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GarPA
01-22-2004, 05:22 AM
2004 will be the first time I;ve clearly spelled out a fuel surcharge clause in most of our agreements. Bascially the trigger for the fuel fee is $1.75.
If needed at all, most of the fees per month will be small, but I dont intend to eat it if the price go bonkers as some fuel experts are predicting. I;ve read predictions that fuel may go as high as $3/gal later this year. Lets not get into the age old argument of "what happends if fuel prices are significantly lower than 2003."

I'm interested to hear from those of you who have added such a clause last year or this year, in your agreements. MOst of my renewals have been approved but I have 2 commercial accounts that are whining about it. (they whine about everything else as well). Just would like to hear about your expereinces if you've done this... thanks

rodfather
01-22-2004, 08:36 AM
I've done it Gary in the past. In fact, that is one of the VERY FEW things people IMO have whinned about. Increase fuel costs are something for the most part they understand cause they feel the same pain when they pull up to the pumps as well.

I used to use the $2 a gallon rule (2003), but I think I will change it this year to $1.75 like you as well. BTW, ask those 2 commercial accounts if they would like some cheese with their wine...LOL

GarPA
01-22-2004, 09:01 AM
Rod...thanks much for the feedback. Hearing your opinion is very valuable since you've been in this biz for 10 years.

I dont get too p'ff at most things customers say or d0 but I REALLY have a short fuse when it comes to this fuel issue. Guess who in the end pays for the fuel surcharges being levied by UPS, trucking companies, now my mulch suplier, and on it goes....yep, WE the consumer in the end pay for ALL the fuel charges.

I swear on a Bible that if these 2 object to this very small fee per month, if even needed at all, I will walk away from their accounts. I;ll be damned if I;m going to eat these increased costs. Margins on mowing are thin enough as it is....

ok now that my BP is off the scale I feel better...thanks again Rod for your perspective.

olderthandirt
01-22-2004, 09:14 AM
Not on mowing contracts but on other landscaping I just added a fuel surcharge on the bill and stated it as such. I only had one out of 25-30 that called and they just wanted to know what it was about. Granted it usually was aroung $10 but I think people are getting use to seeing it from everyone. And if it made problem I would of dropped it, kinda surprised it did not cause an uproar

Mac

Jimbo
01-22-2004, 09:21 AM
The fuel price would have to swing a lot before I put that into a contract (because I know people would complain). If you dont want complaints the best thing is to increase your price yearly to reflect inflating prices in general.
Most companies I deal with increase their prices in January, so thats when I try to hit them with my increase letter. They seem to deal with it better when they are handing out their own increases.

Makes sense to me.

Jimbo

GarPA
01-22-2004, 10:09 AM
agreed....but last week I was doing a little research on the long term fuel supply predicitions. One of the analysts said that it is well within the realm of possibility that 87 octane could go as high as $3 gal. While I dont think that will happen(oh yeah right...what makes me know more than they do) I dont think its a stretch to think that 89 octane could reach more than $2 a gal. if I were to build lets say 2.25 in my renewals, they'd have a sht fit over that as well...and then I have the issue of fuel coming down below 1.50 and people wanting "credits"...which some other industry watchers say might also happen. I just think that the fuel clause is the fairest and most accurate way to handle it....just my opinion however

DFW Area Landscaper
01-22-2004, 10:28 AM
I'm still in the process of writing up my 2004 residential service agreement. Perhaps I should add a line item in the payments and services section of the agreement that says that I will assess a fuel charge of an additional 10% on all services if the price of 89 octane gasoline meets or exceeds $1.70 per gallon.

Does anyone have a written contract that spells this out?

Please post example wordings of fuel surcharge.

Thanks,
DFW Area Landscaper

lawnman_scott
01-22-2004, 08:55 PM
Would it not be more efficient to base your prices on gas costing $2.50. How much would that increase your bid? and no complaining.

DennisF
01-22-2004, 09:19 PM
I've informed all of my accounts that if fuel exceeds $2.50 per gallon that I will tag on a fuel surcharge based on the number of total hours that I work on their account. My average account takes approx 30 minutes per visit or about 2 hours per month. I have figured that my equipment is using about 2.2 gallons per hour based on total hours of operation from last year and total fuel comsumed during that time. This means that each account averages about 4.4 gallons of fuel use per month. If fuel rises from $1.50 to $2.50 it will trigger a fuel surcharge of $1.00 X 4.4 or $4.50 per account per month. I think that's fair and I have not heard any complaints (yet), but I'll bet there will be some whining if and when that happens.

mtdman
01-23-2004, 12:01 AM
In the past when gas has gone over $2 my customers have always been very nice and considerate about it, several offered to pay more. This year I'm going to add the fuel clause if gas goes over $2 per gallon, and don't really care if they like it or not. That extra added cost comes outta my profit.

GarPA
01-23-2004, 05:02 AM
Dennis ...thats also how I've calculated it...becuase I keep painfully detailed records all year on costs per account, I was able to put an example in each renewal ....It would be extremely rare, even for a larger commercial account, that the fuel charge would be greater than $10 per month. But as you a few dollars for each account each month, can add up to a total fuel cost that is not insignificant

impactlandscaping
01-23-2004, 06:19 AM
We have been charging a $ 1.00 fuel surcharge per cut on all mowing accounts since '02. Conditional release being gas falls below "x"$$ , and no surcharge.I forgot to add the surcharge in October, and everyone got a freebie.. I added 4.00 per hour for dump truck time as well, and have got no complaints...yet

mmacsek
01-23-2004, 07:13 AM
Our fuel surcharge clause is, "If the price of regular unleaded rises to $2.00, a 2% surcharge will be added." I should probably drop it to $1.75 a gallon. I see your point with how much time you spend at each account to determine the increase. Don't foget the fuel usage in your truck(s). That remains constant no matter how long it takes you to cut. Matt

GarPA
01-23-2004, 07:29 AM
Actually Matt, the fuel used in the vehicles comprises most of what is in our fuel surcharge. I know the mileage between each account so the "one way" mileage is how I determine the fuel for that account for that month, in additon to the fuel used in the mowers. At 9mpg you bet I take that into account on the fuel surcharge.

James Cormier
01-23-2004, 08:12 AM
you guys dont know how to budget if a $.50 raise in gas prices effect you enough to risk pissing off a customer and losing them

GarPA
01-23-2004, 08:24 AM
I guess that means that UPS, Fed Ex, mulch and material suppliers, airlines, trucking companies, and any other business where fuel is a significant operations cost, also do not know how to prepare an operarting budget..... or is it that we dirt-workers should once again should take it in the ear because we really don't have a for-real business?

mtdman
01-23-2004, 10:46 AM
Originally posted by James Cormier
you guys dont know how to budget if a $.50 raise in gas prices effect you enough to risk pissing off a customer and losing them

It's got nothing to do with budget. It's totally about your costs eating into your profits. I for one have to make a living off this business, and every $ extra I spend at the pump when gas prices go up comes out of my bottom line. Every other business that depends on gas as a cost does the same thing, I'm not going to eat the costs. Budget all you want, I'm getting paid accordlingly.

James Cormier
01-23-2004, 10:55 AM
That's boloney.....I use ups almost weekly and I dont get fuel surcharges......know your numbers

DFW Area Landscaper
01-23-2004, 10:57 AM
I just added a line item to my 2004 residential service agreement. It reads as follows:

"A fuel sur-charge of $3.00 per billing statement will be added if the retail price of 89 octane unleaded gasoline exceeds $2.00/gal during the statement period."

Does that sound fair?

Later,
DFW Area Landscaper

mtdman
01-23-2004, 11:03 AM
Originally posted by James Cormier
That's boloney.....I use ups almost weekly and I dont get fuel surcharges......know your numbers

They don't charge a surcharge, they just up your rates. Airlines charge a fuel surcharge and up them as their costs go up. I would rather add a surcharge to my customers that can be lowered if the gas prices go down than raise rates halfway through a season, after I've already agreed upon a price for the season. If gas prices go up and stay up, you can raise their rates next year and drop the surcharge.

Five Diamond Lawns
01-23-2004, 12:09 PM
Let's do the math.

2003 my gas cost was $6,000. For this exercise let's say my average gas cost was $1.60. That's 3,750 gal. of gas.

If gas goes up to an average of $2.50, that's 3,750 X .90 or $3,375 out of my pocket for doing the same work.:cry: :cry:

I work to hard for that :mad:

The only thing I don't get is how we justify $4 per account per month? If you guys are saying you figure a normal res. account to use 2 to 2.5 gal a week and we are figuring gas going up at most $1 per gal compared to last year. Where does the $4 come from?:confused: :confused: :confused:

James Cormier
01-23-2004, 02:03 PM
It comes from someone saying....Hey lets add $4.oo

So if last season's gas price was 1.60 and next year it goes down do you give a discount?

All I saying when I do my annual budget, I budget high for things that go up & Down.
So I am ready for sudden changes

When you budget for next season and you plan on paying 1.60 then you need to re-think how you set up your budget.

And fuel goes up and down up and down, I remember back in the 80's paying 1.75....then in the 90's it was .99....now its back up to 1.50 (New england). SO to be safe I budget fuel at the highest rate I ve paid in 10 years + 20%

BTW..airline tickets are cheaper now then they ever where, Ive been going to FLA every winter and I have never seen them as cheap as 79one way from boston,

Grounds Control
01-23-2004, 02:12 PM
i like to incorporate this price into the service charge. have you ever read your electric bill? half of athe actual cost is transmission charges, etc.....

it's nice to just pay a bill and not worry that your being nickled and dimed to death.

James Cormier
01-23-2004, 02:14 PM
"It's got nothing to do with budget. It's totally about your costs eating into your profits" mtd says

I'm...thats budgeting, knowing your costs and not letting them eat your profits

Flex-Deck
01-23-2004, 02:30 PM
mtdmaster - what if fuel costs drop to $1. Are you going to give them a rebate?

I agree with James Cormier - Fuel costs are such a small percent of total overhead, WHY would you even think about having a customer the chance to be somewhat disappointed over such a small amount?

If you are operating on such a shoestring as to where a 50 cent fuel increase is going to put you under, maybe something else is in order? Not trying to be sarcastic, but just seems to me that 50 cents an hr. in overhead changes should not elicit large contract changes etc. Am I wrong?

GarPA
01-23-2004, 02:39 PM
I know my numbers, inside out, mileage, time and fuel on each account, and on and on....the point of this thread was not to add surcharges because gas prices may be "high"...obvioulsy one could project fuel costs at $2 gal and would probably be ok. Doesn;t take a financial genious to pull a number like that out of thin air and hope its fair for both parties. Rather, my consideration for this clause was based on the fact that there are widely varying opinions on where fuel prices are heading this year....some analysts say $3 a gal is not out of the realm of possibility...some predict lower than 1.50.

One could choose to ignore these forecasts,or take them with a grain of salt, or pick one end of the price spectrum, or an avg.

Perhaps I need to buy a new Crystal Ball and box of tea leaves so I won't have to stoop so low to be asking my custumers to adequately pay for the services and products they receive. If I can't find the right Crystal Ball, I guess I could just eat the increased costs...on the other hand, I could overcharge them so as to avoid the dreaded fuel clause.

LAWNS AND MOWER
01-23-2004, 02:45 PM
I've posted on this issue before and I'm totally against a fuel surcharge. Raise your rates accordingly before the season to cover your arse, and if they question you, tell them the "cost of doing business" keeps going up. Insurance, labor, GAS, etc.... Don't ever put yourself in a corner, and blame it solely on gas increases. I realize I'm breaking the rules Gar, but the issue of "what if the price of gas drops" needs to be addressed. Give them a discount if gas drops to .99/gallon?? I can easily gross $500/day (solo) using 8 gallons of gas. Say gas is $1.50, $12 is my total fuel cost for the day, which equals 2.4% of my total gross. OK, gas goes up to $2.50, now my gas expense is $20 or 4% of my gross for the day. Not sure about you, but I can easily absorb $8 extra in operating expenses per day, considering I'm grossing $500.

Flex-Deck
01-23-2004, 02:46 PM
Garpa - If your fuel costs were $6000, then your gross must be in 7 figures or close - What is the percentage of gross, - about 2% maybe - if it is a lot higher, maybe you should think about a diesel power plant. (1/2 the fuel usage, and about 4 times the life expectancy)

GarPA
01-23-2004, 02:49 PM
Flex...3rd proverb from I dont remember where.......

"manage the pennies and the dollars will come".

And I beg to differ that fuel costs are a small % of overhead. Not at all true for a smaller operation that does not have a large payroll. For the sake of an example, a $500 per month fuel bill is not peanuts to a small operation. If fuel goes up from 1.50 to 2.00, thats a 33% increase...which means the little company's monthly fuel bill, for the same amount of gas, just went from $500 to $665. Pocket change? I beg to differ...especially in a business where the margins are thin already

Flex-Deck
01-23-2004, 02:56 PM
You say a small operation - That is mine - One person - One mower running - The mower grosses on average $80 per running hr. when I am mowing. It burns 3/5 gal of diesel @ $1.50, and 1 gal of gas @ $1.50 = $.90 + $1.50 = $2.40 per hr. for fuel.

This is 3% of the gross the mower produces. This is a mower that has two engines, a diesel and a gas - mows about 6 acres per hr on average. Am I going to quibble about another $1 or even $1.50 per hr. NO. I will just figure out another way to get a bit more efficient.

Here is the mower btw

DUSTYCEDAR
01-23-2004, 02:56 PM
just raise the price.
no reason other than the cost of doing biz.
all my bills went up with no reason other than they felt like raising them
phone, gas, diesel, ins, advertising
just tell them it now cost more
why work 4 less

Flex-Deck
01-23-2004, 02:57 PM
Here is the mower
http://Wide Deck

Flex-Deck
01-23-2004, 03:00 PM
An increase from $1.50 to $2.00 can be looked at 2 ways.

At $1.50 you are paying 3 units of 50 cents.

At $2.00 you are paying 4 units. The extra 50 cents on the new $2.00 (4 unit deal is only 25%).

As they say - Figures don't lie, but Liers Figure
Thanks Brad

James Cormier
01-23-2004, 03:01 PM
I dont think the margins are thin because of fuels prices.

There thin because any laid off factory worker or teacher can buy a truck and mower and now there a Landscaper, or kid out of high school with a bronco and a trailer is a pro at mowing lawns but dosent know the first thing about running a business.

"One could choose to ignore these forecasts,or take them with a grain of salt, or pick one end of the price spectrum, or an avg."

Which would you do, if your running a business I would hope you would pick the high end of the price spectrum.

Its not about ignore forecasts ( Ive read that enough oils fields have been found to supply the world with Oil to last 250yrs at our currnet rate of demand)

And if your gonna say what if it goes up, you gotta say what if it comes down. Common sense

DUSTYCEDAR
01-23-2004, 03:01 PM
flex is right about the time is money point
but u cant eat all the price increases
u have 2 do something every little bit helps

GarPA
01-23-2004, 03:02 PM
you guys make a valid point about fuel as a % of revenue...

I think maybe where we differ here is what we believe the long term fuel costs look like...I dont sweat them going up 50 cents a gal even if I didnt forecast that figure. I'm more concerned about a huge increase..way beyond what we forecast.

I just get so sick and tired of hearing how bad pricing is in this business, and low ballers, and on it goes...we dont suffer from low pricing, and I dont plan to start anytime soon.

Lets just agree to disagree on this becuase it really is up to each person how they want to account for fuel costs...I do believe the thread started by saying something to the effect of "IF you use a fuel surcharge....". I am well aware that many guys dont like the clause, and I respect their opinions. Lets move on... and not get into one of infamous beat-it-to-death threads.

DUSTYCEDAR
01-23-2004, 03:04 PM
yeah but i just got a new hammer:blob2:

James Cormier
01-23-2004, 03:07 PM
:)

GarPA
01-23-2004, 03:10 PM
hah....I think you'll have a chance to use it a few times here....I need to go out and fill up the snow throwers with Texas Tea...as Granny Clampett used to say....

Appreciate the different points of view....chow

Flex-Deck
01-23-2004, 03:17 PM
Cool - :p :D

65hoss
01-23-2004, 04:14 PM
Originally posted by Flex-Deck
You say a small operation - That is mine - One person - One mower running - The mower grosses on average $80 per running hr. when I am mowing. It burns 3/5 gal of diesel @ $1.50, and 1 gal of gas @ $1.50 = $.90 + $1.50 = $2.40 per hr. for fuel.

This is 3% of the gross the mower produces. This is a mower that has two engines, a diesel and a gas - mows about 6 acres per hr on average. Am I going to quibble about another $1 or even $1.50 per hr. NO. I will just figure out another way to get a bit more efficient.

You are a dentist that cuts your church and church cemetary.

When you start cutting 50-100 properties a week and realize the only fuel you consume isn't the mowers, i.e. truck, then you will have a more realistic idea of what fuel cost can do.

I don't sweat the small increases. Those are not a big deal if you have priced your jobs correctly. But big spikes can make big differences. Cost of fuel in mowers isn't as big a deal as for the trucks. They use a lot more fuel on average.

Flex-Deck
01-23-2004, 04:28 PM
65Hoss - You are absolutely correct - I do mow some properties for hire - am insured etc. I build into my quotes an unload cost. It would probably be my problem if I booked 5 properties that were 20 miles apart, but from most of the members here, it would appear that their territory is somewhat gaggled together, or at least most of them try to.

I try to figure my cost per hr of actual mowing, and bid that + what I want to make an hr. and then add the unload fee (I do not mention this as a separate cost in the bid - One total number in the bid only) and I try to arrange and bid properties in my area in such a way that the unload part of the bid is $1.50 per mile.

I see your point though, and I think in my own way, I do address that situation. :rolleyes:

grassrootsinab
01-23-2004, 04:44 PM
Consider yourselves lucky!! Up here in the great white north we 're paying 68 cents per litre (I think about 4.2 litres to US gallon so that makes it 2.72 a gallon!!! And I'm in Alberta where we produce the stuff...in BC or Ontario its worse...up to 80 cents a litre. Wish I could get some of that cheap fuel!!

mtdman
01-23-2004, 04:57 PM
It's not the $2 I'm worried about, it's the $3 and $4 per gallon. 3 years ago when gas went over $2 a gallon, my costs doubled and I wasn't able to recoup that $$. I am determined to have a clause that lets me up my price if gas goes up. If I were to budget for $4 a gallon, my rates would not be competitive, and I believe people would be more upset about that than paying and extra amount for a limited amount of time if gas prices do rise.

Really, it's 6 of one, half dozen of the other. I'm doing it this way this year. But I really do appreciate all the concern for me and my customer's reactions.

:rolleyes:

GarPA
01-23-2004, 05:17 PM
Hoss you used the word I should have used to explain my point a little more clear....Big "spike" like you said, is what concerns me...mower fuel is really no big deal compared to the vehicles as you pointed out...

I'd bet though that we all have a price point at which we would do something about fees...maybe its not $3 gal...maybe its 4 or 5 or 6...but at some point, even those who dislike the surcharge might have to reconsider the issue....what that number is, is up to each business owner...but I bet its there for each one of us

DennisF
01-23-2004, 05:37 PM
Originally posted by James Cormier
That's boloney.....I use ups almost weekly and I dont get fuel surcharges......know your numbers



http://ups.com/content/us/en/resources/find/cost/fuel_surcharge.html

65hoss
01-23-2004, 06:16 PM
Originally posted by DennisF
http://ups.com/content/us/en/resources/find/cost/fuel_surcharge.html

Guess his balonoy got cheese and bread on it.

:D :D

GarPA
01-23-2004, 06:22 PM
touche' Eric....and "amazin'"

Grounds Control
01-23-2004, 07:14 PM
i just want to point out that the fuel surchage is not applied to all services. oddly enough, ground transportaion (gas and diesel i assume) doesn't get it but air does.

i like to keep my contracts short, sweet and simple. i like to have the least amount of numbers on there followed by a detailed service decription and priced accordingly. Like anything there a risk you take with no clause, but it's one i'm willing to take. it seems to "corperate" and besides i'm not UPS.

one thing to note, however, fuel prices will go up and down according to seasons and holidays.

Expert Lawns
01-23-2004, 08:39 PM
just a quick thought. when you guys are adding up your numbers, are you including 2-cycle gas as well? i run premium in my 2-cycles, and that would affect the total annual fuel costs emmensly. just wondering.

GarPA
01-24-2004, 02:41 AM
yes...we keep a a separate record for 2 cyc fuel

James Cormier
01-24-2004, 10:40 AM
HeY your right, I had to go back 4 invoices to find the fuel charge,
BTW it was $0.19 on that invoice, For a package I sent across the country.

mtdman
01-25-2004, 03:03 AM
Originally posted by James Cormier
HeY your right, I had to go back 4 invoices to find the fuel charge,
BTW it was $0.19 on that invoice, For a package I sent across the country.

Yep. But figure that 19 cents on every package that goes across country, or whatever the charge is for any package, applied to each package UPS handles, and that's a lot of $$. The fact that UPS is willing to watch that 19 cents and that it's important that that 19 cents gets passed on to the consumer should tell you that every little bit counts. If a big company like UPS watches the smallest expense and compensates for it, why shouldn't I?

Richard Martin
01-25-2004, 06:12 AM
Originally posted by mtdmaster
The fact that UPS is willing to watch that 19 cents and that it's important that that 19 cents gets passed on to the consumer should tell you that every little bit counts. If a big company like UPS watches the smallest expense and compensates for it, why shouldn't I?

Because you're not working on the scale or the profit margins that UPS is.

For example if UPS delivers 100 million packages and they charge an extra 19 cents on each one they have recouped 19 million dollars in expenses. But if you cut 1 thousand lawns a year and charge an extra 19 cents a lawn you are only recouping 190 dollars.

Additionally why would you single out fuel prices as the only thing to surcharge for? Is it the only expense you have that price fluctuates? Of course it's not. Everything we buy from blades to insurance price fluctuates. Even the electricity you use to power your computer that you write invoices with price fluctuates from winter to summer.

You just need to make sure that your anticipated profit margins can absorb the additional price changes in fuel.

Everyone here at Lawnsite is quick to tell another member that they will learn how to bid properly if that member posts a post telling how they have underbid a job. Well I am telling everyone here, that is considering fuel surcharges, that they will learn how to budget their business after they finally sit down and see what their real costs are, can figure anticipated profit and can charge accordingly.

Grounds Control
01-25-2004, 08:49 AM
sorry, screwed up

DennisF
01-25-2004, 09:20 AM
Originally posted by Richard Martin
Because you're not working on the scale or the profit margins that UPS is.

For example if UPS delivers 100 million packages and they charge an extra 19 cents on each one they have recouped 19 million dollars in expenses. But if you cut 1 thousand lawns a year and charge an extra 19 cents a lawn you are only recouping 190 dollars.

Additionally why would you single out fuel prices as the only thing to surcharge for? Is it the only expense you have that price fluctuates? Of course it's not. Everything we buy from blades to insurance price fluctuates. Even the electricity you use to power your computer that you write invoices with price fluctuates from winter to summer.

You just need to make sure that your anticipated profit margins can absorb the additional price changes in fuel.

Everyone here at Lawnsite is quick to tell another member that they will learn how to bid properly if that member posts a post telling how they have underbid a job. Well I am telling everyone here, that is considering fuel surcharges, that they will learn how to budget their business after they finally sit down and see what their real costs are, can figure anticipated profit and can charge accordingly.

I fail to understand your logic.

UPS uses fuel surcharges to offset the cost of fuel for deliveries. They and many other fuel dependant business's do this on a regular basis so that they do not have to permanetly raise prices for their service. The airlines have been doing this since the 1980's. If the price of fuel drops..they drop the surcharge. If the price of fuel drops I will drop any fuel surcharges that I pass on to my customers. If the price of fuel drops do you lower your set mowing price?

The point is consumers are more likely to respond positively to a temporary surcharge ( if indeed it will be needed at all ) than they would be to a permanate price increase.
I have spoken with all of my customers and informed them that I will only add the surcharge if fuel reaches $2.50 or more, and that I will eliminate it if prices fall below $2.50. None of them has complained, but the moment I suggest a permante price increase the complaining begins.

Lux Lawn
01-25-2004, 12:19 PM
I am raising prices this year to make up for the added fuel charges I have to pay.Its just like mtdmaster said why should we pay the extra for fuel and not pass that on to the customer when they know about the fuel prices everytime they fill up or see it on the news.Sure some will complain and even switch companys but we have to make a living to it all how you present it to the customer.They go to there jobs everyday and expect at some point in the year to get a raise why shouldn't we.

mtdman
01-25-2004, 01:39 PM
Additionally why would you single out fuel prices as the only thing to surcharge for? Is it the only expense you have that price fluctuates? Of course it's not. Everything we buy from blades to insurance price fluctuates. Even the electricity you use to power your computer that you write invoices with price fluctuates from winter to summer.

You just need to make sure that your anticipated profit margins can absorb the additional price changes in fuel.

I do have other costs that fluctuate. But not as much and not with as direct an impact as fuel fluctuations do. It is the big price spike that might happen in the summer, the $2 to $5 increase, that I worry about. My other costs don't fluctuate and vary as widely as fuel costs do, and fuel costs are a leading expense for me. I am going to insure that I don't get bitten by those fluctuations.

And the point with UPS is, if they see an expense that bites into their profit margin, and compensate for it with surcharges, why shouldn't I? Just because I run a smaller business I'm supposed to eat increasing costs, not recoup expenses that spike and fluctuate? Why am I some supposed to eat that? UPS brings in far more than I do in profits, I think I should be concerned with where my profits go just as much as they are. And I am going to follow their example in recouping those expenses.

As far as budgeting goes, as I said before, I can budget for a minor increase in fuel prices. But anticipating a higher increase and building that into my price would raise my rates beyond competitiveness. And those increases might not come.

I am not telling people they should do it, I'm telling people I will do it. Whether or not others do as well doesn't matter to me. Speaking of telling others how to run their business and what they do is wrong. :rolleyes: As I said before, I am charmed that others are so concerned with my customers and their reactions to my policies. It is touching.

Richard Martin
01-25-2004, 02:29 PM
Originally posted by mtdmaster
the $2 to $5 increase, that I worry about.

And the point with UPS is, if they see an expense that bites into their profit margin, and compensate for it with surcharges, why shouldn't I? Just because I run a smaller business I'm supposed to eat increasing costs, not recoup expenses that spike and fluctuate? Why am I some supposed to eat that? UPS brings in far more than I do in profits, I think I should be concerned with where my profits go just as much as they are. And I am going to follow their example in recouping those expenses.

As far as budgeting goes, as I said before, I can budget for a minor increase in fuel prices. But anticipating a higher increase and building that into my price would raise my rates beyond competitiveness. And those increases might not come.


We have this same conversation every year.

If gas rises 3 dollars a gallon I will make a move to recoupe that cost. It would be stupid not to. But as in every other year it has been a case of the chick crying that the sky is falling. It just doesn't happen.

Say you burn a whole gallon of gas and the price has exceeded your set gas price level of 2.00 by 19 cents. What are you going to do? Ask them for $35.19? My customers would tell me I was crazy. Are you going to carry around spare change?

To make the claim that just because UPS charges a fuel surcharge you should too is nonsense. UPS and other large companies don't have the 40 plus percent price margins that so many people here at Lawnsite claim to have. Those large companies are operating at margins of pennies on the dollar if they're lucky. And they don't all make money every quarter.

GarPA
01-25-2004, 02:48 PM
MTD...I must be nuts to wade back into this thread but, as you said, a few of us who are adding the fee, if at all, are doing so because of possible, significant SPIKES....not the "normal" and projected increases for inflation, FUEL, insurance, materials/equip etc. THose factors were already accounted for in the 2004 rates.
And to those who say "know your numbers"...pardon me, but I know them all too well, every variable and fixed expense, by account, by type of work,by month.
We each handle the fuel issue in a way that we believe is best: first for our business, and second, for our customer. I'm outta here...have to go get more FUEL for one of the gas guzzling FORDs and 2 Honda snow machines....gulp gulp..oh thats right I forgot,....fuel is an insignificant factor within my overall costs of doing business....for some reason I cant seem to remember that...... might be because of all the time spend at the gas pumpsevery week watching the numbers roll around...

rodfather
01-25-2004, 04:05 PM
Well, my fuel bill was $10,178 for last year.

Right now, Hess is charging $1.49 per gallon for unleaded regular right down the road from where I live. If tomorrow it went to $2.00 a gallon and stayed there for all of 2004, I would be paying an additional $2544.50 (if all factors remained the same) vs. 2003.

Now, why should I be out 2500 bucks I ask??? So yes, I will initiate a fuel surcharge as I previously posted a couple of days ago.

GarPA
01-25-2004, 05:23 PM
Yo Rod...have you heard the latest forecast for your area for mid week? the Weather Channel was just saying your area could be in for a BIG ONE...mark mancusso even said a FOOT of snow is very possible for NE PA and Joysee....ok go ahead and say it....we're all waiting.......

rodfather
01-25-2004, 05:27 PM
Alright then if you insist..................................................CHA-CHING...I'm lovin' it.

Woohoo!!! Who says $$$ is always green, huh???

work_it
01-25-2004, 06:11 PM
I, for one, did add a fuel clause in my contracts for next year. For those of you that aren't worried about loosing money, the more power to ya. This is my business, and I choose the way I want to run it. You have the same right with your business.

Here's the way I look at it. My accounts are not so consolidated so I do use more fuel than someone who has a tight route. I'm going to use an easy figure for this example; so don't really want a debate on how much fuel each individual operation uses. Let's say that over the course of a season I use 1000 gal. of gas. When I start the season off the price is $1.50/gal, but then the price goes up to $1.75/gallon the next week. If that price holds the rest of the year it will cost me $250 extra out of my pocket. If the price goes up to $2.00/gal.; I'm looking at loosing $500. At $2.50/gal. I'm loosing $1000.00. Now take into consideration that as the gas prices go up so does the price of mowers, parts, and all other living and business expenses. By keeping my prices the same I'm loosing out on both ends by refusing to fluxuate with the economy.

Since I've been a member on this site I've read too many complaints about how our industry prices haven't kept up with the economy over the last 2 or 3 decades. It doesn't suprise me after reading some of the posts here. If you want to claim that you run a legitimate business, then operate like one.

For those of you that live on the seaboards. If you want to see how a market can fluctuate just go down to the fish market, or a place that sells fresh seafood. They're mainly small operations, but do you think they're going to absorb losses because they don't want to follow what the economy dictates?

Grounds Control
01-25-2004, 09:42 PM
these are good comments supporting "the clause".

now you have me thinking again

mtdman
01-26-2004, 01:24 AM
Originally posted by Richard Martin

To make the claim that just because UPS charges a fuel surcharge you should too is nonsense. UPS and other large companies don't have the 40 plus percent price margins that so many people here at Lawnsite claim to have. Those large companies are operating at margins of pennies on the dollar if they're lucky. And they don't all make money every quarter.

I don't give a crap if UPS does it or not, or what their profits are. I simply used them as an example because they had been brought up already. And even if I do have a 40 plus percent profit margin, who is to say that's enough for me to absorb the added cost? How is it anyone's business to say I have to eat that? I still haven't seen a good answer for that. Money that I spend due to increased costs is money I don't have for my business or myself. Bottom line, it doesn't get any simpler than that.

It kills me when people try to minimize it down. It's not the 1 gallon that costs me 19 cents extra. It's the 10000 gallons that add up to $2000. Two grand that comes outta my pocket.