Many landscape lighters do not know their costs and are broke !

21 Dec Many landscape lighters do not know their costs and are broke !

By Mike Gambino

Many landscape lighting installers do not understand their overhead and arbitrarily price jobs by the number of fixtures rather than the time it takes to do the job. To make matters worse landscape lighters without an extensive number of systems completed do not have an accurate estimate of how long it will take to complete a lighting system due to lack of experience. Too many in the industry merely price the job so much per fixture, and to price at more than $400 per fixture seems unbelievable to them. But such a price is not out of line for a complicated job with lots of details.

Too many landscape lighters price jobs so much a fixture and think the job will be profitable. The problem is that a per-fixture price is merely an average. It’s the total number of fixtures divided by the selling price for the job. Another problem is that not all fixtures cost the same, neither do they take the same amount of time to assemble and install. In addition some lamp (bulb) types cost more than others. The growth of the usage of subcontractors and non specialized amateur operators in the residential landscape lighting trade has contributed to this problem. In addition to using incorrect averages, many sub crews just look at income per day and have no idea of what the real cost of installation is. They also may not be paying overtime, nor have proper insurance coverage and may be cheating workers’ compensation. This is not to mention the lack of understanding and awareness of governing national electrical and local city codes for technical electrical installations like landscape lighting.

This type of pricing has no contingency for extra time needed for tough site conditions, difficult soils, obstacles that must be navigated under and around and some money set aside for call backs or unpaid service/warranty visits if they arise. Another factor is contractors think that since their prices are per fixture and their sub or piece rates are set, they can’t lose money. This is just not true. Suppose a contractor’s overhead was $800 a day, and that is what it took to the keep the doors open. To illustrate the point that one can still lose money with set per-fixture prices, I created some imaginary numbers that are easy to follow for this example. Suppose material cost is $200 per fixture (including all the components required to complete the installation), installation is $50 and gross profit to cover overhead and profit is another $50, making the overall per fixture price $300. Again, this is just to make the math easy. If you completed a 20-fixture job in one day, there would be a $1,000 gross profit ($50 x 20) The contractor would have made $200 that day ($1,000 – $800). Hardly enough to grow the business let alone make it possible for the contractor to stand behind their work. If the job went to 25 fixtures, there would be a gross profit of $1,250 per day ($50 x 25) and $450 profit for the day. Suppose now the lighting system goes to 30 fixtures. The total gross profit is $1,500 ($50 x 30), but now you have to divide that by two days because now the job is two days, not one. So at $750 gross profit for the day, $50 is lost because there was not enough gross profit to cover the $800-a-day overhead costs.

Some costs are fixed but most overhead is a function of time; it’s not calculated per fixture. We don’t pay our rent, truck payments and bookkeeper by the fixture but rather by the day, week or month. Overhead costs should be estimated and related to time. Profit should be related to risk. If a job is simple or complicated, the cost to send a crew out for the day is the same. If the job is risky, more profit should be added to the job.   Contractors have a tendency to bid using unit costs that are easy to estimate, such as landscape lighter by the fixture or mason with concrete by the yard. Many landscapers double the cost of a tree. But just because something is easy to use does not make it accurate.

Unfortunately most don’t know what they will need to cover costs for the period of time the job will take and how much of their capacity it consumes. Pricing jobs correctly eliminates the winners from the losers.

Wake up Contractors as you’ll work just as hard — if not harder — on the jobs that lose money.

So how does this affect the landscape lighting buyer? You may be thinking right now that who cares it’s the contractor’s problem to know how to price his own work correctly.   Well that may be true however their problem will become your problem when things start going sideways during or after the installation or when they can’t afford to finish the installation because they ran out of money and leave you in the lurch.

When a price just seems too good to be true there is usually a real good valid reason for it.

This landscape lighting blog is published by Mike Gambino of Gambino landscape lighting inc. all rights reserved. Mike is a professional landscape lighting system designer/ builder and has been designing, installing and maintaining landscape lighting systems for more than 20 years. Mike resides in the Los Angeles area with his wife and 2 sons. To visit his website go to www.gambinolighting.com . To inquire about hiring Mike please  click here . Blog articles may be published with permission on other websites without editing or removing links.