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View Full Version : Fuel cost increases...pass them on?


GarPA
03-25-2002, 11:30 AM
No secret that fuel cost is rising fast..... again. For all of us who preach "know your costs" b4 you do an estimate, do we surcharge our customers at some point?? I'll bet most of us don't yet there has to be a point at which we must, else we are "lowballing" in a way....granted for small lawns the client might say, whats the big deal he can't be using that much fuel..but...over a week plus the truck fuel...it could add up to a moderate increase in our costs...lets say by June, fuel is 50 cents more than when you built your cost structure back in January....do you just eat it? thanks

Golfgar4
03-25-2002, 11:39 AM
If you increase your costs in mid-year after telling your clients what the costs will be, do you think they're going to stay with you very long? They're going to think that you'll increase your prices anytime you want. This is part of doing business. If you know what your operating costs are and provided for possible unexpected increases, you should be alright until you can legitmately increase your prices the next time. I think once a year is the max you can increase your prices, UNLESS the customer wants to renegotiate the contract in mid year.

TOSLC
03-25-2002, 11:43 AM
Last year I told all my customers that the price of fuel was rising, not only for the equipment, but for the vehicles. If the price of fuel got above "X" amount, I would have to increase the price of the serives. . . until the price of fuel returned to "normal". They were all very understanding. Of course I still had some that whined and complained, but I didn't lose any of them.

JimLewis
03-25-2002, 11:53 AM
Last year we used the rising cost of fuel as the main reason for raising prices. We usually raise prices about every 2 years anyway.

When we raise prices for any reason, it's never across-the-board for all of our clients. Some of our clients are worth gold to us and I'm not about to risk losing them for anything. Everyone has a few of these. Still other clients are fairly new to our company and I hate to raise prices on someone who we just signed up at one price and then tell them, "Oh, sorry. Now it's more." So we usually don't raise the prices for them either.

What's left are existing customers we've had for a year or two or more. We raise their prices.

We always try to raise prices as little as possible, just to lessen the impact. I'd rather raise prices a little every year or two than I would raise them a lot just one year.

BTW, we've raised prices several times over the years and I rarely lose a customer because of it.

roscioli
03-25-2002, 12:06 PM
Just my .02, but I feel that no increase should be unexpected. I always price a job with a buffer for things like gas going up. Now, I will be raising my prices this year for almost all existing customers by a couple bucks, but keep in mind that inflation is about 2-3%, and gas prices haven't risen with inflation for the past 20 years. While I hate to see it, gas prices really should be higher compared to how they were 10-20 years ago, and how they are in the rest of the world. Perhaps you could say like TOSLC says- "If it goes up to $X.XX/gallon, we will have to raise prices by X" or something like that. Just be prepared

GarPA
03-25-2002, 01:25 PM
those are reasonable approaches...I didn't mean to imply I would raise prices everytime it jumped 20 cents a gallon...rather as some of you suggest, if it goes above 'x' then I will be making an increase..thanks for your good points of view

LAWNS AND MOWER
03-25-2002, 01:34 PM
I would never tell a customer I'm raising their price because price of gas has gone up. What if gas falls to 80 cents/gallon? Are you going to go down on their prices? I only increase rates at the beginning of the season. If they ask, tell them that the cost of doing business has increased. Never use gas prices as the main reason for raising prices. I can mow $600's worth in one day using 10 gallons of gas. ( Mower and Van ). If gas is $1.50/gallon, my fuel cost for the day is $15. If gas is $1.00/gallon, my fuel cost is $10 for the day. I hope you get the point. $5/day extra for gas is not going to break me up. Granted, others have larger outfits than myself and use more gas, but the %%%% of fuel cost to gross revenue should still be pretty consistent.

LAWNS AND MOWER

Richard Martin
03-25-2002, 03:43 PM
I agree with LAWNS AND MOWER. We roughly figured it out here the last time the prices went up and we came up with a figure of around 50 cents maximum additional fuel cost even if the price went up by 50 cents a gallon on a 1/4 acre lot. And that includes the increased fuel cost for the towing vehicle assuming you don't drive for miles between each job.

thelawnguy
03-25-2002, 04:14 PM
You really need to be up on current events and trends. Any price increase, be it fuel, repair costs, insurance, whatever, needs to be somehow passed along to the customer, otherwise what are you working for, gas and groceries? Not for me...

rodfather
03-25-2002, 05:38 PM
I never had in the past...but I might this year as a "fuel surcharge". I know others in the NE do, just not sure yet if we will.

Charles Laws
03-25-2002, 10:41 PM
Remember when the power companies added a surcharge and trucking companies still add a fuel surcharge that remains in place until the fuel prices decline - why would we not be allowed to do the same thing if necessary. I do think it would have to be sold to your customer base, if the work performed is up to par most would not have a problem at all with a 3%-5% increase just to cover fuel. Let's hope that the price will stablize and this won't even need to be discussed.

BRIAN GALLO
03-25-2002, 11:49 PM
I agree with some others that the price should be "passed on" - afterall, it gets passed on to us for services we use right down to higher grocery bills. I tried to raise my people up last year just high enough to cover rising fuel costs and only met with a favorable response from a few people. Most of my customers think they should still get 1984 pricing on their lawns.

watatrp
03-26-2002, 07:58 AM
I've already let my customers know that if gasoline goes above $1.50 per gallon, I will add a surcharge this year. Last year I ate the increases. You have to remember that the increased fuel costs are not only the gas in the equipment but the gas that goes in your truck to transport the equipment. At the rate I use fuel, I figure that last year I paid $700 more in fuel costs more than I would at today's prices. For those that think the increases are small, think again. Would you be willing to write me a check for your losses? My suppliers of parts and equipment have raised prices because of fuel costs. Do the math. It all adds up.

Turfdude
03-26-2002, 09:52 PM
For those of you who issue contracts to clients - include one of these in your contract.

If the cost of regular unleaded fuel should surpass $x.xx per gal, than the cost for weekly service shall increase by x.x%. Most people realize all our equipment runs on fuel.

Good luck

Bob

olderthandirt
03-26-2002, 11:32 PM
Last yr. I added a fuel surcharge to the bills 5-10$ depending on the size of the job {not mowing} lawn install, brick work etc. I had a lot of people ask about it and after explaining that the cost went up x amount since it was bid I was forced to add it, most understood, a few mumbled under there breath, and 2 refused to pay it. Its a good thing that the 2 that did not pay did not have problems becouse I could not have afforded to drive out to handle there complaints.

ohiolawnguy
03-27-2002, 02:32 AM
in our 2002 renewal letter to all customers, it was explained that if gas went over $1.50 a gallon, that we would put a fuel surcharge onto the monthly bill.

TLS
03-27-2002, 10:37 AM
Didn't everybody raise their prices last season? I just kept mine at that, and will probably just keep them there for this season.

Anytime I get a customer complain about prices, I just say:"I bought that truck there (Point to my truck) brand new in 1989 for $20,553. It was fully loaded with every available option. Now 12 years later, a fully loaded pickup would cost me $38,000!" This is almost double! I tell these people to be carefull, I may just charge them double what I started them at 12 years ago!

An example of one of my accounts that I have had for 13 years. Started them out @ $30/cut, now am up to $38, and they bark every time I raise them (usually $2 increments every other couple years). This is a problem, using my "truck" formula, they should be close to $60/cut!!! This is where we all have to stand back a take a look at the BIG picture on pricing!!!

summitgroundskeeping
03-27-2002, 07:53 PM
Increaseed costs=decresing profits. CYA=cover your a$$. Every other business passes on the costs, you better too.

ex. NIPSCO is my areas' power company and b/c of increased costs to supply my area w/power, they incresed their bills. And guess what? They had a record year for real net profit!!!! Wow, amazing.