lost 2 customers to a low baller

[tgrebis]

Lost two customers. Each property is 35000 sq ft. I was charging 40 each, right next door to each other. These weren't very profitable to me since we only use 48' walkbehinds. It generally took about 3 hours labor to do both to a high quality. They both got someone to do them for $25 each. I can tell they were cut with one of those fast 61" riders, But 25$ each???!!! You got to be kidding me. What are they trying to do, get the whole neighborhood and then jack the prices up next year? How the hell are they not losing money on this deal? Are they subsidizing the lawns for all the other work in the neighborhood?
Just wondering what everyone thinks is the scam going on here or are these people just destined to go out of business real fast.

Tom

[65hoss]

Let them have it. At $40 each for 3 hours you were not making anything either. People like that will learn the hard way, one day.

[MikeLT1Z28]

i'd say they did you a favor if it was taking 3 hours to do them and you were getting $40 for them each. if the customer isn't happy and returns to you, jack the price up to where you should be.

[MikeLT1Z28]

i swear we aren't the same person! just known each other too long i guess! lol

[Doogiegh]

Originally posted by tgrebis
I was charging 40 each, It generally took about 3 hours labor to do both

I think some on here think you were getting $40 for 3 hours work or $40 for 6 hours work.

I believe from the chopped quote above, you were getting $80 for 3 hours work, which then seems to be a semi-fair price. Low-end, but not as bad as I think some on here interpreted it as.

Gary

[MikeLT1Z28]

i understood it as $80 for 3 hours, but that avgs out to 26.67 an hour. like you said, a little low. i say let em wear out their MTD's and Crapsmans on it!

[tgrebis]

80 dollars for 3 hours is correct. It is low but would be fair if I had a large rider. now the other guys, are charging $50 total. There is a pool you have to use a small mower on, etc. No way anyone good get these properties done in under two hours.

[tgrebis]

the main concern is that this wasn't taken by a scrub. It was taken by a larger outfit, but I don't know how legit the employees are. I don't believe anybody could speak english.

[65hoss]

I didn't misunderstand. $40 each=$80 in 3 hours.
I'm not questioning the $40 for 35,000 sf, I'm questioning why it takes 3 hours. If its taking 3 hours your not making nothing. And again, yes I know its a total of $80. That is barely covering your expenses assuming you pay taxes, g/l insurance, gas, mowers, truck, truck insurance, etc.

[tgrebis]

65hoss,

your right, thats why I am not upset about losing these lawns. They were the least profitable ones I had. I just can't understand how a larger firm can bid these so low.

[wattsup]

65 hoss is correct. Let it go. Sit down every night and do a profit and loss statement. Do this every night until you have a full understanding of your profits and your losses. You actually profited today. Most lco's have a minimum of $30 (in my area). If I were lowballed on a 35,000 sq/ft property it would not be at $25, it would be at $40. I would charge $50 on average for an acre lot which is basically what this is. You can not unload your trailer on a 35,000 sq/ft property for $25 and make money. No way, no how. This other company is scamming these people for other services to make up for the low price.

[Albemarle Lawn]

If you work 9 hours in the field, which means really about 12 hours after repairs, commuting, etc,

Then you may get 250/day = 1250/week

1250/week * 26 weeks = 32000/ year.

Then you have to buy fuel, mowers, insurance, vehicles, etc.

YOU WERE WAY TO LOW AT $40.

We alway get $60/ hour min with (2) crew. In the case of the 35,000 sf yards, we would be at $60 each minimum.

Ken

[TGCummings]

Nice breakdown, Ken.

I agree, you can't make $26.67/hour and make a living in the lawn game.

[cheapcuts]

Couldn't you make a living if you paid no tax if you made 26 an hour? I know that is illegal but could you? I think maybe this is the case. Employees are under the table also I bet.

[John from OH]

Originally posted by tgrebis
80 dollars for 3 hours is correct. It is low but would be fair if I had a large rider. now the other guys, are charging $50 total. There is a pool you have to use a small mower on, etc. No way anyone good get these properties done in under two hours.

I'm going to throw this out. Not every low price is a low ball price. A large company has more billable hours to spread their overhead recovery. As your company grows, your costs don't increase at the same rate. For example, you double your sales, your insurance, phone, office staff, electric bill, utilities, etc. don't double in cost.

Your production seems to low, 70,000 in 3 hours is only 23,334 square feet per hour. A 5' mower will knock those lawns out in less than half the time. They might be generating more per hour than you were. They may or may not be low ballers. Your equipment or production techniques may not match the property.
The other company might just be reaping the rewards of having more efficient equipment, productin, and employees. I remember a thread on here last spring. The area to mowed was x acres. Someone posted that with their 36" walk behind the could cut the area in x number of hours and they price would $xxx returning an hourly rate of about $40. I didn't reply, but a 5' machine in the same area could have produce the job about $40-$50 per cut less, with an hourly rate of $60. Who would be the low baller? I'm all for maximizing price and profit, but I'm also realistic about how market efficiency can make competitors numbers seem deceiving.

[scott's turf]

One buys faster, more efficient machines to make more money/hr. Thus is someone mows a lawn with a 36" for $30 and it takes him one hr, The guy with the Z should be able to do it in 30 min or less and still make $30 on the lawn. He has to to pay for his much more expensive machine. Back in the day when we raked lawns I would be lucky to get $20/hr, but considering the equipment cost it was basically just labor. Now having $500 blowers I price the job the same but now I make about $40-$50/hr. The price should never decrease because you have faster machines, that is unless those machines are cheaper to purchase and run.

[John from OH]

The price should never decrease because you have faster machines, that is unless those machines are cheaper to purchase and run. [/B][/QUOTE]

I wholeheartedly agree, but as the market matures, prices in general will go down. This is true in any industry. The other consideration, and it may not be true in this case, I see alot of pricing that is out of line with the market due to inefficiency (undersized mowers and poor production techniques) on a property.

The points I attempted to make are:

The larger the organization, the lower overhead per production hour and a lower hourly rate. We have on of the biggest lco's in our market working on the larger accounts at prices that the smaller operators can't make money on.


The more efficient the organization, the more competitive they will be in the market place.

Anytime someone comes in with a lower price doesn't necessarily make them lower ballers. I think that term is use too often on this site to justify losing an account. In this case it was stated that the other firm was a large organization using faster (more efficient) 5' (larger - more production capacity per hour, a 20% advantage) equipment. He stated he didn't understand how the other company could work cheaper than him. It took me years to learn that lesson. He also stated that his price would be reasonable if he had the same mowers. I used to moan and groan about others prices until I learned how those prices are established. It has nothing to do with his production and costs are, only what the competitor's production and cost are. A true lower baller would have trouble last long enough in the marketplace to become a large company. They simply don't have the ability to generate the profits needed to grow.

[Russo]

Originally posted by John from OH


The larger the organization, the lower overhead per production hour and a lower hourly rate. We have on of the biggest lco's in our market working on the larger accounts at prices that the smaller operators can't make money on.




John, I respect your position. Since you threw it out there, I'll throw this out there, too.

I have been an Ops. Manager for a VERY large landscape company. When you get that big, your cost per hour is not directly inverse to your revenue. You can incurr more costs in the areas of professionsl fees, DOT regulations, bad debt, workmans comp,training, mobilization,etc. Plus you are a big target for law suites. What I've seen happen many times is that margins can actually be lower for a big guy, so he tries to make up the difference in quantity because he has the ability to do so. There in lies the myth.

To me, this is a vicious circle because lower margins means less motivation to perform good work which means the loss of work. Before you know it, the "big boys" become so quantity oriented that they operate more like a marketing firm than a landscape company. Sales become more important than service. And what a great way to meet sales goals; by lowering the price and starting the process all over again.

So I'm asserting that it is the HIGH quantity of low margin work that can allow a big guy to charge less, not lower operation costs.

This is not word of God, just my experiences.

[Mowman]

If the guy is using a mower 2 1/2 times the size of yours maybe he's making what he needs to make a profit. If it took you 3hr's and it's only taking him an hour or less, at $50 he's doing alright. Overhead is the name of the game. Keep your expenses down and you can alway cut for less than someone the has the HIGH OVERHEAD COSTS.
JMHO

Mowman