Illustration by Khafizh Amrullah/iStock.

In the tree care business, things can change quickly. One job may be a straightforward climb; the next may require every piece of equipment in your arsenal. That unpredictability is part of the appeal, but it also means owners need systems that help them understand their numbers.

Many arborists take safety seriously but grow quiet when the conversation turns to finances. Often it simply comes down to discomfort with numbers. But don’t let that stop you from learning what your financials are telling you!

In my work helping arborists understand their finances, I’ve found that a few core metrics can bring clarity. Think of them like parts of a tree: canopy, stem and roots. Together, they provide a practical framework for understanding how your business performs – and help you set clear goals for healthy growth.

Financial tools

Before diving into the numbers, it helps to have the right tools. Most companies benefit from using both accounting software and customer relationship management (CRM) software. Accounting systems track transactions and financial statements, while CRM platforms track leads, jobs and client data. Used together, they give you a clearer view of how your business operates.

The specific software matters less than using it consistently. Accurate data allows you to see the real cost of doing business and make better decisions.

With that foundation in place, here are three financial numbers every tree care company should understand.

Canopy: Profit projection

The canopy is the most visible part of a tree, just like revenue can be the most visible part of a company’s financials. But revenue alone doesn’t tell the full story. What matters most is profit.

A profit projection helps you understand the components that drive revenue and the systems behind it.

A simple formula can help estimate potential profit: leads × close rate × average job price × profit margin. In other words, using your CRM data, estimate the number of leads that you will generate. Multiply that by your sales close rate, which you can also pull from your CRM. Multiply that by your average job price, to be found in either your accounting system or CRM. And finally, multiply that by your desired profit margin.

Looking at these numbers helps owners understand the “control levers” that affect revenue and profit:

• Lead generation.
• Sales conversion rate.
• Pricing.
• Efficiency.

A CRM can help identify where leads are coming from and which client segments are most valuable. For example, an extremely high close rate could indicate that prices are too low, while a low close rate may signal pricing or sales issues.

The goal of this exercise is not perfection but clarity. It provides a rough target and helps owners understand how marketing, pricing and sales influence profit.

Stem: LTV/CAC ratio

The stem connects the canopy to the roots, much like a company’s customer lifetime value (LTV) to customer acquisition cost (CAC) ratio connects revenue to profitability.
LTV represents the gross profit a customer generates over time, while CAC measures how much it costs to acquire that customer.

Understanding this relationship helps companies evaluate how efficiently they acquire clients. Below is a simplified example.

Cost to acquire a client:
Marketing spend: $3,000
Leads generated: 100
Cost per lead: $30

If you close 20% of those leads, you gain 20 clients. If you take your marketing costs and add your sales-
related costs, let’s say that equals $8,000, and you divide that by the number of clients closed, then your customer acquisition cost is $400 per client.

Lifetime value of a client:
Average job price: $1,200
Average jobs per client: 3
Lifetime revenue: $3,600
If the gross profit margin is 50%, the lifetime gross profit equals $1,800.

LTV/CAC ratio

Lifetime gross profit (in this example, $1,800) divided by your customer acquisition cost (in this example, $400) equals your ratio of 1:4.5. That means every dollar spent acquiring a customer produces about $4.50 in gross profit.

A ratio of 3 or higher is generally considered healthy.

Companies can improve this ratio by lowering acquisition costs or increasing client value. Practical approaches include:

• Prequalifying leads to focus on better-fit clients.
• Improving sales processes and close rates.
• Developing referral partnerships with landscapers or contractors.
• Following up with past clients through email or other communication.
• Offering recurring services or additional work.

Review this number monthly or quarterly to spot trends and measure marketing efficiency.

Root: Target hourly rate

Roots support the entire tree. In business, pricing plays a similar role.

Many tree care companies set prices based on competitors or instinct. A better approach is to base pricing on your actual costs.

Three major cost categories determine your hourly rate:

• Direct labor: Wages, payroll taxes and benefits for the crew performing the work.
• Equipment: Ownership and operating costs for trucks, chippers, saws and other machinery.
• Overhead: Office staff, insurance, marketing, rent and other administrative expenses.

For example, let’s say your costs are divided into those three major buckets:

• Direct labor: 50%
• Equipment: 20%
• Overhead: 20%

Total costs equal 90%, with 10% profit.

To calculate the hourly rate needed to cover costs and generate profit, use this formula: (Labor rate + equipment rate + overhead rate) ÷ (1 − profit margin).

• Labor rate = All labor costs per hour (crew wages + taxes + insurance).
• Equipment rate = Fuel + maintenance + depreciation, etc.
• Overhead rate = Total annual overhead.
• Billable hours = Divide your total costs (labor + equipment + overhead) by your total billable hours.

Assign the desired profit margin to the hourly rate.

For example:

• Labor: $50/hour
• Equipment: $40/hour
• Overhead: $20/hour
• Total cost: $110

If the company wants a 20% profit margin, the hourly rate must be: total cost on an hourly basis (in this example, $110) divided by 1 minus profit margin (in this example, 0.80) to equal your target hourly rate of $137.50. For a three-person crew, that equals about $412.50 per hour.

This is a little different from the common “revenue per hour” metric, which looks backward at past performance, while the target hourly rate helps set pricing before work begins. Both metrics are useful, but the target hourly rate ensures each job covers costs and generates profit.

Conclusion

Tree care businesses operate in a dynamic environment. Weather, equipment issues and scheduling challenges can all affect performance. That’s why understanding your numbers is so important. By focusing on three metrics – profit projection, LTV/CAC ratio and target hourly rate – owners gain a clearer picture of how their companies operate.

There are many financial metrics available, but mastering these three can help strengthen the canopy, stem and roots of your financial tree.

Edward Morrow combines his knowledge as an accountant, arborist and author to help tree care professionals supercharge their careers. Under the TREE S.T.A.R.S. brand, he develops community urban-forestry programs and helps tree care businesses develop
client-retention/engagement programs.

Morrow will be presenting “Financial Elevation: A Practical Approach to Understanding Numbers in Tree Care” at TCIA’s Business Growth Workshop, which will be held from April 30 to May 1, 2026, at the Arborwear Headquarters in Chagrin Falls, Ohio. Click this TCIA link for more information.