View Full Version : Larger the LCO, the lower the price?
04-29-2011, 08:39 AM
This isn't a lowballer thread, just a legit question about pricing and size of operations. I'm mainly looking for answers from our larger members (more than 1 crew... maybe 2 or 3)
Can you bid at lower prices the more guys/crews you have? I wouldn't think so. Other than the idea that if you have 3 customers right in a row you can bid lower because you don't have to include travel time. (instead of $35/cut you can do $25 etc.)
I ask this because there are two big LCO's locally and the larger of them advertises that they do lawns for $25 no matter what the size. I don't see how they're still in business (other than the fact that he owns school busses as well and makes up for the loss in the lawn care with the bus driving).
They have professional equipment (Scags, Hustlers and Exmarks. Stihls and Red Max trimmers and blowers). Again, other than the residual income of the school bus driving, is there any reason he can bid lower because he's bigger?
04-29-2011, 10:00 AM
Economy scaled to size. Who's going to get mowers and truck cheaper the guy that is running one truck or the guy running ten?
Are four guy's jumping out of a crew cab going to move faster then a crew of one or two?
Larger operations have advantages. So do small operations. The small guy just has to promote his advantage when selling.
04-29-2011, 12:28 PM
So your answer is yes they can bid smaller? My confusion comes in that you pay for labor and equipment costs on multiple mowers (instead of 3 for a single crew, you pay for 6 or 9 with 2 or 3 crews). I understand that having a 4 man crew or multiple crews has it's advantages, but other than linear customers (all in a row) the price shouldn't decrease.
If I'm not understanding your response 32vld, please explain a bit further on the pricing "advantages" mulitple crews has.
04-29-2011, 12:38 PM
Actually 32lvd, I'm not asking about the size of a crew... besides, that can even be argued that more than 3 on a crew (of course depending on your clientel) and you're running into someone standing still for a long time (unless it's you the owner or manager of the crew... then that's fine. :cool:)
04-29-2011, 04:33 PM
I believe what 32 was getting at was that yes the larger companies can afford to sometimes bid cheaper. In referencing the larger crew thing I believe he meant that they can get the work done faster, therefore increasing total production for the day. Example they may be able to do 30-40 $25 yards a day as opposed to a solo operator doing 10. multiply this by several crews and they are some large numbers. Also you gotta keep in mind that these operations didnt get so large by doing strictly residentials. All the larger operations around here use residentials as filler work to supplement their large commercial jobs. I know one company who has a school district year long contract that is close to $1M
(mowing/maintence/cleanup/snow/sports fields) and other larger commercial jobs that also does probably at least 100 $35 (his advertised price) residentials to keep his multiple crews busy for a 40 hr week.
04-29-2011, 04:54 PM
In addition to the above, personally I have had 3 man crews knock out residentials in around 10 minutes (1 on ztr 1 trimming 1 pushmowin or also trimming and whomever is done first grabs the blower). This is doing a professional job too not junk. Put a bunch of these in the same neighborhood and you get some high production numbers!
I also know of one larger LCO in the area who told me years ago that he did enough residentials to be able to cover employee payroll for the week, thats where he got the number of yards he wanted to do and the commercials were what he paid his other expenses from and where his profits came from! Now mind you he doesnt pay his employees the best, believe he was starting them at $6 10 years ago, but he must be doing something right as he has been around for 25 years and seems to grow his business yearly.
04-29-2011, 05:43 PM
Yes & no. It depends on the owner, the employees, etc. Yes some things are cheaper in scales, for instance the payroll company I use has a minimum charge. Overhead can be dispersed overlarger amount of billable hours.
For me when I had 5 guys on, I payed them from the time they got to the shop, to when they left for home(or there abouts). Ive heard others only pay the foreman (or driver of truck) this way, others only gt paid from time they hit the first lawn to time they finish last. At times I felt the guys (mainly forman) abused the way I did things. If they were taking longer to get things done, he would skip a big property, & do a small one a day early, then drive back the next day to do the large site, adding up employee hours...but non-billable hours costing me money. Combine this, the addidtional abuse to equipment (its not there equipment), etc.
For me it barely added to the bottom line....not enough to make it worth it for me.
04-29-2011, 08:54 PM
Iresidentials to keep his multiple crews busy for a 40 hr week.
Bingo.......better to be doing a yard at $25 and keep them busy until you can get commerical property to fill up the week.
04-29-2011, 09:06 PM
It depends on the tactic.
Can you pick up 100 homes in one neighborhood with no drive time in between each? So your guys start the machines at the beginning of the day and dont shut them off till the end of the day......NO windshield time....No stopping at the deli between stops...No extra minute to finish your smoke when you pull up....No load/unload....Start stop....
If you could do that.....Could you do those lawns cheaper than you could, one lawn here....Drive to it, finish your smoke...Get out.....unstrap the mowers...Open the gate...Fire up....mow the lawn....come back to the trailer....weedwhack and blow the lawn....load the equipment...strap it down....close the trailer....get back in the truck....have a drink...take a breather.....drive across town to the next one.....
I had a 3 man crew that could do 250 residential lawns in 3.5 days....
How long would a "normal" route of 250 lawns take, and how many people?
Normally a 3 man crew wouldnt have a chance of mowing 250 lawns in 7 days....
04-29-2011, 09:11 PM
Good points already mentioned. Also think about that larger crews have a higher number of properties. More than likely most are charged within reason, but you still have a few outliers on both sides Thus, what they lose on the properties they bid low on, they can make up on properties they bid high. It averages out for them so to speak.
You rarely see a large company that only does mow and blows. The largest company I worked for had about 80 guys on the payroll with offices all over the metro Atl area before they split up. We only did residential yards on Thursday afternoon and Friday. We did lots of planting, bobcat work, irrigation, construction cleanup, major yard renovations.
Its hard to get big making 40 a yard. Pretty much anything besides mowing pays better in the landscape world.
The bigger companies also can take a hit on a residential yard knowing that they are advertising by doing this yard and have the potential of creating more business. Smaller guys need to try and utilize each hour to the max. They can't afford to take a hit.
04-30-2011, 12:34 PM
I agree with you on the landscaping aspect Will. I think using the bobcats and planting can bring in some serious cash because the customer will be paying for the use.
04-30-2011, 01:06 PM
If I pay some-one ten dollars an hour, I know their payroll deductions add about 20% more to their hourly labour cost. If they have medical/dental it's up to 27% more.
I then figure out what the company overhead costs are going to be for the year, including a return on investment so I can buy new equipment without paying out of pocket every few years. Divide that by the number of employable hours in the season, and then divide that by the number of employees.
If you're a bigger company you have more employees, the company overhead that you add onto what you charge per hour per employee is less.
If you have a small company with few employees, your overhead costs are higher per employable hour.
For a return on investment, ROI, say you have a new five thousand dollar mower.
You know it will last for five years. You should be trying to divide that cost and adding
it into the employable hours so that your clients are paying now to replace the equipment in the future.
Generally if your mower is five grand, double that amount, divide by the amount of employable hours over the five years the mower will last and add that number to the labour cost.
That way in theory, you pay yourself back for the new mower, and then in five years you have the cash on hand to purchase a new replacement mower too.
Keep an eye on the cost of the mower over the five years, if it goes up then you can adjust your prices.
The only problem with this scenario right now, is that times are tough for alot of us.
We may have to skip the addition of the return on investment for a year.
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