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View Full Version : fundamental changes: consumers vs. green indiustry


HBFOXJr
11-10-2011, 02:59 PM
I read in a green industry trade mag the other night about one alleged guru saying that prices will continue to drop under pressure from consumers. Not only are they putting on the price squeeze, but he said they are expecting more.

So many publication consultants and writers, seem to be talking about doing more for your client while getting paid less or getting no bump up in price. I want to know who is doing what for me.

I like to cook, there for I grocery shop from time to time. I've noticed prices are really up. I used to make fun of how my mom talked about pennies in the store. I'm a many of dollars and pennies didn't matter to me. Especially when mom would drive 1/2 hr out of her way to save a dime.

Today, it is dollars in the grocery store, and the gas pump, electric bill, shoe store, Costco. Every where I go, prices are up. Bubba burgers not long ago were $7.99/2 lb box. Add $2, today. "1/2" gallons of ice cream are now in "cute little" containers of 48 oz. I think a pint is still a pint, but when will that be 12 oz? My favorite whole bean coffee at Costco used to be maybe a 2.5lb bag for $5+/lb, $13+ total. Now $6.30+/lb and a 3lb bag, total $19+/-. I've noticed many things at Costco now come at prices and multiples to make the purchase approximately $10-20/cart item. You all know more stories including the price of brooms, shovels, rakes, mower blades, etc.

So my question is when is the industry going to get a set of testicles and say we've given enough. If you are doing residential work, the sweat off our backs, and the backs of our employees allows people to make what is essentially a discretionary purchase of green industry services.

Personally I am tired of people in $300-$600k+ houses and real nice cars, complaining about fert prices, sprinkler blow out prices, or any thing else. I'm even more tired of the morons in this biz grovelling at the consumers feet for the privilege of serving them.

Why o why are guys winterizing sprinklers for 1970-1980 prices? The people have to have it done. They will pay the price.

2012 looks to be about the last year I can do anything to hold prices or give my customers more value. I have been doing it for several years now, by changing the way we do business. More pre paid irrigation plans get us to more sites in the spring for more service. Telling people when we are going to come and winterize their system, rather that calling them and asking when they'd like it done. That way we get better route density and more done for time worked. We've gone to robotic phone calls for some sales promotions to clients and appointment announcements and reminders. That cut mailing and office time.

Next year I will route all my sprinkler start ups and winterizing with mapping software with out regard for what month they have had service in the past. that will make for even better routes than this year. It's the only ace I have left. I know I'm not alone. I'm not saying we haven't grown sales and profits the past 2 years. We needed to after 2008 and 2009, and we deserve it for how hard we have innovated and worked.

Despite the success, we're just getting back to normal and have yet to make up for what we lost over those 2 bad years. I'm afraid if the industry doesn't not start to change how we operate and price, we will have established a new kind of normal for the consumer. It will be a normal, we can't live with.

wbw
11-10-2011, 05:39 PM
The blame doesn't lie with the consumer. The blame lies with your competitors. And with you. And with me. We chose an industry that requires very little in the way of start-up capitol or licensing requirements. This low barrier to entry allows for a lot of fools (self employed people many times working for wages, sometimes working at a loss hoping to make up for it in volume) as competitors. You will always battle this, always. It will always be a little worse with each economic downturn and a little better when things are going good. The only way to make it go away is to change industries.

HBFOXJr
11-10-2011, 06:10 PM
I'm hoping to retire with in 3 yrs. *trucewhiteflag*

You are right in all you say. However, consumers no matter whether residential or commercial are going to get a reality check pretty soon. Even low guys can't get much lower.

HBFOXJr
11-10-2011, 07:35 PM
The National Farm Bureau says the cost of making a traditional holiday dinner will increase about 13% this year.

PROCUT1
11-10-2011, 08:56 PM
wbw said in a few words a perfect summary of what i have been talking about on here for years.

Supply and demand.

Over the years the supply of lawn guys has grown like crazy.
Get laid off. Buy a mower, and live the dream of being your own boss.
No education, experience or training necessary.

Yes, Many if not most will fail...........Eventually.....

But there are 10 lined up to take their place.

HBFOXJr
11-10-2011, 09:20 PM
Ever since the late 70's I've seen tons of guys come in to the industry. What do you think, 5% had a business plan?

So they say, "I can do it for half of that". No one ever says, I can do it for 96% of that. It's so easy to divide by 2. Even a kindergarten kid knows what half is today. You don't have to be smarter than a 5th grader. You just need a kindergarten education for this business. :laugh:

muddywater
11-10-2011, 11:04 PM
I don't think it is the industry. I think it is up to the individual company.

I have seen one local company build a solid company on service, quality, and effective branding. They are almost always the high bidder, but do somewhere in the 3-4 million a year range.

I blame myself for my shortcomings...not the industry.

HBFOXJr
11-11-2011, 08:03 AM
I don't think it is the industry. I think it is up to the individual company.

I have seen one local company build a solid company on service, quality, and effective branding. They are almost always the high bidder, but do somewhere in the 3-4 million a year range.

I blame myself for my shortcomings...not the industry.

In all my griping I'm not saying I don't have a solid company, and I know darn well what mistakes I've made. I divorced the biggest one 8 yrs ago, and business has gone much better since. Seriously.

I beg to differ about problems not being industry problems. I agree with you on nearly every point you make. My experience tells me even more.

3 yrs ago I reroofed my old farm house. Tear off to the rafters, plus aluminum trim and soffit. Siding ready job. Big roof and project, $17,300. 2 other bids in the 17s as well. You can't get that in the green industry. Same thing when I shopped for replacement windows. Yes I have found variations in home work pricing, but there always seems to be kind of a going rate where guys are clustered.

The same close goes for auto repair and we can name more. Customers over the years are always amazed at the wild and crazy swings in our industry pricing. Although our prices are determined by individuals, the individuals we attract often appear to be the least savvy in pricing.

You can't talk about the low cost of entry, because if we take roofing, replacement windows and siding for examples, the investment is very low as well.

thunderthud
11-11-2011, 01:00 PM
We've been in a race to the bottom in terms of pricing. I came from the heavy and highway construction industry. I'm thankful to not be doing that right now because the race to underbid and keep working has depressed prices across the board. There are jobs I looked at the bid package, came up with what I would have bid, and watched the job be awarded for 3-4 million less than I thought was a bare bones bid.

Lawn cutting is really a business competing with a kid and a 21inch Craftsman as a barrier to entry.

We bought a complex in Florida this past year from a large bank and the company that was maintaining the property quoted me a price that I could not come close to touching doing it in-house. I paid to move three employees to FL, moved equipment and bought a shop just to do two properties in state and someone who did a decent job could do it for 15% of my cost without my moving expenses. Subtracting out my Union employee expenses, which are much higher than theirs most likely, how can they be making money? I pay roughly the same for a mower, I pay roughly the same for an edger, my insurance has to be less because of my size and buying power. My trucks are probably more expensive, but I still can't imagine doing the work for 15% of my cost and still making a living. I don't need to make a profit on my crews because they're a fixed cost of the property, not an hourly expense. The number they offered frightened me.

My employees are well paid, have excellent benefits from the Union, and retirement accounts to provide for them and their families after they're sick of working for me. These guys are the last of the middle class working right now. If you can do what I do for 15% of my fixed cost, and still profit what are you going to do in the future? Do you have health insurance? Can you retire?

In reality at the prices I have come across, perhaps we're not competing with the kid and the craftsman, we're competing with the guy who figured out a decent home mower costs $5,000 plus repairs and gas, and that is quite a few cheap mow and blows that require none of his time or effort.

What is the solution then? Should we be pushing for some kind of equipment license to operate a mower? Should be require a lawn care horticultural license to mow professionally? If you drive any commercial truck, you need a graduated CDL?

At what point can you change a dude or dudette with a mower into a pro who knows his or her business and gets paid what his or her skill level is worth? Or are we at that point where the pro can get paid what he or her is worth and the lowballers will continue unabated because they are basically unskilled lawn jockeys anyway? Because even in a prevailing wage state like Massachusetts heavy construction has state approved contractors working for less than I think the job is worth, and I have 20 years of bidding experience. What hope is there for the non-prevailing wage landscape industry?

HBFOXJr
11-11-2011, 01:47 PM
Great commentary from a different perspective. Years ago I said that there would one day be a whole new category of poor, older people. We have a few years yet to see that. They will come from the self employed service industry such as the green industry and similar.

They be be those that worked for less than real job wages and often off the books. Their SS will be low to non existent, there will be no pension, no savings and no health care.

Much is made of the single, unemployed or under employed black men in this country and the women than support them. I'm thinking there are a lot of under performing white men in this industry and others, pretending to be in business, while their significant other brings in a decent paycheck with benefits.

Maybe it's natures way. Look at male and female lions. Males do battle and the females support the troops. Who am I to figure this out.

I see irrigation jobs all the time where after the cost of materials, the job could not have generated more than $20-$25/hour. Even with $10/hr cash labor that only leaves $15 for the owner, equipment and operating the business. Huh?

Long, Long ago, in a far away mind, some moron arbitrarily decided landscape (installs) work should be sold for 2 or 2.5 times the cost of material. So a hundred pieces of rooted ground cover costing $20 and taking an hour to plant sells for $40-$50 dollars. 15 potted shrubs worth $10 ea. sell and planted in an hour yields $300-$375+. A large caliper tree costing $175 and taking 2 hrs to plant might go for $350-$410. Experienced guys will know their production time and costs and bid this job differently than the 2x company. 2x may win jobs that will hurt, experience will win jobs that pay.

muddywater
11-11-2011, 02:42 PM
Is it is possible to even live off of ss soley now? I am trying to contribute as least as possible now, because I believe it is a ponzi scheme. I don't think my chances are too great for receiving anything in 30 years and I am not sure I would want to live on 30k a year or whatever pathetic amount it ends up being.

Do you really bid against some of these people that are so much lower than you now? If a potential client got 3 bids in your area from the most recognizeable companies, would the others still be significantly lower than yours?

I find the longer I am in business, the less I bid against the super low guys.

What is your hourly rate for irrigation repair? What do you try to get per man hour on your other services?
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HBFOXJr
11-11-2011, 03:51 PM
Social security was never meant as a pension or a sole source of income. It was meant to be an assist. I'm behind the 8 ball because my x was on my payroll for a fixed salary and the balance of profit came to me a sole proprietor. She was a part time employee and she was a liability.

I have always planned to sell my biz when I retire. So I haven't shaded the numbers. I want to be able to justify the price when I do.

Yes we bid against low ballers. In irrigation installs we're almost always the highest price. However, there is real value in our work. Always more heads and zones for better coverage, matched precipitation nozzles, as built drawings, a manual exclusively written for our systems, weather based controls, and a real education about how to use the system to their best advantage.

When the good times were rolling we always got creamed. Consumers just bought as much crap as they could. Word of mouth was primarily bragging about how cheap a perceived deal they got from some schmuck.

In some ways I love this down economy. It has made consumers more careful with their dollars. They are spending discretionary cash more wisely. After 40 years, I have seen things come around.

When I started in 1972, I was the new kid on the block and had no credibility with consumers compared the few originals around. In the 80's things began to change. The older established guys were ditched in favor of the young guy just starting out. I missed my ride, but kept rowing.

The 90's were horrible for irrigation installs. I went from 2 install crews in the 80's to 1 and sometimes none in the 90's. One year I only sold 6% of my estimates. The next year I said cvbn it and told people we were booked up and not taking work. We became almost exclusively service. There was plenty of that from all the junk jobs built in the 80's and 90's.

Today, I price installs pretty much at cost or a little above. It helps fill service holes and prevents the loss of revenue. No one ever gets 3 bids here. It's often 5-8. 3 qualified bids? That was the old days.

Surviving this recession meant concealing our hourly rate, so we went flat rate for repairs. No more arguments about time, a helper not doing anything, how much the rate is. We shoot for around $80 in that flat rate, repairs discounted if a pre payed package. That doesn't get us rich. labor runs 35% of sales, equipment 10%, hard OH 15%. Add 15% as a salary for me, deduct materials, and profit might be 9%. No wonder I'm cranky some times.

muddywater
11-11-2011, 04:48 PM
I don't understand how you can flat rate irrigation repair.
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HBFOXJr
11-11-2011, 04:58 PM
I don't understand how you can flat rate irrigation repair.
Posted via Mobile Device

What don't you understand? It's just like a mini mulch job where you bundle labor and materials, or a landscape job where you quote a price for a job, a mowing job including edging and trimming.

muddywater
11-11-2011, 05:06 PM
Ok so you just don't tell them your hourly rate?

When people ask us how much for a repair, what do you say?

You can't compare a mulch job to irrigation repair because we cant "see" the problem on most irrigation repairs and really have no way to accurately bid the job until it is dug up.
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AI Inc
11-11-2011, 05:28 PM
You can't compare a mulch job to irrigation repair because we cant "see" the problem on most irrigation repairs and really have no way to accurately bid the job until it is dug up.
Posted via Mobile Device

Actualy that depends on the problem. Its easy to do with a broken head , a junk clock a new rain sensor ect.

HBFOXJr
11-11-2011, 06:00 PM
Ok so you just don't tell them your hourly rate?

When people ask us how much for a repair, what do you say?

You can't compare a mulch job to irrigation repair because we cant "see" the problem on most irrigation repairs and really have no way to accurately bid the job until it is dug up.
Posted via Mobile Device

We don't work by the hour any more. Period. We have a $49.95 diagnostic svc call to check the problem. It's not credited towards the repair. It's gets us to the door and checking the issue at hand. With flat rate it is easy to quote a pipe repair, valve replacement. We know how fast we can swap heads incl the swing pipe below and allow for a new swing pipe assy if needed. We have a different price if it is a below head leak and just have to replace some fittings.

Customers LOVE flat rate. Its easy to prioritize spending. Techs love flat rate. It's easy to tell a customer what something is going to cost and not make an estimating boo boo. I love flat rate because billing issues are a thing of the past AND I can charge what I need to provide high quality service. We have a very high retention rate for installs and service, IF we can get them in the door.

HBFOXJr
11-11-2011, 06:10 PM
Flat rate takes the focus off nit picky stuff like the hr rate, min 1/2 hr or 1 hr, what size increments, 1/10th or 1/4, parts pricing and puts focus on what's it gonna cost to get this system taken care of.

What I saw before is that some guys hourly rate was lower than ours but there parts were much higher. People focus on the hourly rate and not on materials. Did I say I love flat rate?

muddywater
11-11-2011, 06:53 PM
Actualy that depends on the problem. Its easy to do with a broken head , a junk clock a new rain sensor ect.

Yeah thats true. I will quote a clock over the phone. But trying to price a valve replacement or pipe break is when it gets hairy.

muddywater
11-11-2011, 07:20 PM
We don't work by the hour any more. Period. We have a $49.95 diagnostic svc call to check the problem. It's not credited towards the repair. It's gets us to the door and checking the issue at hand. With flat rate it is easy to quote a pipe repair, valve replacement. We know how fast we can swap heads incl the swing pipe below and allow for a new swing pipe assy if needed. We have a different price if it is a below head leak and just have to replace some fittings.

Customers LOVE flat rate. Its easy to prioritize spending. Techs love flat rate. It's easy to tell a customer what something is going to cost and not make an estimating boo boo. I love flat rate because billing issues are a thing of the past AND I can charge what I need to provide high quality service. We have a very high retention rate for installs and service, IF we can get them in the door.

How do you flat rate a manifold rebuild? or maybe you don't deal with pvc? It seems kind of hairy pricing any kind of leak. Or do your guys dig around first before they give the estimate?


Now that I think about it, the local air condition companies all do flat rate pricing. When I finally got their hourly rate out of them, it was $180 an hour!! So you might be on too something. I would love for my service tech to make $180 an hour.

HBFOXJr
11-11-2011, 07:24 PM
Yeah thats true. I will quote a clock over the phone. But trying to price a valve replacement or pipe break is when it gets hairy.

Paralyzed by fear? Chgs for the svc call, valve locate and lastly replacement. There is no mystery unless you've never done this. You know the range of time involved and who cares if you are over? There are more normal and easy than tough ones. 4 valve Manifold- no problem, charge for 4 replacements if you can't get just a single one out and back in.

This is a reason to always know production times for every thing you do. I have always made my guys keep and eye on the clock. You can't manage time if you don't know what time it is.

HBFOXJr
11-11-2011, 07:32 PM
I learned in the 70's to price my lawn maintenance annually for the client. If you didn't they'd quibble about a yard of mulch, clean or cut prices etc. We think we are finding that in the fert business now. It appears that people don't compute 6 x $50 as easily as $300/yr. They say, "that's reasonable". It flies in the face of what I heard in some places to break the price down to the lowest number. Now it may be just hit them with the bottom line.

We pay our mortgage by the month, insurance by the year, not by the week or some other small item.

muddywater
11-11-2011, 07:34 PM
Paralyzed by fear? Chgs for the svc call, valve locate and lastly replacement. There is no mystery unless you've never done this. You know the range of time involved and who cares if you are over? There are more normal and easy than tough ones. 4 valve Manifold- no problem, charge for 4 replacements if you can't get just a single one out and back in.

This is a reason to always know production times for every thing you do. I have always made my guys keep and eye on the clock. You can't manage time if you don't know what time it is.

Yes a simple valve repair can be done in less than an hour, but a manifold rebuild can take several hours... and sometimes you don't know how the stuff is piped in until you dig it up. Maybe you price plenty of cushion in your price?

I would be wary about flat rating a valve locate. How would you flat rate on a large commercial job?

HBFOXJr
11-11-2011, 08:34 PM
Yes a simple valve repair can be done in less than an hour, but a manifold rebuild can take several hours... and sometimes you don't know how the stuff is piped in until you dig it up. Maybe you price plenty of cushion in your price?

I would be wary about flat rating a valve locate. How would you flat rate on a large commercial job?

If skilled, you should be able to locate a valve in a 1/2 any where. Allow 90 min for a residential valve. Some times they are a pain in a bed with roots and wires but that is seldom. We have adjusted our attitude and simplified our lives and the lives of our clients.

Pipe over 1.25 inches and valves over 1" are additional. When you are working with 2-3" pipe and 2" valves things take 2-3 times longer.

PROCUT1
11-11-2011, 08:42 PM
If you bid a 50,000 contract and they told you for 48,500 it was yours......how many people would turn that down?

Next year the new guy wants that 48,500 contract. If he comes in at 45,000 he could get it.

Next year the next new guy wants that 45,000 contract. If he comes in at...........

When the overwhelming majority of people in this business have no clue where that 50,000 number came from to begin with, they still wont know when that same contract is 20,000 in a few years.

This is the easiest business to get into. But one of the hardest to try to run as a real business.
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HBFOXJr
11-11-2011, 08:53 PM
There are a many easy businesses to get in to with a low investment. go learn a little skill and do replacement windows, roofing, siding, deck building, concrete work, framing, etc.

It's not hard to run this business. It's hard to swallow the operating expense realities and just no to pricing that just doesn't work.

wbw
11-11-2011, 10:53 PM
Now that I think about it, the local air condition companies all do flat rate pricing. When I finally got their hourly rate out of them, it was $180 an hour!! So you might be on too something. I would love for my service tech to make $180 an hour.

The only way to get to that level is with flat rate pricing. I recently read an article about a plumbing company. The owner sat down and figured out what they need to hire the quality of tech they wanted, pay them what they were worth, cover the overhead and make the profit they wanted. The number was $250-260 an hour. So that is where they started pricing their repairs. The tech's are happy and that makes for happy customers. The customer never knows the hourly rate. He just know that a really nice really knowledgeable tech came out and took care of his problem.

HBFOXJr
11-12-2011, 12:07 AM
The only way to get to that level is with flat rate pricing. I recently read an article about a plumbing company. The owner sat down and figured out what they need to hire the quality of tech they wanted, pay them what they were worth, cover the overhead and make the profit they wanted. The number was $250-260 an hour. So that is where they started pricing their repairs. The tech's are happy and that makes for happy customers. The customer never knows the hourly rate. He just know that a really nice really knowledgeable tech came out and took care of his problem.

Amen. I have to go back to the people that enter this business, pricing their work as a fraction of any other low bid. I feel that is chronic in this industry compared to other home services I've mentioned before. Repeating again, even consumers are amazed at the goofy pricing of this industry. Too many people in this business are STUPID. Not behaving stupid, they are stupid. Smart people, when they found out they were a fraction of the cost of the competitors, would quickly raise their prices when they saw how much money they left on the table.

seabee24
11-12-2011, 01:28 PM
I would agree, I like this business, for the most part dealing with good people.

but lets be honest, its a bad one to be in. This is not an industry that is going to make you rich. ( at least not most people). all it takes is basic math to figure it out. yeah I can hire some one at minimum wadge, and i can turn a small profit on that. except, how does that worker pay all his bills and have a good life? -- cant be done. Go ahead figure out your labor rate paying your guys a 'good rate" one that will allow them to have a good life and insurance. see how much you would make?

too many companies have to take short cuts in training and all kinds of other things to save money.

for what we as owners take home, their is a heck of alot of liability. I could really sell all the equipment and invest that money in other areas.