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View Full Version : Does volume make up for low price?


HBFOXJr
01-18-2012, 03:02 PM
http://www.eyesonsales.com/content/article/does_volume_make_up_for_low_price/

nwimaintenance
01-18-2012, 04:19 PM
No Way!! The only time I will do work for a cheaper price is if the account is near another account I already have. High volume and low price usually ends up in poor quality of work.

grass-scapes
01-18-2012, 04:35 PM
The article needed only one sentence. The one that said when you cut your price, you aren't actually cutting the costs, only the profit to you.

I am guilty of cutting price a bit at times to get a job. I do it as little as possible because once they have the price, they expect it. If you go up, they expect the next person to give the cheaper price. That's why Unlicensed, uninsured, and unknowledgeable people have done so much damage to this industry.

DEPENDABLE LANDSCAPING
01-18-2012, 06:27 PM
Well said grass scapes.
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wbw
01-18-2012, 07:34 PM
[QUOTE=nwimaintenance;4277663]No Way!! The only time I will do work for a cheaper price is if ....QUOTE]

Sounds a little contradictory to me.

wbw
01-18-2012, 07:36 PM
[QUOTE=HBFOXJr;4277591]Does volume make up for a low price?QUOTE]

Often times yes, often times no.

The real answer is...only if it comes with increased efficiencies.

wbw
01-19-2012, 10:04 AM
Let's explore this topic some more.

Is it profitble to use one part of your business as a marketing center for another part. I'll give an example of what I am asking.

I service swimming pools. This business paralels lawn service in many ways. There is little margin in tha actual weekly service but there is very good margin in equipment repair and replacement. Sort of the same relationship landscaping and hardscaping have to lawn mowing. Should I lower my already thin margin on service to increase my total customer base in order to get more repair/replacement work?

HBFOXJr
01-19-2012, 10:50 AM
Let's explore this topic some more.

Is it profitble to use one part of your business as a marketing center for another part. I'll give an example of what I am asking.

I service swimming pools. This business paralels lawn service in many ways. There is little margin in tha actual weekly service but there is very good margin in equipment repair and replacement. Sort of the same relationship landscaping and hardscaping have to lawn mowing. Should I lower my already thin margin on service to increase my total customer base in order to get more repair/replacement work?

I think when services are intertwined as described, you have to simply look at the big picture. You have to focus on your value, to your client. If they can count on your weekly service and it's good, they need to know they can count on you for a bigger problem when they have one. Since repairs are not done often, and knowing the challenges of informing clients of our capabilities, and keeping it in their minds, I'd concern myself with making sure clients call you first in case of breakdown. None of us like to hear " I didn't know you did that".

wbw
01-19-2012, 07:42 PM
Typically price is a big part of the customers initial decision making process. However, they very rarely price shop us after the initial meeting. We don't rape them on the extras buy we do far better than we do on the weekly service. I try to never quote an hourly rate for labor ($95). I prefer to give them a lump sum price to replace or repair an item. When questioned about how much we charge I tell them enough to make a fair profit and stand behind what we do.

MDLawn
01-20-2012, 12:20 PM
"Does volume make up for low price?"

If you're selling a mass produced item then yes.


If this is your business plan then this is the place your business will always be. You'll charge low and EVERYONE will know this due to the volume you'll build and if you try to raise prices those customers will drop you in a heartbeat. Price shoppers are exactly that. If you can't do it cheaper they will find someone who will.

Is this how I think most of lawn mowing is done....yes. Because everyone prices too low to start getting work and has the starting mentality of "Well if I get 10 more lawns I'll make X more dollars, if I get 20 more lawns I'll make XX more dollars, etc..... Soon enough you're servicing 100 underpriced properties and barely paying expenses let alone any additional labor costs and your quality is starting to suffer. Oh wait it just rained for 4 days straight....man that phone wont stop ringing with complaints of why I wasnt able to service people. Or you just work 80hrs a week and dont care about ever having a life. Please dont get me wrong running a business will take far more hours than those with your backside sitting on a mower and hard work should pay off.

The other side of this is "Well I know my business really needs to make $XXXX dollars per hour/day/week/month to operate, pay salaries, and keep everything running. I'd like to make X% profit so I can expand or upgrade equipment from time to time. I'll will need to hire employees to help with the expanded workload and I cant make them work over 40hrs without overtime. So I have 40hrs/week and X weeks per year to make this work. I need to charge $X/hr/day to make this happen. Whatever that $X/hr/day is will dictate the client you'll search out.

You can choose any way you like

Price Shoppers - plenty of them and easy to acquire, will drop you at the sight of a price increase, probably wont give extra work and if they do you better offer it a your same cheapo rate, referalls? yea right they're to busy shopping for someone cheaper than you! Oh yea if they do refer you guess what's the first thing they'll say. "Oh they do it real cheap too!"

Great Clients - very few and harder to get a lot of them, understand some price increases because you maintain such a high level of quality, offer you extra work that you make much more profit on because they demand quality, refer to their fam/friends/neighbors who also like great work, etc....

Once you learn how to walk away from underpriced work and not feel so beat up about it (some people take a "no" from a potential lawn mowing customer so personally) you'll never do that low priced volume stuff EVER again.

cpllawncare
01-20-2012, 04:38 PM
Well said MD Lawn.

MDLawn
01-20-2012, 07:59 PM
Well said MD Lawn.

Thanks.

I just get frustrated how people are afraid or think it's so wrong to make money. If you offer a service for a price and they agree and you deliver a superior product and they're happy.....then no one got ripped off. If you don't deliver and your quality stinks, then yes you ripped them off. I think more people whine about people getting ripped off because they themselves cannot acquire work on a certain price level.
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landscaper22
01-21-2012, 11:36 PM
My basic thoughts on how high my price is at a particular time boils down to supply and demand. Basic economics. What I mean is, if I find myself working nearly solo at that moment and time, I will go high end on price quotes. I think in the back of my mind there is no way I can even really make time for this, but if the price is right I will do what I have to. But if my employee situation has left me high and dry, and I pick up a lot of customers for a lower price, then I end up screwing myself. Doesn't make sense to kill myself for little profit.
But, if I have a great employee situation I may price the job lower, but I will still make a profit. I figure it is extra work for my employees and if they are doing the majority of the work, and I am making a profit, then it gives me a chance to show the customer how dependable we are, and how we want to provide excellent service. Then, during that year of service, I evaluate and can make adjustments if I need to.
Generally, I price on the high end anyway. It weeds out the customers I don't really care for.
I don't really agree with the whole volume thing, it just boils down to my situation at that particular time. If my demand is high, my price goes up. If I have an employee itching for more hours, my price may go down to almost guarantee a job assuming the employee is a good employee and I want to keep them around.

wbw
01-22-2012, 08:12 AM
Thanks.

I just get frustrated how people are afraid or think it's so wrong to make money. If you offer a service for a price and they agree and you deliver a superior product and they're happy.....then no one got ripped off. If you don't deliver and your quality stinks, then yes you ripped them off. I think more people whine about people getting ripped off because they themselves cannot acquire work on a certain price level.Posted via Mobile Device

Different business models require different plans.

Personally I have not run into this whining in person. I am a salesman at heart. I made a living for many years in full commission sales. I can acquire work at any price level. I can acquire more volume, faster at a competitive price point. If I were twenty years old and lived at home (I am not implying that you are or that you do) I would slowly build a clientele of hand picked customers and service them myself. However, I am an old fat man and I need to generate more income than that, faster than that.

MDLawn
01-22-2012, 07:14 PM
Different business models require different plans.

However, I am an old fat man and I need to generate more income than that, faster than that.

Agree

And I understand your position. I just know that if you go for low priced work that is what you'll be known for and stuck at. If you're just adding "filler" fo make ends meet then maybe it works. But if you need income......
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DA Quality Lawn & YS
01-23-2012, 11:17 PM
OP, great, you just started a WalMart thread. No place for that in our industry.

MDLawn
01-24-2012, 09:41 AM
OP, great, you just started a WalMart thread. No place for that in our industry.

Well each has a place just like these low priced high volume lawn companies. The cater to poor or cheap people. They are easy to acquire because, lets face it, they are the masses. Yes they do destroy some good businesses and convert customers who once did pay for quality. But thats the way it is now. "Where can I get the cheapest." Instead of loyalty to service most go wherever the cheapest price can be. I mean people have died or been hospitalized on black friday because of "cheap". Me I go where I know I can get expert help when I need it. Take a small locally owned electronics store vs. big box store. I know for a fact that the small store can and will give me the best service and support after purchase. The other stores make you call the 1-800 number to talk to someone in another country. Maybe that small store sells me a TV and surround sound for a couple hundred more but the service sets them apart. Not everyone shops there though. But the people who do are willing to pay that premium.

When I started this very small business I have I knew a guy who sold eXmarks. He gave me a honey of a deal on a 48" turf tracer and EVERYTHING else I buy. I keep going to him for stuff because I'd rather support him and he'll give me a better deal than some of the box stores. Even if he asked me to pay full price I wouldn't question him, but he wont ask full price or he'll throw in extra stuff. Why do I go there? He gives me the best service. I've called him sooo many times about problems and he takes his time to give me ideas. Thats customer service and I want that. Plus I tell everyone I know to go there to buy things that I know they sell.

For me I want the customer that appreciates what I do for them. These people have a check in the mail the day or two after your invoice goes out. They come out to talk to you and ask "Haven't seen you in a while, how's everything going?" They compliment your work each and every time you do get to talk to them. And when there is an issue or complaint both sides can easily come to an agreement to remedy the situation. Also you find yourself doing small extra's for these people because of this relationship. They value the service you bring and you value their commitement to you. It's a win win for both. These customers are harder to get but I can say that these ones are the ones who are on top of my quickbooks "Income Summary By Customer". I have a few duds too that are on the bottom.

For the guys who are doing the high volume low price route their customers just dont fit into my plan and thats ok. Just like the shoppers at the large cheap stores will never shop at that small specialty TV place.

I want to be the small specialty TV store. Excel at service that people are willing to pay for. Take more time to do, um yea. But the reward for your efforts can be worth it.

landscaper22
01-25-2012, 09:58 PM
I want to be the small specialty TV store. Excel at service that people are willing to pay for. Take more time to do, um yea. But the reward for your efforts can be worth it.

Yep, you end up with a lot less headaches that way. Leave the cheap customers for some other lawn service. Those people go through lawn services like water.

wbw
01-27-2012, 07:03 PM
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wbw
01-27-2012, 07:08 PM
Which store makes the most money?

I can almost guarantee you that the high volume guy does. I know that there are exceptions to every rule but I think it is almost impossible to make much more than 100k in the high end business where you pamper your select clients.
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landscaper22
01-27-2012, 07:28 PM
Which store makes the most money?

I can almost guarantee you that the high volume guy does. I know that there are exceptions to every rule but I think it is almost impossible to make much more than 100k in the high end business where you pamper your select clients.
Posted via Mobile Device

The main reason the high volume stores make more, and have their prices lower is because they buy in extreme volume. So, Walmart orders thousands of an item and the small store only orders 2-3 of that item. Walmart gets a much better price, so they pass the saving on. This industry is a little different. I guess if you go buy 30 FS-80 trimmers at the same time you could save money on them. But you are selling services not goods. So, other than maybe a discount for buying large quantities of equipment, you are going to have basically the same expenses whether you are a large LCO or a small one. Again, the main way to have high volume/low price in this business is if you can concentrate all your business in one area. I could do major volume and offer nice discounts if I could do 20 properties all side-by-side each day, without packing up and moving my truck. That is why I do offer good prices on larger accounts where I can spend several hours in the same place without moving.

grass-scapes
01-28-2012, 06:12 PM
The main reason the high volume stores make more, and have their prices lower is because they buy in extreme volume. So, Walmart orders thousands of an item and the small store only orders 2-3 of that item. Walmart gets a much better price, so they pass the saving on. This industry is a little different. I guess if you go buy 30 FS-80 trimmers at the same time you could save money on them. But you are selling services not goods. So, other than maybe a discount for buying large quantities of equipment, you are going to have basically the same expenses whether you are a large LCO or a small one. Again, the main way to have high volume/low price in this business is if you can concentrate all your business in one area. I could do major volume and offer nice discounts if I could do 20 properties all side-by-side each day, without packing up and moving my truck. That is why I do offer good prices on larger accounts where I can spend several hours in the same place without moving.

Or hire 4 or 5 guys per crew, paying them 8 bucks an hour, get it done in a lot less time, move on to the next one. If one guy quits, hire another, and another....

keep the labor cheap and plentiful. Thats the way the big guys do it.

MDLawn
01-28-2012, 09:39 PM
Which store makes the most money?

I can almost guarantee you that the high volume guy does. I know that there are exceptions to every rule but I think it is almost impossible to make much more than 100k in the high end business where you pamper your select clients.
Posted via Mobile Device

I actually thought I read something this past year that high end retailers did better profit wise than the major discount retailers. They said this was because the rich got richer and the rest cut their spending. So the major retailers did less because the the majority of the population was spending less. Are the stores crying poor...no. But just recently I heard jcpenny was changing their strategy by not having "sales" and just pricing stuff lower on a regular basis. Sounds like a "volume" sales place is hurting a bit. But high end retailers were doing great.

My point..... The high end is out there and people are willing to pay. Question is how many really make an effort to get these customers as its not east. Low end volume is just easier to acquire. Each system can work and each of us needs to choose which one works for each of us. Me...it's higher end or not at all. I don't feel any need to be a massive company serving massive commercial clients. I want that personal touch. Also maintenance work can lend itself to be more of a volume business anyways, but not always. Choose your side and do it better than everyone else.
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wbw
01-29-2012, 01:54 PM
Each system can work and each of us needs to choose which one works for each of us. Me...it's higher end or not at all. I don't feel any need to be a massive company serving massive commercial clients. I want that personal touch. Choose your side and do it better than everyone else.
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I am not knocking this approach. There is certainly a niche for this and the profit margins are certainly much greater. My real concern is that I think you are more limited on the growth. Everybody in business number two priority should be "How much can I sell this thing for?". I am an old fart and it is becoming more and more apparant that you have to retire someday.

P.S. This topic is of great interest to me and I hope we can keep this dialog going for a little while. sorry I didn't respond sooner but I went out of town this week. I honestly think that I am able to go out of town whenever I want because I don't provide that "personal touch".

MDLawn
01-29-2012, 02:48 PM
Wbw, when I say personal touch I don't necessarily mean me actually doing everything. I've been reading threads by etwman, ideal, pro turf, and perfectearth. I can't speak for them as I do not run their businesses. But they all agree about having that "personal" touch/communication with their clients. Each also run uniquely different business. I think one guy talked about meeting one of his clients each day for lunch, coffee, etc.... He's not running a mower, he's keep great communication lines open. Some talk on expansion while others feel they've reached their "sweet spot" with the amount of customers. Three out of the four seem to pretty much run the business side and are out of the field. That's my ideal situation too. But I think you'll agree that maintenance and installs probably need two different business models. But I don't know. I don't want to be bound by working a job (solo op) but rather run a business and like you said be able to take time and also retire. So please don't think when I say personal it means being solo doing jobs myself. I'd rather be meeting a client for lunch, maybe stirring up some new business.

This is a good dialogue and it's good to get a perspective from others who think differently, as long as we're all civil.
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MDLawn
01-29-2012, 02:53 PM
Which store makes the most money?

I can almost guarantee you that the high volume guy does. I know that there are exceptions to every rule but I think it is almost impossible to make much more than 100k in the high end business where you pamper your select clients.
Posted via Mobile Device

Didn't see this. Etwman seems to do this and from what I read he's is in the $1-2million range for sales. From his thread it seems like they do 8-10 large high end installs/year. He has I think 10 something employees whereas to do that much in mowing sales you'd need a ton of employees right?

But like I said before. Choose the business model you want and do it better than everyone else.
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wbw
01-29-2012, 10:38 PM
Didn't see this. Etwman seems to do this and from what I read he's is in the $1-2million range for sales. From his thread it seems like they do 8-10 large high end installs/year. He has I think 10 something employees whereas to do that much in mowing sales you'd need a ton of employees right?

But like I said before. Choose the business model you want and do it better than everyone else.
Posted via Mobile Device

Most definitely. And I was certainly thinking of maintenance and not installs. I like the recurring business and I think that the business itself is more marketable with steady income from repeat customers. I need to point out, in case I haven't already, that I service/maintain swimming pools. I have built pools in the past although never in the volume needed. Servicing pools and maintaining lawns are very, very similar businesses.

wbw
01-29-2012, 10:40 PM
As far as the "personal touch" goes I expect my guys to provide this as much as I do. I tell them that how we make our customers feel is more important than what we actually do for them. I remind them all the time that "It is hard to fire someone you like."

MDLawn
01-30-2012, 09:23 AM
You're definintely right about the steady income, it's something you can count on. What's interesting is that some of the large install only companies are offering maintenance programs, mainly to their install customers only, to control the maintenance side of thier installs and to create another revenue stream. 10-15 years ago you could go it alone on installs but today is a little more select market.

I'm not sure what goes into maintaining swimming pools but when it comes to lawn maintenance there is just such a major investment in equipment and that first $800 craiglist commercial mower is only going to go so far or last sooo long. I mean new machines are pretty pricey (yes you don't need new) and to have a high volume, low priced business with tons of employees means lots of machines, trucks, etc... hard to see how low pricing could work for the average guy that starts a lawn buisness. Not to mention just starting out and getting a large volume of customers, and employees to do the work, is not easy nor cheap especially in a market domintated by many with a similar outlook. Hard to differentiate yourself.

I'll add a spin on this that may change peoples opinions on what I say. Currently I am part time but have been contemplating a switch to running a full time business in landscaping/maintenance. It's been interesting to say the least. I've had the people approach me saying "Wow you do such a better job than my current service, what do you charge?" After evaluating their property and giving them a price people will say no based on an extra $20-$40 per month, $5/$10 per cut, etc.... Many just "want it done" vs really wanting a quality job. But I've also had others jump ship immeditately and take up my services. A friend I used to work for, who is part time but pretty much runs a full time business with employees now, would walk away from more work and not bow down to each customer who balked at his prices. I learned a lot from that. I honestly think he probably makes more, part time, than 75% do on here full time. He's got a great full time job and makes more in landscaping than the full time.

I'm really going to be crunching numbers this month to see what I need to do, but I don't think I can or ever will be the low price volume guy. I'll find another line of work before I create those headaches.