebrow!
Where’s the difference between a skilled gardener, with years of practice, a van full of specialised and expensive equipment – perhaps together with a fist full of certificates for Spraying, Chainsaw use etc; and a motor mechanic or the man that mends the washing machine?
A simple answer may be that clients only use a mechanic once a year, or an electrician every five years. That would be the response of a client to such a statement, but they would be wrong. All you have to sell is your time!
The more skilled you become, the greater your rewards should be. It would be unrealistic however, to expect your existing customers to see things that way. Therefore, you need to gradually change your customers, shedding those that pay the least, on a regular basis. This is to say, you should always be seeking to change your lowest paying client with another, paying higher and ever higher rates.
I realise that this is a lot easier to say than do. We all become attached to our regular clients, perhaps watching their children grow up, their pets become your pets, and before you know it, you are part of the family. This is fine, if you are earning enough to cover your outgoings and you are happy to chug along being part of the garden furniture. But if you are losing money – or raising the temperature of your credit cards – you will not be around for ever.