The board is full a month out, estimate requests keep landing, and somebody in the office finally says it out loud: we need another crew.

Plenty of companies are in that spot. Sixty-seven of the 109 owners running $1M+ tree companies in our operator survey picked hiring as their biggest constraint. No other answer came close. (They could pick more than one.)

A full board and a high close rate are two numbers your customers hand you every week. Read together, they say people want your work badly enough to wait for it at the price you charge today. It is easy to read that as a staffing problem and post a job. Some of the time it is a pricing problem, and a pricing problem doesn't need a climber you can't find.

Edward Morrow, an ISA Certified Arborist and accountant who writes for TCI Magazine, named the warning sign in April: an "extremely high close rate could indicate that prices are too low, while a low close rate may signal pricing or sales issues."

Price also moves profit harder than volume does. In 1992, two McKinsey consultants studied the average economics of 2,463 companies for Harvard Business Review. Selling 1% more raised operating profit 3.3%. Charging 1% more raised it 11.1%. Those were public companies, not tree services, but the same pull shows up on a tree company's books. Morrow's April example has costs at 50% labor, 20% equipment and 20% overhead, leaving 10% profit. Charge 3% more for the same work and the 10 cents of profit on each dollar becomes 13, which is 30% more profit with no new truck.

The usual worry is that customers walk. On Morrow's numbers, you could lose about 9% of your jobs and still make the same money, because the labor and equipment go away with the jobs and only the overhead stays. If those crews would sit in the yard on the clock instead, the cushion shrinks to about 3.6%. (That math is ours, not his.)

A booked-out company rarely has crews sitting in the yard. When a customer turns down the new price, the next job on the waiting list takes that slot. The backlog that has you thinking about a new hire is the same thing that makes a price increase cheap to test.

Find the jobs that earn less per hour than they should, and raise those first.

A flat increase across every estimate is the blunt version. Job types don't all earn the same per hour. Some pay well, and some tie up a crew for less than the hour costs. Morrow's April piece gives you the line to measure against, a target hourly rate, and the formula fits on a sticky note: your cost per hour divided by one minus the profit margin you want.

His example: labor, equipment and overhead come to $110 for each hour a crew member works. At a 20% margin, that's $110 divided by 0.80, or $137.50 per person-hour, which he puts at about $412.50 an hour for a three-person crew. Your numbers will be different, and that's the point of running them.

Action Steps:

Skip the price increase if your crews already have slack days, if most of your work is price-shopped residential, or if you live on low-bid municipal contracts where the lowest number wins. The hourly check is still worth running. It tells you which work is carrying the company and which work is riding along.

Chandra Brown, business operations manager at CM Tree Service, told TCI Magazine in August that knowing their expected revenue per hour let them "evaluate bids more accurately, identifying which jobs were costing us money." The same article describes their weekly sales meeting, where backlog and revenue per man-hour sit on the agenda next to new jobs sold. That is what this check looks like once it becomes a habit instead of a one-time exercise.

Hiring adds crews at whatever price you charge today. If that price is low on some of your job types, you end up building a bigger company around the underpriced work, with more payroll, more trucks and the same hiring problem 67 of those owners already named. A full board is the one time a price increase comes with insurance built in. Find out which jobs need it, then use it before you write the help-wanted ad. When to hire gets its own issue soon.

If you run the hourly check, reply and tell me which job type came in lowest. You don't need to send the numbers themselves. I'll help you figure out where to start.

Here's to a full board at the right price.

- Jacob Hastings

The Backcut