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f350
10-13-2002, 07:10 PM
Industry pricing, just a thought..A must read thread
Industry pricing, just a thought..A must read thread
I saw the article and thought it GREAT! He gets right to the point and makes valid points about the industry. This has woken me up and I am going to run our place of this mentality and direction. Others should take heed and listen.



Written by Mark Kline of Lakewood, Colorado.

Mr Kline owns a ScandiaTek repair shop in Lakewood Co. He holds a Master ASE – certified Technician and master automotive machinest certifications. He was also the president of Saab Rocky Mountain dealership Service and Parts in 1978



For the past five years , I have been trying to buy an additional shop. Each time I have found one , it’s been the same old story. The shop is run by an excellent, well meaning techincian and is jammed with loyal happy customers. Why shouldn’t they be, with cheap prices and great work? So I get the paperwork, and learn the truth about the shop’s financial health: little or no profit, and the IRS is their prime lender.
The shop is doomed because the “tired owner" is the business and the low price is its main product. If I bought it and brought the pricing up to where it should be, I’d lose most of the customers. Once again, ……it is too late. So I pass on the deal and sure enough, it soon goes of buisness with a parking lot full of cars.
Several years ago, a new shop opened near me….number 6, I believe. As usual, it has damaged my new customer business because the owner thinks he’s a marketing genius by setting his prices so low that no one can beat it. No one would want to!!! I don’t even know who he is competing with as it is so far below everyone elses.
So once again I must wait, and once again another of my competitors—over time will join the rest of these low ball marketing wizards in the unemployment line. But not until he’s made the public think the other well run shops are “Ripping them off” ! ( HOW TRUE IS THIS?)
If I could make a dream law, it would be that automotive shop owners must take a buisness course before being licensed to run a shop. Why is it so many of us refuse to VALUE our work? I even see this with long lived shops. Somehow they have managed to survived on miniscule profits’, being afraid, or to lazy, to price their work at a professional quality level. I could see if they did “poor” work, But these are often good technicians!
Now I have been preaching this for 21 years, and I have been called a number of unpleasent things by what I deem ”confused” other shop owners. I have never understood what is wrong with charging top dollar for TOP QUALITY WORK:; or what is off base about making a decent return on the risk and immense effort it takes to run a shop. Finally, I would love to know what is amiss in having the resources to hire and pay for the BEST personnel, being honest with the IRS, and having enough saved to retire on.
If you think about it, you will find you DO NOT set the price of your work, the cost of doing a good buisness does. So stop guessing and stop belittling our line of work. Throw out those pointless flat rate books. Pay your people salaries, including you. Forget about what the other shop is charging. Who say he knows what he is doing? Just because he is busy does not mean he is making money. Sit down with your accountant and figure out what it takes to run your buisness and meet your goals. Be brave, and actually make an “ honest profit”.

MY DREAM SEES A DAY WHEN ALL COMPETE ON WHO IS BETTER……..NOT ON WHO IS CHEAPER!!!!!!!

You want cheap work, pay a cheap price.

Mark Kline

Bruce... WE4 comment:,
I truly believe in this and the “smart” people will see this and respond accordingly. What good is paying a cheap price if the shop will not be there 3 years from that day? Honestly, Think about this….



our disease flows through all service type companies!!!

Guido
10-13-2002, 07:36 PM
I agree totally. Search this site and you will find some posts we made about 2 years ago on this very subject!

Its a problem in most large service industries. People don't even realize they are killing themselves for pennies (literally sometimes).

The only way this problem gets solved though, is if the industry as a whole brings prices up to where they need to be. Thats why its hard to make it work.

It all starts with the small city/town/state lawn and landscape associations. You don't have one?? Start one. If the "true proffesionals" in the area can all get on a level playing field (as far as prices go) they will all be much more profitable.

Sadly enough, there will always be the scrubs out there, looking for the quick buck, undercharging as a way of marketing.

Its sad.................

LAWNGODFATHER
10-13-2002, 08:50 PM
How very true.

f350
10-14-2002, 04:17 AM
forgive me if i seem a little out of line, but how can a thread about a rig and new trailer from capt. devo get 16 hit's yet this one was addressed only 2 times? this is exactly why the greens industry is in such poor shape. a lttle less ego and a little effort guy's.

Guido
10-14-2002, 05:45 AM
Originally posted by f350
forgive me if i seem a little out of line, but how can a thread about a rig and new trailer from capt. devo get 16 hit's yet this one was addressed only 2 times? this is exactly why the greens industry is in such poor shape. a lttle less ego and a little effort guy's.

Your exactly right. Thats the reason I quit posting so much. Its funny. I would get the question, "How much do I charge for this?" "Or That?" "Or This?" "Or That?" So I tried to write a few good posts on how to figure out your overhead, maintenance costs, profits, etc, so you can price ANY job, but no one wanted to read it. Who needs to know about the stuff written in the business forum right? :(

Its sad, but people say, who cares, I hate paperwork, I like to mow (even if their not making a dime).

And I still see it today, people posting, how much do I charge for this job, or that job? If they would just stop for a minute and learn how to set up a pricing structure, they would know the answer to how to price any type of job.

I wish more people in this industry would get more educated on running the business, not running the ZTR. Anyone can be a worker in this field, but the only business' that will survive with good profits in this industry are the ones ran by businessmen.

This is why the large chains have slowly taken over a huge chunk of the industry.

It really is sad.

65hoss
10-14-2002, 07:38 AM
Another part of the problem is some LCO's look at some of their local companies and see them working long hours. They have a couple of crews with nice new trucks. They see them running wild all over town. They assume they are making big dollars.

Then they assume I'm not working as much as they are. I need to be working all the time. If I lower my prices I can do more work. Yep, lower your prices you can do more work. But there goes the profit.

Oh, while I'm on the subject, the old line about "I have lower overhead so I can be cheaper" is crap. Why would you want to lower your profit margin because your overhead is cheaper? That is why small mom and pop companies are appealing. Lower overhead and higher profits are what smaller companies need. If your cost is $5 and your charge $6 because of lower cost, but the market will pay $15, who did you help?

awm
10-14-2002, 09:56 AM
this commentary very much worth reading..lotta good stuff there.

MacLawnCo
10-14-2002, 10:48 AM
Guido,

I completely agree. Just a quick thanks for your posts on finding costs. I read them a while back and they helped tremendously. I totaly agree with you as why the large co are taking over. Hopefully my co will be among them in the next few years.

Guido
10-14-2002, 01:51 PM
Originally posted by 65hoss
Oh, while I'm on the subject, the old line about "I have lower overhead so I can be cheaper" is crap. Why would you want to lower your profit margin because your overhead is cheaper?



Great point which needed to be made. I wish this post got more intrest because it means a lot more to the industry then who's stripes are darker and "How much should I charge to brush Ms. Gordens Cat"

If you can lower your overhead, or keep it down, thats the best thing you can do to make a killer profit. It gives you a bigger margin for error in bidding and helps you make more buck for the bang.......;)

Richard Martin
10-14-2002, 04:27 PM
65hoss wrote:

Another part of the problem is some LCO's look at some of their local companies and see them working long hours. They have a couple of crews with nice new trucks. They see them running wild all over town. They assume they are making big dollars.

Then they assume I'm not working as much as they are. I need to be working all the time. If I lower my prices I can do more work. Yep, lower your prices you can do more work. But there goes the profit.

I have the same "problem" here. A case in point: A friend and competitor named "Mike" had a lawn service for 8 years. His customer base was up to around 100 to 110, solo. He was working from sunup to sundown 6 and 7 days a week. He was driving all over the county to service these accounts. He was tired and his equipment was real tired. His mowers were literally rolling junk. Last fall his truck was torched (for real, there were other vehicles that got it that night) and he finally just quit. This Spring some of his former customers called me to get prices. He was cutting lawns for as much as 50% less than what I get. I would get the "Well Mike only charged me $17, why are you $35?" question. Then I would explain to them that Mike is no longer in business because he couldn't afford to stay in business.

scott's turf
10-14-2002, 04:58 PM
I love that line, "well the last guy did it for this" Well if he was so cheap than why are you trying to find someone else? I swear half the time these people are lying becuase I give them a price of almost double and they go with it. I think some of it may be a way for them to try an get a better price.

f350
10-15-2002, 12:12 AM
just wanted to bring this to the top...
hey do u dress up for halloween?

Guido
10-15-2002, 04:01 AM
Originally posted by f350
hey do u dress up for halloween?


I love it........... I'm with you 100% on this one. I can't believe this is not a hot thread, but the stripe phenominon and halloween cotumes are more important industry issues!

Gotta love this biz!!

SamIV
10-15-2002, 10:10 PM
Just before this season kicked in which is around April for us here, I dropped 16 clients and raised the price on the remaining by 20-25% depending on the type of account. All of my accounts pay a yearly rate and not by the cut now. I did not drop anyone untill all agreed to the price adjustment. Not a one complained. Then I dropped the accounts I really did not want in the first place.

I too was working too many hours and not making the money I felt I deserved for the time invested. I made more money this year than any previous year and I work less. Have more time to offer more proftiable services now also. I now make no less than $50.00 per hour plus on an average day. Yes when it rains I do make less.

If you want to work for less you are doing yourself a disservice.
If you do quality work get what your worth.

Thanks,
Sam