View Full Version : overhead costs on pricing estimates

01-07-2008, 01:48 PM
Hello everyone, i have a question that i havn't really seen handled on here.

i don't wish for this to become a flame war but i was wondering if the small solo lco is not so much undercutting/lowballing the Big lcos and the inefficent lcos.

for example I run out of a 18 year old box truck that is set up nicely, have 2 commercial walkbehinds that are fully paid for...The toro is a 1986 model and works as nice as some newer models.

I have lawn maintenance accounts that are close together, no workers comp or equitment payments to worry about. I pay for advertizing, insurance, gas, parts just like the big guys, but i imagine my overhead is low compared to them

they obviously must do alot more accounts to pay for the brand new trucks and mowers, workers comp, wages and more fuel ect ect. That being said is it that outragous that I am 5 and 10 dollars cheaper in the same neighborhood.

I don't think i am lowballing anyone, just don't belive were really bidding by the same set of rules, on a huge property and cleanups i am usually higher priced then them due to working alone.

any comments on this subject would be appriciated as i don't really want to cut anyones throat, and am quite happy with my current price schedule

Barefeet Landscaping

01-07-2008, 03:29 PM
It sounds like you are priced to be competitive. Keeping expenses low is a worthy goal which I share.

One question you need to ask yourself: If you are consistantly $5 or $10 cheaper per cut, aren't you leaving money on the table? If you have 50 lawns, that is between $250 to $500 per week that you are intentionally trying to not earn. That is $1000 to $2000 per month wasted.

Unless you are using price to sign up new customers, you may want to consider raising prices to equal the competition, regardless of overhead.

01-07-2008, 07:45 PM
I was in the same boat for awhile. I found out that i was consistantly $10 cheaper per average sized lawn in my neighborhood compared to a few of the larger lco's in my area, so I raised my normal cutting price by $5. I'm happy cause I make more money and the customer is happy cause they are getting a less expensive price and the same if not better serivce. Having almost no overhead is a great thing :)

Paradise Landscapes
01-07-2008, 08:23 PM
Now, Back to your post heading: Overhead cost on pricing estimates. Am I reading this wrong? Please Correct me.

Your overhead expenses per month example, say 300.00 Divided by 30 days/ daily to make( 30/300 = 10.00/day you need to make to cover overhead.)

Or are you asking what is the cost of giving estimates?
= How much time are you using?
How much gas are you using to get there?

01-07-2008, 09:08 PM
the subject is my overhead costs influincing my pricing estimates...

this mostly started with an argument between me and another lco that i happen to be freindly with.

For example i have 1 89 f350 non powerstroke desiel. i have 30 accounts. it costs me 100 dollars to plow them all in fuel costs, and a mininumal amount in insurance. for arguments sake lets call them 40 dollars each.

1200-100- 100 for incidentals each storm= 1000 back into the buisness

he has 3 f350s thats hes making payments on, carring full insurance on, 2 employees that hes paying a wage plus workers comp and social security, 3 x the fuel costs, and probably a bunch more i'm not even thinking of.

lets say he has 150 accounts at 50 dollars each 150x 50 =7500
7500- all his expenses =? no clue

but i know if he serviced 90 accounts at 40dollars they would repo his truck..

I was hoping to show the diffrence to him and a lot of big lcos who naturaly think that if your price is lower then theirs, your a low-balling throat cutter.

I also was hoping to find out if i was a low balling, throat cutter or if neutral parties could see the point.

some may have forgotten being small, or maybe never were. I plan on staying small for some time, its just easier.

01-07-2008, 09:10 PM
Interesting to see both sides of the perspective. Lower overhead giving the ability to offer a better price vs. higher overhead needing to charge more to pay the ++ of having employees and current equipment. At the end of the day, both show comparative net numbers.

Clearly, the solo has the price point advantage and can take on as much business as he can handle. The moderately large to big LCO depends on fair market value and suffers a reduced customer base at the hands of discounted solo pricing.

As I begin to enter the business myself, I can appreciate both sides. Funny how this is a reversal from most industries where the larger corporation swings the "big stick".

01-07-2008, 09:12 PM
yes your happy with the money, but as you fill up your schedual, think about how much happier you will be with an extra $10/cut per lawn. 20 lawns, 4x a month, thats $800 a month, $1600/month for 40 lawns. and thats just for underpricing!! once you fill up you will think why did i ever do the work for so little. at $1600/month, thats why some of us have brand new equiptment and trucks. your lowballing could simply be paying for new stuff.

01-07-2008, 09:21 PM
i do see the point in how the extra 10 dollars adds up in a hurry.
i have to jack the price big time just to make up for the loss in fuel this year.

if i had the extra money... lol i would probably just buy a whole feet of old trucks and mowers.... i'm rough on them,to me a truck is a tool, plus i love the fact that if you roll the whole truck down and embankment and destroy everything....

i'm out about 3 or 4 grand tops.... i have seen ztr mowers come off trailers that cost more then it would to replace my entire line....

plus its like a sin to see someone fithly sitting on leather seats......
however i would like one of those heated and cooled seats.....like i just saw in an excursion.

01-07-2008, 09:35 PM
little peice of info i forgot that sort of fits this story

about 10 years ago i worked with a guy who ran with ex state trucks...

his vis yellow, ny state blue and tons of rust , junkyard mowers that were peiced together

his accounts were primarly bedroom community summer homes.

mostly wensday thursday and friday mows.

he had a customer for 4 years and never had met them face to face, they were extremly happy with the service and even sent him a holiday tip every year.

they let him go the first time they showed up early on friday and saw him mowing. multi million dollar house.

they hired someone with a brand new truck and new trailier and he folded after 3 years.... he took them back after he raised their prices by a hundred

he always refered to it as his truck payment and he bought a new powerstroke to tow the trailer

01-07-2008, 09:39 PM
Actually, you are not figureing in your overhead. While it may be true that your truck and mowers are paid for, they wont last forever. Someone could give you a brand new truck and brand new mowers and in 4 or 5 years, even with you takeing excellent care of this equipment, you could be out of business if you dont factor in replacement cost (overhead) into your priceing. While you might be making good money at your current pricing, what about when your truck or mowers need replcement. If you havent planned for this, your standard of living could quickly go down as soon as you purchase a replacement tool. Even if you saved the cash for the replacements, you have still lowered the amount of money you have been able to retain from your business in the previous years. Just because a piece of equipment is paid for or given to you doesnt mean it doesnt have to factored into your overhead.

Nothing says you have to have new equipment to run a business, but you do need to know present value versus future value of any equipment you already own or decide to purchase and reflect these numbers into your pricing structure.

Paradise Landscapes
01-07-2008, 09:46 PM
I would probably raise my prices the next year, so your current customers don't complain about a "sudden increase in lawn service". I would raise them the next year. But, any new clients you get, start raising your prices now. However, with your current customers, is thier such a clause that allows ypu to raise prices due to unforeseen events? Or Company reserves right to raise prices?

01-07-2008, 09:47 PM
good point..... i have figured out that equitment needs to be replaced,

in some cases i have thought ahead and secured spare equitment that is ready to go, and i keep an inventory of parts to fix major problems. ie a parts mower since they are 10+ years old. most of the time your local dealer has a pile of belt driven machines in a pile behind the shop.

it has worked out well thus far, although I completly see everyones point on leaving money on the table... iI think i'm only looking for 5 more accounts so i will raise them up to the proper level

i can see a ex u haul 16 footer powerstroke in my future with gas prices out of control.

01-19-2008, 05:09 PM
If you only charge for old equipment that is all you will ever own.price your trucks,mowers,etc to run new stuff and save on down time and repairs. you need to figure out your hourly cost on every thing you put at a site and that will give you your cost add you profit margin and that is your rate

01-19-2008, 05:25 PM
Overhead and pricing is a chicken and egg question. What comes first?

I back into it. I price myself over the low ballers, and a tad over the average market price. Then I forecast sales volume. This is the tricky part. How many customers, what services will they buy and at what profit margin, strictly using operating costs. Now I have a net number. From that number, I figure out how much overhead I can absorb wieghed against personal income goals.

If you are ten bucks cheaper than eveyone else, you ARE a lowballer, plain and simple. Leaving money on the table is by my defonition, low balling. Doesn't get much simpler than that.

01-19-2008, 08:07 PM
I rasied most of my prices this year..

guess what?

my fellow lcos also raised theirs..

new trucks and equipment, fire sale on equitment thats almost brand new.

I've decided that my customers are right where they should be.

i'm still high on large maintenance jobs.
a little low on small accounts
right on instalations and snow plowing.

as a sole prop i can't compete on the same scale. I however have a nice profitable little niche that i don't plan on pricing myself out of.

plus my real comp around here is the economy fast approaching the toilet

when it comes to food, taxes, utily payments and landscaping you know what going first

01-20-2008, 12:41 PM
Mudstomper hit on it.
You are not running a business you're getting by.
You need to cover alot of items to be in business. ie: replacement costs, equip.upkeep,insurance and your own retirement.

The real money in any business comes from growing it to the point you can sell and make a bundle.

01-20-2008, 01:27 PM
We have a LCO in our area that has been doing lawn care for quite a few years and he operates on some of the same principles as you do.

He operates with an old 1970's era Ford truck and a small 7'x8' trailer with hand painted signs on it and all of the equipment is rusty junk that barely runs and most of it smokes the whole time its in use. Many times during the day I'll see this guy with the hood of his truck open trying to get it started, I can only imagine the amount of time this guy must waste trying to limp by on old worn out equipment.

This guy operates on the theory that he has no overhead so he can offer his services $10 below everyone elses rates, he truly believes he is doing quite well in the industry since hes been doing it for so long and is still in business but we both use the same dealer for support and i've been told that the guy has a hard time paying for his parts and many times ends up putting a $100 part on a payment plan.

What this guy doesn't understand is if he would just charge what everyone else is charging he wouldn't have to operate on a shoestring budget and he could afford to have newer equipment and vehicles. The sad thing about this guys operation is that he's been in business much longer than I have but our business surpassed his years ago.

01-20-2008, 01:59 PM
I was lower than most in my area my first year or so. I was not doing this to be a lowballer, I just didn't know what I was doing. I quickly realized that I didn't want to be in the low ball niche. I just don't understand your approach, it only sounds good in theory. Everyone wants to have a nice vehicle, equipment, and a professional, profitable business. Like muddstopper said, your stuff will wear out eventually.

You can either continue doing what your doing just to get by making about the same profit as the big guys by charging less with lower overhead, or... you can charge like the big boys with your low overhead and make a killing. Caugh Caugh... that's my approach.

You WILL lose your customers if you try to throw a huge price hike at them. I lost almost all of mine. The customers you have are cheap and don't care that you have been doing a great job. I would keep your current customers unless you are losing money and just start bidding accordingly from here on out. Drop them slowly or raise prices slowly as need be. JMO

01-20-2008, 05:44 PM
like i said

"i'm still high on large maintenance jobs.
a little low on small accounts
right on instalations and snow plowing."

As for

What this guy doesn't understand is if he would just charge what everyone else is charging he wouldn't have to operate on a shoestring budget and he could afford to have newer equipment and vehicles.

Why would i want a new truck?..to work in..the old one runs just fine. the mower runs as good as the day it was made. I have spare machines and parts. I can still work on it.

How would a new truck make me any more money. can't drive it any faster. Sure i could get a few miles to the gallon but at the cost of huge payment, higher insurance and higher repair costs.how would the biggest and faster ztr make me any more profitible.


After this discussion and the one with a freind that started it all, ive come to the conclusion that i'm fine and i'm not a lowballer, nor am I a Chest thumping gear head.
I provide a good service at a fair(for both Price) Make up for my low bids on small propertys by being on the high side on large ones, do a great install, snowplow biz. I raised my prices 8-14% this year and only lost 1 customer. how many people with real jobs got a 8-14 percent raise.

i got 2 3 2 my last 3 real job years

Maybe a new shiny truck(to work in) dosn't appeal to me. I like my bottom line and I would rather run a lean mean small operation then have to triple my amount of accounts raise my prices, buy workers comp, and forget knowing your customers.

I appriciate everyones input, perhaps i just can't see it. i worked in lean manufacturing and know what being fast and lean can do to a profit margin.

3 minutes a job X 10 jobs a day =30 minutes

1.00 per minute =30 dollars
4 days of maintence a week
easy 120 a week
i don't run to the store 15 times a job
just me to worry about no waiting around for someone to finish,mowing eating taking a dump
my equitment had less then 1.5% downime last year (mostly operator error)

Maybe someday someone will start a thread about high rollers

01-20-2008, 06:44 PM
I would think it would work both ways or at least you could argue for both sides having an advantage in pricing.

I'm small in lawns, I have 34. if I, after all overhead, taxes , replacement costs, if all I have is $15 profit, money in my pocket profit, from each lawn. I'm screwed. I need lower overhead and do the work myself etc.

But, if you are a very large co. and you have 1000 customers and after all expenses and rainy day funds, advertising, taxes you only make $10 profit per customer per month, you got 10k in your pocket. and probably didn't mow a single lawn.

Some of the largest co. like just mowing, have the lowest prices and the largest wallets. I would imagine.

01-20-2008, 06:46 PM
I'm so confused why you started this thread:confused:

All I was trying to say was the obvious(to most people atleast) Your leaving money on the table. You don't have to take the extra money and go buy new stuff. I guess your just in the business for the exercise.

Maybe a new shiny truck(to work in) dosn't appeal to me. I like my bottom line and I would rather run a lean mean small operation then have to triple my amount of accounts raise my prices, buy workers comp, and forget knowing your customers.

You must have misunderstood my post. I said CHARGE like the bigger operations. With your small operation you will make more money. Everyone in the industry wins.

01-20-2008, 10:23 PM
Well this is like the poster boy tread for how to low ball and leave money on the table, and convincing one's self it's the right thing to do. High rollers? Dude... as the commercial goes.... Dude, you are INTENTIONALLY screwing yourself out of profits! And then call anyone who charges market rates high ballers? ROFFLMA.

01-20-2008, 10:40 PM
Nate, I went back and re-read your original post again and it seems like your happy with the prices you are charging and the amount of money you are currently making. So if your content making "less" money to provide the same service as your fellow LCO's then so be it.

I don't really understand why, but as long as you feel good about it then it shouldn't matter what anyone else thinks.

01-20-2008, 10:40 PM
do any of you people actually read the posts or just go off what the last 3 people have said...

i raised my customers and guess what.... i'm still low on small accounts high on big accounts and the same on snowplowing and installs.....

i'm not going to let company that has had to raise their prices to avoid having there @sses handed to them set my market price.

i was looking for some opinions and as a sole lco i should not be charging the same as a large lco, or by this rationale since i got a few of those big jobs even though i bid high, then they should raise there prices on a large lawn

not even apples and oranges......most of the big lcos won't even mow a small yard "50+ to drop the gate"

my original reason of starting this post was to get some opinions and diffrent views on the subjct.

everyone who thinks i'm a lowballer on small accounts (fine) i more then make up for it in other areas.

with the economy in the toilet were all just a neighboorhood kid away from losing accounts.


none of that adds one ounce of value to there product.

They want you to treat them fair, know their names and deliver what you promised....

i've allready signed my new customers, left room in the schedule, and will turn a profit again... And in the end i realized i don't give a Cr@p about what anyone else is charging.