Hourly Rate vs Quoting for lawns and gardens. 29/07/2020

Hourly Rate vs Quoting for lawns and gardens. 29/07/2020

This argument is like what came first? The chicken or the egg.

There are good points for both charging an hourly rate and quoting an overall price for a job.

Let's take a look at some pros and cons for both.

Pros for hourly rate:

• Less risk
• Accurate estimate of "regular" income in line with hours worked
• Easier to quote jobs
• If a job is taking longer than expected you are still getting paid
• Easier to schedule

Cons for hourly rate:

• You are "on the clock" and customers will make sure you are working hard
• Limited earning potential, capped at your hourly rate
• Hard for customers to accept a high hourly rate
• You are earning the same amount or less when you get more efficient with experience and upgraded equipment (until you raise prices)

Pros for quoting:

• Higher earning potential
• You are not "on the clock"
• You become more efficient
• You earn more as you become more efficient through experience and upgrading equipment
• As long as you show value you can quote high

Cons for quoting:

• Risks in under quoting
• Need to be more thorough in quoting and spend more time meeting the customers expectations
• You may lose out on some work where a customer wants a set number of hours per week
• Harder to schedule regular work

Personally, we are all for quoting jobs and we teach this in our training courses. 

Although there are benefits in charging by the hour and sometimes a mix of both work well.

But so you don't limit your earning potential and for you to get a reward for improving your business and its systems we recommend quoting an exact price.

That way both you and the customer know the total end cost no matter how long it takes. Just be sure you are very clear with what is and isn't included in your quote.

Mindset plays a big part here. For example: 

In both cases you must show the customer the value they will receive from your work.

Quoting - you look at the job, estimate it will take you two hours and your target hourly rate is around $85 p/h (which you do not disclose to your customer). You explain the value and give a quote of $170.

If you have really shown the great value they will get and guaranteed the excellent job you will do, then the customer will accept 7,8 or 9 times out of 10. 

Hourly rate - you go through the same process as above but give them an hourly rate of $85 and tell them it will take 2 hours. Now even though this is the exact same price, most customers will scoff at such a high hourly rate and will not accept it. You will likely get 1,2 or 3 people accept out of 10. This is why people who charge by the hour bring their prices down to meet customer expectations.

Keep in mind that this example is subjective, but you get the idea.

Diving in a bit deeper. 

If you had been charging by the hour for the first year of your business and you decide to upgrade some of your equipment. Now the same jobs you have been doing for a year take you 20% less time than before.

You are now stuck in a situation where you have just spent money on better tools and you are doing jobs quicker, therefore making less money or having to work longer to make it up.

If you had quoted those jobs from the start and then upgraded your gear saving you 20% in time, you have just automatically raised your hourly rate without having any pressure to explain it to your customers.

Again, this is subjective but you should be starting to see the bigger picture.

Hopefully this helps you to understand and charge what you are really worth.

If you want to be 2 steps ahead of the competition, then check out our online training courses and members club.