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Up North
09-22-2004, 04:34 PM
I've seen a few posts/threads talking about lowballers recently. In most cases doesn't the "lowballer" have to know what the customer is paying for their current LCO? Is that a standard practice in this field? And as an LCO, do you walk into a prospects business or home and ask them what they are currently paying for services?

When starting out my business I knew of a couple guys/friends that had LCO's servicing their commercial properties and I asked them what they paid for mowing service so I could get an idea of where to start. But since then have never asked anyone else that question as I felt it really wasn't any of my business. My feeling was I needed to give the customer an estimate based on these things: make money for my company, priced within the market, affordable.

So do you guys ask prospects/customers how much they currently pay, or what they have paid in the past?

Buck

lawnman_scott
09-23-2004, 12:21 AM
I have never asked. Lowballers, like scrubs is a term overused by those who cannot run a business and someone else has to be the cause.

HOOLIE
09-23-2004, 12:41 AM
I don't ask potential clients what they've been paying, but more than a few have come out and told me. Anyhow, I would define a lowballer as someone who intentionally works at a below market price, strictly as a means of getting the business. A scrub to me is basically an LCO who is somewhat clueless about how to run a business. He may lowball, but out of ignorance of the market rates, not to steal business.

Up North
09-23-2004, 12:55 AM
I probably shouldn't have titled this thread "lowballers" my main issue was finding out if it was common practice to ask a prospect/customer what they are/were paying for service. Personally I don't like doing it and haven't other then right at my starting point of the business.

I agree that "lowballer" and "scrub" are pretty much one & the same. I guess I was thinking about the situation in which an LCO asks what a prospect is paying currently, then gives them a cost below that JUST to get the business.

Anyway, it looks as if my thinking is pretty much in line with you two guys on not asking how much they pay for current LCO services.

Thanks guys,
Buck

Soupy
09-23-2004, 02:16 AM
Ther is no reason to ask what they pay. You should just go in and bid it at your rate. If the customer says they were paying X amount of dollars and they are looking for someone to beat that price. Tell them that you know what you have to get to stay in business and you have allreay given them a reasonable price. Also, tell them that there are a lot of guys out cutting cheap because they have no clue, and they will never be able to offer the quality and reliable service that you offer.

Most potential customers are looking for a new LCO because the old one quit or didn't do a good job. Their prices (if lower then yours) was probably why the customer got the service they got. If the customer wants to be cheap then they can go on getting crappy service.

jerryrwm
09-23-2004, 02:59 AM
I probably shouldn't have titled this thread "lowballers" my main issue was finding out if it was common practice to ask a prospect/customer what they are/were paying for service. Personally I don't like doing it and haven't other then right at my starting point of the business.

I agree that "lowballer" and "scrub" are pretty much one & the same. I guess I was thinking about the situation in which an LCO asks what a prospect is paying currently, then gives them a cost below that JUST to get the business.

Anyway, it looks as if my thinking is pretty much in line with you two guys on not asking how much they pay for current LCO services.

Thanks guys,
Buck

Several thoughts on this subject.

If you don't ask what the current pricing in your area is, are you sure you are pricing right? If you are bidding on the jobs armed with all the information that you have accumulated that tells you what your costs are, what your production rates are, what your BEP is, what your desired mark-up is to hit your net profit goal, and you bid accordingly. You are basing your bids on the factors that affect your particular company and you are making money. But are you in the right ball park when it comes to pricing? Let's say you determine that a particular type residential property in a targeted neighborhood should have a monthly charge of $160.00. You're happy with the net. But if you had asked several of the owners in the neighborhood, you might have found out that the going rate is actually $180.00. That's $20.00 a month you just left on the table, that would have gone directly to the bottom line of the P&L sheet. Just asking the right questions can be profitable.

On the other side of the coin, it can be a great help to know what the competition was charging for the project. Then armed with that information and your factors for profitable pricing used in your business, you can then look at the project and see if bidding lower by as little as 0.5% can still be a profitable venture. You will be able to see what your costs are and what profit you are willing to give up to do the job. If you know what the opposing bid is, then estimating becomes a simple task.

Knowing what the market will bear and what the competition is charging are valuable pieces of information in any business. Why do you think one grocery chain hires ghost shoppers to make purchases at the competition's stores?

Now, bidding a job lower just to get the business without taking all the cost factors into consideration is a sure sign of stupidity and a sure bet for eventual failure. Case in point: irrigation contractor in the area has been advertising in flyers "will beat any price by $400.00" and he does it. Well, one of the other contractors had enough and said he would "break him of suckin' eggs". He bid an installation job at $100.00 over BEP. That was going to be his net on the job. Old nimrod came in and beat the price, right on cue. Then he was pissin' and moanin' at the supply house about how low this job was. He even went back and asked the homeowner for more money! Well, he didn't learn, and is still suckin' eggs, but he is slowin' down on the flyer distribution.

All I'm really trying to say is that being armed with all the information that you can get makes you better able to determine the profitability of the job when you bid it, and allows you to make as much profit as the market will allow.

I never wanted to be the lowest priced business in town. I want to be right at or just under the highest priced successful business in town.

Someone had a signature line that says, "I will not let my prices be set by the guy who is no longer in business." Amen, but I still want to know what his prices were.

Jerry

Soupy
09-23-2004, 03:35 AM
How do you know they are not fudging the numbers a little when you ask how much they paid the last guy. Shoot, I don't ask anything about the last guy, as for as know, none of my customers had previous LCO's.

Sure it's good to ask around from neighbors, friends and family that have lawn service. But to trust a potential customer is nuts. Fudging the number by $5 is a big profit loss.

Figure out what you think you need and keep raising your pricing structure until you hit a wall. Remember, you don't have to get every estimate you put in. It's good to lose 25% of them.

jerryrwm
09-23-2004, 04:22 AM
How do you know they are not fudging the numbers a little when you ask how much they paid the last guy. Shoot, I don't ask anything about the last guy, as for as know, none of my customers had previous LCO's.

Sure it's good to ask around from neighbors, friends and family that have lawn service. But to trust a potential customer is nuts. Fudging the number by $5 is a big profit loss.

Figure out what you think you need and keep raising your pricing structure until you hit a wall. Remember, you don't have to get every estimate you put in. It's good to lose 25% of them.

Soupy,

I agree. A customer may fudge, and two may fudge, but several aren't going to be right on the same $5.00

As I said before, if you know what your costs are and you know what it takes to make money on a given job, then you are better able to bid it properly. Then you have the power of the pen.

Let's say you have looked at a property and after careful analysis and checking your numbers, it is determined that you can profitably service that property for $40.00 a trip. But in the course of conversation you are talking to the owner who was paying $50.00 a trip but fudges and tells you it was $45.00 a trip. What are you going to bid that property at? I sure hope you don't bid it at $40.00!! You might bid it at $50.00 and get it with a little haggling. But the prudent thing would be to bid it at $45.00. Now you have made $5.00 more profit than you had originally calculated. Makes me happy when I make more money!!

Now if you know that you have to have that same $40.00 per trip, and the customer was paying $40.00 but fudges on $5.00 and tells you it was $35.00 a trip. What do you do? You can bid it at the price that you have to have which is $40.00. Or you can turn on your heel and walk away, shaking the dust from your feet as you leave the property. Tell them that for $35.00 they should have kept the other guy.

I will try and ask the right questions every time when it comes to business. I have even learned to read upside down, and through the back of paper. Never know when the other contract might be laying on the desk. Don't pick it up, but if the number happens to jump into your eye, then use it. Yeah, if I see your proposal laying on a desk and I'm there to bid on that job also, you can bet your a$$ I'm going try to see what that number is before I bid. Because if your bid is higher than mine, i don't want to leave any money on the table. So all i have to do is be $5.00 under you and I get the job and at a higher profit than I had hoped for. Good for me again - I like making more money.

Jerry

jerryrwm
09-23-2004, 04:40 AM
Figure out what you think you need and keep raising your pricing structure until you hit a wall. Remember, you don't have to get every estimate you put in. It's good to lose 25% of them.

Why is it good to lose 25% of the estimates? If you are expecting to lose that many, why in the hell are you bidding in the first place? I expect to get every bid I put out. I have never bid with the hope that someone else gets the job.

Have you ever stopped to figure out what it costs you to bid a project? If it is a commercial property, let's say a strip center. it takes you 15 minutes to drive there, it takes 15 minutes to talk to the manager/owner. Then it takes another 30 minutes to walk the property to gather needed information. Another 15 minutes to drive back to the office. Now you have another hour or more to come up with the bid price, and write the proposal. Another 15 minutes there and another 15 back. So at this point we are over 2 hrs into the process. Depending on what your costs are, you probably have nearly $100.00 invested in that bid, and you don't even have it signed up yet!!! To paraphrase you... "to bid anything with the expectation that you are going to lose 25% of the bids before you even put them in is just nuts"

Now, I also understand that I am not going to get every bid that I put in. That's just a fact of business, and usually something that I can't control. And I understand that if I do start getting every bid I put out, then I better check something in my bidding before I really start losing money.

Jerry

Soupy
09-23-2004, 04:46 AM
Why is it good to lose 25% of the estimates? If you are expecting to lose that many, why in the hell are you bidding in the first place? I expect to get every bid I put out. I have never bid with the hope that someone else gets the job.

Have you ever stopped to figure out what it costs you to bid a project? If it is a commercial property, let's say a strip center. it takes you 15 minutes to drive there, it takes 15 minutes to talk to the manager/owner. Then it takes another 30 minutes to walk the property to gather needed information. Another 15 minutes to drive back to the office. Now you have another hour or more to come up with the bid price, and write the proposal. Another 15 minutes there and another 15 back. So at this point we are over 2 hrs into the process. Depending on what your costs are, you probably have nearly $100.00 invested in that bid, and you don't even have it signed up yet!!! To paraphrase you... "to bid anything with the expectation that you are going to lose 25% of the bids before you even put them in is just nuts"

Now, I also understand that I am not going to get every bid that I put in. That's just a fact of business, and usually something that I can't control. And I understand that if I do start getting every bid I put out, then I better check something in my bidding before I really start losing money.

Jerry

You answered your question in your last paragraph. Plus I only do residential, I used to have comercial accounts, but have found loyalty and more money in residential. At least in my kneck of the woods.

Premo Services
09-23-2004, 11:02 PM
Ther is no reason to ask what they pay. You should just go in and bid it at your rate. If the customer says they were paying X amount of dollars and they are looking for someone to beat that price. Tell them that you know what you have to get to stay in business and you have allreay given them a reasonable price. Also, tell them that there are a lot of guys out cutting cheap because they have no clue, and they will never be able to offer the quality and reliable service that you offer.

Most potential customers are looking for a new LCO because the old one quit or didn't do a good job. Their prices (if lower then yours) was probably why the customer got the service they got. If the customer wants to be cheap then they can go on getting crappy service.


HOW TURE, HOW TRUE, HOW TRUE, could not have said it better myself.... :drinkup: :cool2:

HOOLIE
09-24-2004, 01:15 AM
The rule of thumb on bidding contracts is (assuming the customer is getting multiple estimates)-

If you're getting the vast majority of these customers, you are most likely bidding too low (people like cheap. You could've gone higher)

If you're losing a lot of bids, you're most likely among the highest of bidders. Some folks are attracted to this, thinking they are getting the "best" service. But most won't go with the the highest guy.

Think of bidding like the judging in swimming or gymnastics. They automatically throw out the highest and lowest scores. You, as the bidder, don't want to always be one of those thrown out.

Up North
09-24-2004, 01:26 AM
The rule of thumb on bidding contracts is (assuming the customer is getting multiple estimates)-

If you're getting the vast majority of these customers, you are most likely bidding too low (people like cheap. You could've gone higher)

If you're losing a lot of bids, you're most likely among the highest of bidders. Some folks are attracted to this, thinking they are getting the "best" service. But most won't go with the the highest guy.

Think of bidding like the judging in swimming or gymnastics. They automatically throw out the highest and lowest scores. You, as the bidder, don't want to always be one of those thrown out.

Yep, that's pretty much the way I view it too Hoolie. I haven't lost any bids yet and I know for a fact that I wasn't the lowest on some of them (don't know about the rest) as the customer told me straight out and the reason they went with me was on recommendation. Which for my first year was a surprise as I only had a few accounts at the time, but like my dad always told me, good quality work will only help you, not hurt you. And I strive to do that.

Buck

jerryrwm
09-24-2004, 03:02 AM
Let me turn this around and play devil's advocate.

Just for sake of argument the market rate in a particular neighborhood is $35 for 10K sq ft. You do several properties on a street for that amount.

A new LCO comes into that neighborhood, and starts selling his service. It is basically the same quality as you provide (I know there is not one in a hundred that can do that. But stay with me on this.) He mows, trims/edges, details and nothing else. Same as your service. Only difference is that he is selling this service for $45. And people are signing up with him. Not everyone is going with him, but let's say he picks up 6 or 7 tightly bunched. Some are even right next door to some of your accounts. A nice little tight afternoon route.

Do you raise your prices on new customers in that neighborhood? After all, the other guy has been selling them for $45. Why can't you? Sure keep your current accounts at $35, but can you sell the service for more to new customers? Or are you going to continue to sell at $35 and now all of a sudden, you my friend have just become the "lowballer", based on the definitions that some have given.

Another scenario in this same neighborhood. One of his customers stops you and asks if you could do their service. They like the work that the other LCO does, but are not really fond of the fact that he smokes while doing the service. Now, there is nothing wrong with the service, it's just a personality clash. How much would you quote them? Remember the other LCO is getting $45 for the service. Would you quote them $45 or would you "lowball" it back to your regular $35 which you are able to be profitable at?

And don't give me any of the, "well he won't be in business in my area very long if he tried that." Don't bet on it. It can and has been done. One LCO looked at a property - 30 townhomes with about 1200 sq ft of turf each with two trees in each yard plus a sidewalk and a public walk and parkstrip. There is a 4' wide common area turf strip in the back but no other common areas. My friend realized that he might not have the time to service this account himself due to his work load, so he contacted another LCO. Asked him for a bid on the project and told him to price it to make some money. The other guy said he would do it for $600.00 a visit. My friend told him to get started the following week. He then showed me the contract that he already signed with the HOA. His price was $1050.00 per visit. The subcontractor was tickled because he was making good money, the HOA was happy with the service, and my friend was happy too! He said all it takes is convincing them that your service worth the money. he doesn't promise anything out of the ordinary, but makes sure that the work is done right.

So, now what is the definition of a lowballer?

Soupy
09-24-2004, 04:04 PM
Let me turn this around and play devil's advocate.

Just for sake of argument the market rate in a particular neighborhood is $35 for 10K sq ft. You do several properties on a street for that amount.

A new LCO comes into that neighborhood, and starts selling his service. It is basically the same quality as you provide (I know there is not one in a hundred that can do that. But stay with me on this.) He mows, trims/edges, details and nothing else. Same as your service. Only difference is that he is selling this service for $45. And people are signing up with him. Not everyone is going with him, but let's say he picks up 6 or 7 tightly bunched. Some are even right next door to some of your accounts. A nice little tight afternoon route.

Do you raise your prices on new customers in that neighborhood? After all, the other guy has been selling them for $45. Why can't you? Sure keep your current accounts at $35, but can you sell the service for more to new customers? Or are you going to continue to sell at $35 and now all of a sudden, you my friend have just become the "lowballer", based on the definitions that some have given.

Another scenario in this same neighborhood. One of his customers stops you and asks if you could do their service. They like the work that the other LCO does, but are not really fond of the fact that he smokes while doing the service. Now, there is nothing wrong with the service, it's just a personality clash. How much would you quote them? Remember the other LCO is getting $45 for the service. Would you quote them $45 or would you "lowball" it back to your regular $35 which you are able to be profitable at?

And don't give me any of the, "well he won't be in business in my area very long if he tried that." Don't bet on it. It can and has been done. One LCO looked at a property - 30 townhomes with about 1200 sq ft of turf each with two trees in each yard plus a sidewalk and a public walk and parkstrip. There is a 4' wide common area turf strip in the back but no other common areas. My friend realized that he might not have the time to service this account himself due to his work load, so he contacted another LCO. Asked him for a bid on the project and told him to price it to make some money. The other guy said he would do it for $600.00 a visit. My friend told him to get started the following week. He then showed me the contract that he already signed with the HOA. His price was $1050.00 per visit. The subcontractor was tickled because he was making good money, the HOA was happy with the service, and my friend was happy too! He said all it takes is convincing them that your service worth the money. he doesn't promise anything out of the ordinary, but makes sure that the work is done right.

So, now what is the definition of a lowballer?

A lowballer is someone that knocks on a customers door and offers to beat the current price by $x. It's not someone that has a lower price.

fourseasonlawns
10-01-2004, 01:41 AM
I think of a lowballer as someone desprately trying to get their foot in the door, even if it means losing money initially.

My first three months, I lost my a$$, as I would bid residential (targeting only one LARGE neighborhood) at $15.oo knowing the going rate is $30. Now My minimum charge to unload any equipment is $35.00. My BREAK-EVEN rate is $25.

A lowballer promises to beat everyone else's price. Most people understand, they usually get what the pay for.

crawdad
10-01-2004, 08:28 AM
Several thoughts on this subject.

...............
I never wanted to be the lowest priced business in town. I want to be right at or just under the highest priced successful business in town.

Someone had a signature line that says, "I will not let my prices be set by the guy who is no longer in business." Amen, but I still want to know what his prices were.

Jerry

Hey, you read my sig line!
Many years ago, I was rototilling gardens, and would hear about the guy that used to do it for 15 bucks. I would ask the customer, "Where is he now? He must have broken something, and can't afford to fix it."
Crawdad

LwnmwrMan22
10-01-2004, 12:38 PM
Life is so much easier if you just go bid your price that you want to make. Who cares what someone else charges.

Jerrym, I understand your point about not leaving money on the table.

BUT, my point is, that if I'm called on to bid a property, I just go and look at it, bid it.

I have one account that pays $45 / hour, the rest run between $75 and $100 / hour, average 60K sqft+, and have had all for over 5 years now.

Now I know, by asking around, talking with the other LCO's in my area, that I'm right smack dab in the middle of pricing.

I'm happy with that, cause I'm making money, and I don't want all the people out there that are just looking for a cheap mow job.

I also don't want the PITA's that are thinking "I'm paying so much to have this work done, look at those 4 blades of grass he missed".

I look at it, just like what a radio DJ always says around here, mediocrity appeals to the masses. That's me. I do a good job, but I also know if I'm behind because of rain or the such, that my clients will not care if I cut a corner, or skip them one week even though they are all contracted for the summer. My prices reflect that.

brentsawyer
10-05-2004, 08:18 PM
Don't tell me, I don't care. I know what I need and what I am worth. That is all that is important. "Talking" price cheapens yourself. This has happened in the past and basically it goes that if I am making less, I will be unhappy and want to the get the heck out of there as fast as I can and move on to something that is more profitable

Mueller Landscape Inc
10-05-2004, 08:45 PM
I've seen a few posts/threads talking about lowballers recently. In most cases doesn't the "lowballer" have to know what the customer is paying for their current LCO? Is that a standard practice in this field? And as an LCO, do you walk into a prospects business or home and ask them what they are currently paying for services?

When starting out my business I knew of a couple guys/friends that had LCO's servicing their commercial properties and I asked them what they paid for mowing service so I could get an idea of where to start. But since then have never asked anyone else that question as I felt it really wasn't any of my business. My feeling was I needed to give the customer an estimate based on these things: make money for my company, priced within the market, affordable.

So do you guys ask prospects/customers how much they currently pay, or what they have paid in the past?

Buck

I always ask! This is part of my screening process. I find out as much as I can about their current maintenance company. I want to know if I am dealing with a price shopper, or someone who wants better service. I want to know why they want to change. I want to know if this will be a good customer or someone who is unreasonable. I can usually find this out before I ever meet with them.

crawdad
10-05-2004, 10:44 PM
I always ask! This is part of my screening process. I find out as much as I can about their current maintenance company. I want to know if I am dealing with a price shopper, or someone who wants better service. I want to know why they want to change. I want to know if this will be a good customer or someone who is unreasonable. I can usually find this out before I ever meet with them.
Do you have a fixed set of screening questions;ie:
Who is your current lawn care provider,
how much,
how happy are you,
etc?
Crawdad