PDA

View Full Version : Path to success or failure


Wells
12-09-2007, 07:23 PM
Everyone needs to read this post, its from another member and it's long but it'll be worth your time and could possibly save your business.

How I nearly lost it all in '95 (by Dave, Sorry I cant remember his screen name)
Basically, I grew too fast. Instead of knowing that I was really lucky, I thought it was because I was incredibly intelligent and talented! NOT. Here's what happened.

Like so many newbs, I used pricing as a marketing strategy. I took the attitude that if another, more experience LCO was doing this yard for $30, I could come out at $25.

"Oh, he'll do it for $20? Ok, I'll do it for $15."

Well, that's ok, I suppose, if you really need the work so bad that you can't afford to pass it up, but you're hurting yourself in the end, if you continue. However, one of the symptoms of too low a price is that you suddenly find yourself with more work than you can get to, but you never have any money after you've paid your expenses.

But in my blissful ignorance, I started using this "genius" strategy on large apartment complexes and other commercials. By 1994, I had a contract with the V.A Hospital, a 23 acre Condo complex and 3 property management companies. All of these were gained by being the low bidder. And I stupidly thought: "This stuff is easy!!"

However, it's all a house of cards. Here's what happened:

Once I had the contracts, I had to buy more equipment to handle the extra workload. I did not have the cash, so I had to finance. I also had to buy another trailer and another truck to pull the trailer. I was pretty fed up with trying to nurse an old truck along, so I went down to the Ford dealer and bought a brand new truck, which I financed. Then I found that in order to get the work done, I had to hire help. But once I hired help, I found that slack periods due to droughts, or heavy rains or winter, threatened me with the loss of my workforce. Workers are not at all understanding of your problems. The large commercials wanted to see uniforms on my employees so that they could be easily identified, so I bought clothes. Also, signs on the truck. Then I found that 1 truck couldn't carry everything, so I bought a 2nd, again financing. And too, I had to buy insurance, pay for workman's comp and I had to provide proof of all of this to each property. I couldn't stay at the office so I kept a cell phone with me all the time. If you'll remember, cell phones were NOT digital just yet, and were way more pricey than they are now. On the large properties, my employees were sneaking back to the truck to make personal calls. I had cell phone bills of $300 or more per month.

Long story short. All throughout 1994, every penny I took in, I turned around and paid right back out. I didn't have anything left for myself. But, at least with all this new equipment, new trucks, employees in uniform and contracts in hand, I at least looked like a big shot. That winter was one of the worst I've had had up to that point because there wasn't any money to put away. I lost all of my employees because I didn't have enough work and then when the spring of 1995 arrived, I had to hire new people and train them. What a nightmare! Also, I had fallen behind on my payments on EVERYTHING. But I promised my creditors that 95 would be different, cause I had lots of work lined up. And I did....all of it underbid. I also bought into a very common myth: "In order to increase profits, increase revenue." In other words, take on more work, even if it is underbid. Oh God, was that ever STUPID!

So 95 was even a bigger screwup than 94. I worked even harder, mistakenly thinking that I could compensate by doubling my efforts. My new employees began to think that I was making a lot of money on their backs and began to undermine things behind my back. My new truck took a tremendous amount of unexplained abuse as did all of my other stuff. Tools constantly disappeared. Work NEVER got done on time and I finally started catching employees sneaking off on the larger properties and taking naps or smoking pot. When I started firing people, the break-ins started. Windows got smashed out of my trucks and everything got stolen several times. Police treated me like I was the criminal and I was wasting their time. And I had dropped the insurance when there wasn't any money to pay for it. When contract renewal times rolled around, amazingly, I got underbid on EVERY property. That meant that all the problems that I had, would now be awarded to other LCOs even more stupid than myself. So now I faced another winter with no contracts, no work, creditors already at the end of their patience and ready to repo. I lost my trucks, I lost what machinery I had left and I went through the worst winter of my life, even worse than 94. I even thought my wife might leave. I had one Scag 52" that I had paid off, and that's what I started with the following year. And I got a Shindaiwa at the pawnshop. Instead of getting a blower, I used a broom.

So that's how I learned not to lowball. I learned first hand what lowballers get for their efforts. And all of the troubles made me mad. Mad enough that I got the courage to stand up and ask for more money AND to not fool with deadbeat price hacking customers. In 96, I started over again, working by myself and this time, getting the money I needed. And it's been that way ever since.

So, if you've just started in this biz, and you've read down this far, take a lesson and save yourself a lot of trouble.

DON'T BE A LOWBALLER!

jaybird
12-09-2007, 07:32 PM
Good Man, thanks.

moose203
12-09-2007, 08:03 PM
thanks for sharing your personal story it is things like this that i need to keep in mind because my business will support my family. knowing about what can really happen sheds a ton of light on the subject.

Jason

DLAWNS
12-09-2007, 08:11 PM
Awesome post. It will definitely make me think about those big purchases that i don't "really need". Thanks for the information.

Wells
12-09-2007, 08:11 PM
So, now the question is are you willing to take the advice from someone who nearly lost it all or are you destined to repeat Dave's mistake?

I've seen hundreds of guys come to these websites for advice each year and they all think they've got it figured out and are going to be the next Brinkmans or Truegreen but the truth is 99% of them get discouraged and leave the industry by June or July when things arn't working out as they planned.

According to Dun & Bradstreet reports, businesses with fewer than 20 employees have only a 37% chance of surviving four years (of business) and only a 9% chance of surviving 10 years. 90% close because the business was not sucessfull, did not provide the level of income desired or was too much work for their efforts

PlatinumLandCon
12-09-2007, 08:12 PM
thanks for sharing your personal story it is things like this that i need to keep in mind because my business will support my family. knowing about what can really happen sheds a ton of light on the subject.

Jason

Re-read the first line he wrote, it's not his story:hammerhead:.

When lowballing, you have to realise the other end, like this story clearly illustrates. When you win a job at a low price, the client will be reluctant to pay a higher price later on. Grow because of quality, not price. Make people WANT your skill and high class work, not just to get it done for a basement price.

Wells
12-09-2007, 08:14 PM
thanks for sharing your personal story

Jaosn, it's not my story but it did come from a member of this site.
Just though it needed to be brought up again.

PlatinumLandCon
12-09-2007, 08:16 PM
....the business did not provide the level of income desired or was too much work for their efforts

THIS IS SO TRUE. Lots of businesses aren't not successful, the owner just had high hopes to start and they weren't met.

moose203
12-09-2007, 09:05 PM
sorry bout that misread that part, still it is good info to be aware of but any way thanks for posting it up

moose203
12-09-2007, 09:07 PM
forgot to put this in my post for me:hammerhead::hammerhead::hammerhead:

WHIPPLE5.7
12-10-2007, 11:44 AM
THIS IS SO TRUE. Lots of businesses aren't not successful, the owner just had high hopes to start and they weren't met.

Very true indeed about many businesses but I do truly believe lawncare has a higher success rate. I sustained my failed fireproofing business for over 1 year with lawncare profits alone before I threw in the towel. That business was like playing the lottery. One day it would seem as though I was about to score a contract for a $1,000,000 job and the next day I'm beating on doors to mow lawns. I finally gave up because the insurance, quotas, and other cost were drowning me out. The only reason I held on for a full year was because I was dealing contracts that were required by state and federal law to have fireproofing done the their buildings but in the end they just took the fine instead because it was cheaper. I almost lost my house and I sold all of personal belongings for cheap just to make the bills. Lawncare is differant though. It is so much more consistant and predictable. I actually don't have to look hard to get work.

topsites
12-11-2007, 02:53 AM
Reminds me of times back when I'd get a price shopper but I was already out to their place by the time this came about, so I give them the least price I think someone else can (and will) still underbid.

Takes practice but it's just over the absolute cheapest, once you get a few years in you know these limits, bid right over the low end.

Dang 35-40 dollar yard... Bid it at 30.
Then comes the next guy...
Oh yeah? Well great I'll do it for 25!!!
And I'm off the hook, the rest is a hidden bonus.

I used to get great amusement out of this, I know it's sick but it helped relieve frustration.
Which is to say I've been in the next guy's shoes, too.

topsites
12-11-2007, 03:07 AM
Oh yeah, perhaps now this makes sense, why I preach these things so much:

- Save your money first and do not finance!
- Buy used and I mean USED!
- NO employees until you've got at least 4-5 years under your belt.
- Ditto with commercial contracts, you need experience first, yes, as a solo doing residentials.
- Fark the signs, forget the uniforms, don't get fancy because looks don't pay!
> Looks help, but what pays is functionality and performance, looks always comes last.

Which is not to say be a total scrub either, but save yourself 5-8 g first.
And by the way, I think it's better to look like a scrub but have no loans than to be the big man with a ton of debt.

chiseled
12-21-2007, 02:43 PM
great post. it's not what you do, but how you do it