How to Price Tree Work by Man-Hours (the Formula That Scales to Any Trade)

Ask ten new tree service owners how they priced their last removal and eight of them will describe a feeling. It looked like a $700 tree. The customer seemed like she would pay $900. The guy down the road charges $1,200 so I said $1,000.

The two who do not describe a feeling describe a calculation, and those are the two who are still in business in five years. Andrew Anstrom and Austin McCoy of Tree Amigos said in their UpFlip interview that the discipline of pricing by man-hours against a target hourly rate was one of the things that let them grow from a truck and a trailer to about $2.6 million a year. Not because the math is hard. Because doing it every time removes the guessing, and guessing is where the money leaks.

This post is the math. It applies to tree work first because that is where I learned it, and then to landscaping, junk removal, pressure washing, and pretty much every trade where a crew shows up and works for a number of hours. At the end I will show you the part most pricing guides skip: how your man-hour rate tells you what a lead is worth, which tells you what you can pay Google for a click.

The formula

Job price = (crew size x hours on site) x rate per man-hour
          + equipment (chipper, grinder, crane, lift)
          + disposal (dump fees, hauling)
          + anything you subcontract

Crew size times hours is your man-hours. A three-person crew for four hours is twelve man-hours. Multiply by your rate. Add the costs that vary by job. That is the price.

The two inputs that matter are the hours estimate and the rate. Everything else is a receipt.

Estimating the hours

You cannot price by the man-hour until you can predict the hours, and you cannot predict the hours without having done the work. This is why every founder who has done this well spent time on someone else's crew first. If you are still there, start a job log today: species, height, access, crew size, hours, price. After fifty jobs you will have a better estimator than any app.

For a removal, the hours break into pieces:

A 40-foot pine in an open yard you can drop whole might be two people for two hours, four man-hours plus a dump run. The same tree between two houses with a fence and a pool behind it is three people for five hours, fifteen man-hours plus rigging and possibly a crane. Same tree, four times the price, and the customer will not understand why unless you can explain the hours.

When you are unsure, price the worst realistic case and tell the customer what would make it cheaper. "If I can drop it whole toward the driveway it is $600. If I have to piece it down over the shed it is $1,100. I will know when I set up." People accept ranges when they understand what moves the number.

Setting your target rate

Your rate per man-hour is not what feels fair and it is not what the company across town charges. It is your costs divided by the hours you can actually bill, with profit added.

Here is a real-shaped example for a two-person operation in year one. Numbers are round and yours will differ.

Now the billable hours. Two people working 48 weeks a year at 40 hours is 3,840 man-hours. You will not bill all of them. Rain, quoting, driving, repairs, and days with no work eat a lot. A realistic billable fraction for a new company is 55 to 65 percent. Call it 60 percent: 2,300 billable man-hours.

$133,000 divided by 2,300 is $58 per man-hour. That is your break-even rate. It covers everything including paying yourself, and leaves nothing for growth, a slow winter, or a blown transmission. Add 20 to 30 percent profit and your target rate is $70 to $75 per man-hour.

This is why "I charge $50 an hour" is a trap. At $50 a man-hour, the company above loses money every single day and the owner will not find out until tax season.

Two things people get wrong here:

The billable fraction is the number that surprises everyone. Owners assume 80 percent and then wonder why the bank account does not match the invoices. Track it for a month.

The owner's pay is a cost, not the profit. If you leave it out, your rate looks fine and you are working for free.

A worked quote

Sixty-foot oak, moderately tight access, one side over a garage, customer does not want the wood. Your estimate: three people, six hours.

Man-hours:     3 x 6 = 18
Labor:         18 x $75 = $1,350
Chipper:       $150 (rented, until you own one)
Dump fee:      $80
Rigging gear:  $0 (yours)
Price:         $1,580

Round it to $1,600 and you can say it in the driveway with a straight face, because you know exactly what is in it. If the customer says the company down the road quoted $1,100, you know one of three things is true: they are faster than you, they are cheaper than you, or they are going to lose money on it. Only the first one should worry you.

Lowering your margin on purpose to win a neighborhood

Tree Amigos talked about deliberately taking a thinner margin to get their first job on a new street. I want to be precise about what that means, because people hear it and start discounting everything.

You do not lower your rate. Your rate is your costs. You lower the profit portion, temporarily, on a specific job, for a specific reason: to put your crew and your chipper in a driveway on a street full of mature trees where nobody knows you yet. That first job buys you the four neighbors watching you work, the sign in the yard, and the referral conversation at the end.

Rules that keep it a tactic and not a habit:

• One job per street, ever. The second job on that street is full price because now they know you.
• Cap the discount. Ten percent is plenty. You are buying visibility, not the job.
• Only on streets where the next ten jobs are visible from the driveway. Big lots, old trees, an HOA that just got a letter about hazard limbs.
• Never below your break-even rate. A job that loses money does not become a good idea because it is a marketing expense.

Done right, this is cheaper than a mailer and far more effective. Done wrong, it is how a company ends up with a book of $50-an-hour customers who tell their friends you are the cheap guy.

The same formula in other trades

The structure does not change. Crew hours times rate, plus job costs. Only the rate and the job costs move.

These are ranges I see across US markets and they are not your number. Run the cost table above for your own company. The point is that a junk removal founder and a tree service founder are doing the same arithmetic with different inputs.

What your man-hour rate says about what a lead is worth

This is the part that connects pricing to marketing, and it is the reason I care about it.

Once you know your rate and your average job, you know your average profit per job. Once you know how many quotes turn into jobs, you know what a lead is worth. And once you know what a lead is worth, you know what you can afford to pay for one, whether that is a referral bonus, a mailer, or a click on Google.

Take the tree service above. Average job $900, of which roughly 25 percent is profit at the target rate, so $225 profit per job. If one quote in three closes, a quote is worth $75 in profit. Not every lead becomes a quote; say seven in ten do. A lead is worth about $52 in profit.

That is your ceiling. You can pay up to about $52 to acquire a lead and break even on that job, and since a good customer calls back for years, most owners are happy to pay well under that, say $25 to $35 per lead, to keep the schedule full.

Now look at what Google charges. Here are the average click costs and typical lead values for a few trades, from the benchmark data we use inside VibeAds:

If a tree service page turns one click in eight into a phone call, a lead costs about $80 in clicks. That is above the $52 ceiling from a cold start, which tells you two things. First, the campaign has to be tight: call-only ads, your service area only, negative keywords for "free," "diy," and "jobs." Second, the page has to convert better than one in eight, which is exactly what a call-first landing page with a tracking number does.

Companies that pull their cost per lead down to $40 in tree service are not paying less per click. They are converting more clicks into calls and refusing the clicks that never had a chance.

The budget calculator does this arithmetic for your trade and your budget in about ten seconds. Put in your average job and it will show you the cost per lead you need to hit.

Pricing mistakes that kill new companies

I see the same handful in the accounts of companies that struggle, regardless of trade:

Pricing the tree, not the hours. Two trees that look identical can be a four-hour and a fifteen-hour job depending on what is under them.

Forgetting drive time and dump time. A job across the county costs you an extra hour and a half of man-hours you did not bill.

Leaving owner pay out of the rate. You are the most expensive employee and the one most likely to work for free.

Matching the low bidder. The low bidder is often about to go out of business. Let them.

Never raising the rate. Costs went up. Insurance went up. If your rate has been the same for two years you took a pay cut.

Discounting without a rule. If every customer who pushes back gets ten percent off, your real rate is ten percent lower than you think.

What to do this week

1. Fill in the cost table for your company. Be honest about owner pay and insurance.
2. Estimate your billable fraction. If you have not tracked it, assume 60 percent.
3. Compute your break-even rate and your target rate.
4. Re-quote your last five jobs with the formula. If the numbers are far apart from what you charged, you now know where the money went.
5. Work out your lead value ceiling from your average job and close rate. Write it on the wall before you spend a dollar on marketing.

If you are earlier than this, still deciding whether to start the business at all, the plan I would follow is in How to Start a Tree Service Business With One Truck and $1,000 in Gear, and the pricing worksheet from this post is day two of the free launch plan below.

How much should a tree service charge per hour?

Most small tree services need to bill between $65 and $110 per man-hour to cover labor, insurance, equipment, and a reasonable profit, with the exact figure depending on local wages, insurance costs, and how many hours the crew can actually bill. A two-person operation with $133,000 in annual costs and 2,300 billable man-hours breaks even at about $58 per man-hour and should target $70 to $75. Charging a flat $50 an hour without doing this math is one of the most common reasons new tree services fail.

How do you calculate the price of a tree removal?

Estimate the crew size and hours the job will take, multiply to get man-hours, multiply by your target rate per man-hour, then add equipment rental, disposal, and any subcontracted work such as a crane. A 60-foot oak with moderate access might be 18 man-hours at $75 plus $230 in chipper and dump costs, roughly $1,600. The hours estimate is the hard part, which is why experience on a crew matters more than any pricing app.

What is a lead worth to a tree service?

Average job value times profit margin times close rate, adjusted for the share of leads that become quotes. For a company averaging $900 jobs at 25 percent profit, closing one quote in three, with seven in ten leads becoming quotes, a lead is worth about $52 in profit. That number is the most you can pay to acquire a lead and break even on the first job, and it should set your ceiling for referral bonuses, mailers, and Google Ads cost per lead.