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View Full Version : What's the best way to raise prices?


Woodland
11-17-2006, 10:41 PM
As my second season draws to a close, I'm starting to take a hard look at the numbers and what I'm finding is startling to say the least. While I'm not finished, it is abundantly clear that I need to charge more money per hour...significantly more. I raised my hourly rate this spring and didn't hear any rumblings, but two years in a row? How do I do this without upsetting my current customers? My suspicions are that many are aware that they have been getting a good deal, but will they be put off by a large jump in my prices.

Obviously new customers are not an issue, and I plan to adjust how I bill next year. These past two years I billed for time and materials and everything was itemized on the invoice. Next years invoices will be more general, i.e.

Spring cleanup $250.00

There was an article in a recent Lawn&Landscape discussing this and it seemed to work well for most who billed this way.

How have you dealt with this issue? Any suggestions or thoughts?

ECS
11-17-2006, 10:59 PM
This past spring I sent notices to my people to confirm that I still had them and informed them that the price was going to go up. Everyone said fine and only one asked what the new price was going to be. I raised my prices by 46% which allows me to go without raising them for a few years. It is not that my prices were too low because they were pretty much in line with everyone else. Where I really make oout is that I do not bag just about everyone else does and that in itself saves me about 30% time on each lawn plus the time to haul the clippings to the dump.

Josh.S
11-17-2006, 11:10 PM
This past spring I sent notices to my people to confirm that I still had them and informed them that the price was going to go up. Everyone said fine and only one asked what the new price was going to be. I raised my prices by 46% which allows me to go without raising them for a few years. It is not that my prices were too low because they were pretty much in line with everyone else. Where I really make oout is that I do not bag just about everyone else does and that in itself saves me about 30% time on each lawn plus the time to haul the clippings to the dump.

Its hard to believe you raised them all by 46% and no one cared....I would certainly lose several if I did that...

Also it shows the difference in your area about tha bagging, because NOBODY around here that does commercial lawn care bags... I might have seen one a few years ago, but none recent that I can remember.... if I had to bag every lawn, I would be in a different business...

jasonnau
11-18-2006, 12:27 AM
I think I would loose most of my customers if I did that! In fact, It wouldn't suprise me to loose all of my customers if I did that! Maybe he meant 4%. I raised a lot of my customers blaming fluctuating fuel costs this year. I got lucky. I'm not lowering them, but there are very few that I am raising.

ECS
11-18-2006, 01:21 AM
I think I would loose most of my customers if I did that! In fact, It wouldn't suprise me to loose all of my customers if I did that! Maybe he meant 4%. I raised a lot of my customers blaming fluctuating fuel costs this year. I got lucky. I'm not lowering them, but there are very few that I am raising. No, 46%. That actually was an average for all properties. One property went from 100 a week to 150. One went from 60 to 75, one went from 130 to 175. My price last year was based on $35 per hour, this year it was based on $50/hr. My goal this year was to increase produtivity and I ended up with an average of $63/hr for mow, trim and blow. So as you can see the difference I increased from $35 - $50 is indeed correct and in all reality it waseven more.

I had no choice but to go with an hourly rate the first year, which was last year, because the person I was going after was the rate they were charging and they bagged every lawn. After talking to several other companies, their price was about the same, meaning they based their set fee on $35/hr and they also bagged every lawn. After a lot of learning from here and on my own, I raised my goal tremendously, still did not bag, saved 30% of the time the others take by not bagging, worked smarter and faster and instead of a 46% increase, it ended up being more than I anticiped. The one that questioned my increase only wanted to know by how much and why. I told them how much and that the cost of running a business dictates that I need to raise their price and they said fine.

JFGLN
11-18-2006, 11:11 AM
We usually raise our prices 4% per year. It's a small enough increase that people don't complain much. If a large increase is in order we send a letter explaining why.

Team-Green L&L
11-18-2006, 11:13 AM
We raise prices 4% each year also due to inflation rates. The minimum wage increase will justify any price changes next year.

Uranus
11-18-2006, 11:23 AM
I'll average a 5% increase on 80% of my lawns. The other 20% I overcharged and I dont think it is fair to them to pay more. Example- 20 min. lawn next to another account, I charge them 60 per week. I thought I had to us a 36"wb in the back yard. I didn't see the 8 ft section of fence that was modified into a gate. All 60" rider work. That works out to 180 dollars per hour when I do it solo. Just a little high, but they are great people and I enjoy working for them so I'm not increasing this one. Also my new minimum is going to $40 per cut, at $35 now. Labor rates are going to $55 per man hour, up from $50 per man hour. Small growth

Woodland
11-18-2006, 04:20 PM
We usually raise our prices 4% per year. It's a small enough increase that people don't complain much. If a large increase is in order we send a letter explaining why.

This was my thinking. I don't do many lawns, mostly landscaping and maintenance, so as I said in my original post, new customers are not really a big problem, its the ones that I do spring cleanups or regular projects for each year that I'm worried about. I'm talking about a 40% increase in my hourly rate. I'm hoping that a letter describing the business aspect of the price increase, maybe through in in some important terms like overhead and company's long term viability will help explain things. The letter would probably be followed by a phone call to explain further and answer questions.

rodfather
11-18-2006, 04:54 PM
Want to know how to raise your prices? Buy out your competition and gain market share, that's how.

topsites
11-18-2006, 06:42 PM
Basically, you go UP in price. :laugh:

Way I do it is, I go up on the bottom of the barrel jobs, those places where I'm making the least (if not losing) and I leave the middle to top ranged jobs alone. So prices go up a little here, a little there... It's an ongoing process, it never stops but it's also never every service for everybody: One here, one there.

So say I raise someone's grass-cutting service, chances are I'll do their hedge trimming for the same as last years price, stuff like that.

Every year I make a price sheet for the basic services: ALL new customers get this price quoted.
Existing customers may escape the increase if the difference is minor AND they are not at a loss, also if they just recently saw an increase...

As for the total loss leaders (say an acre lot for $40 that really should've been $60)...
That's tough, +$5 / year until I'm somewhere close. For one, it's usually still better than going rate, and for another, if I lose this customer it's no big deal.

/////////////////////////////////
Some tips:

- Send them a letter or inform them verbally NOW, in plenty of time for them to decide whether they wish to keep you *OR* do it in spring without notice (thou the nice way to do it is tell them now).

- Plan on putting out at least DOUBLE last year's advertising, then it's never a problem.

- If you have a borderline customer(s), one you can't decide because you don't want to lose them but the price burns... What I've done is flat out asked them for a voluntary increase: You won't get all of these, but you'd be surprised how many will say yes. AND, it sets the stage for a almost certain increase next year (thou I mean 365 days from now, not in spring lol).

Hope that helps

ed2hess
11-18-2006, 10:47 PM
A very high percentage of our calls in the spring come from customers that have been notified that their mowing rates are increasing. Got to keep in mind that in the spring homeowners get plastered with door hangers....we get at least five a week for around 3 months. And all these flyer are starting to look very professional.. So customer has options.