LandOpt, Pittsburgh, Pennsylvania, suggested that contractors consider a number of rate increases due to higher operating costs, inflation and economic uncertainty in its annual recommendations on contractor rates for the year 2023.
“As with this year, 2023 will be laced with a variety of economic challenges, including labor and materials inflation that top the list,” says LandOpt President Jim Westover. “Those will be compounded by higher interest rates and the threat of a recession.”
LandOpt says contractors should “consider a minimum 4.4% rate increase to offset higher operating costs, an 8.8% hike to return margins to pre-inflationary levels, and a 10% or greater boost when possible as a hedge against unpredictable cost increases.”
The rate adjustment suggestions are determined by a number of factors, Westover says.
“The metrics LandOpt used to determine the rate increases were inflation rate, material costs year-over-year, gasoline prices and labor cost projections. We looked at the aggregated profit and loss statements from our network to determine what price increases would be needed to get margins back to where they have been historically, assuming the number of jobs remained consistent.”
When it comes to the irrigation industry, Westover says an even larger increase might be necessary due to the size of the industry.
“We believe there is a bigger opportunity to raise prices on the irrigation side since it is a niche market. According to the recently released NALP Compensation and Benefits report, only 6.5% of a landscaping companies’ revenue comes from irrigation installation, repair and maintenance,” he says.
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