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View Full Version : Best method for raising prices


Husky03
11-19-2004, 05:44 PM
Allright, I need some serious responces to this thread because it is very important. Here goes, next year I am taking all of the steps to become legit and I am obviously going to have overhead so I have to raise my prices drastically from this year. When I first started doing this with my push mower I had no idea I was charging so much less than others. I have now learned so much from this site it is Ubelievable, and as I said I am becoming legit. How do I go about raising prices for people I cut for this year for next season? I am not talking just a 5% increase, to get what I am worth I have to charge a lot more. For example, for a $20-25 lawn i was cutting this season I need to be charging atleast $30-35 next year to make money. How can I go about breaking this to my customers? Should I send them a letter some time in February or what? I don't give a damn if I lose every one of them because I am not going to work for cheap because I provide quality work and if I cannot make money in this business then I will find something else that interests me. I realize I am not going to make a huge profit my first few years, but you know what I mean. I plan to do a ton of advertising this spring and pick up a whole new base of customers in a different area if these people will not pay. I am really starting over. Am I on the right track? Thank you and I would really appreciate some good help from the veterans on this board :)

bobbygedd
11-19-2004, 06:02 PM
i think you will lose quite a few customers with increases from 20 to 30, 35. i mean, how can you even explain this? " i have been running an illigitimate company, and now i'm gonna be for real, so it will cost you alot more." i don't think it's gonna fly, just my opinion. my first couple of years i was dirt cheap (thinking i was charging "the going rate", i was wrong). i don't have a single client left from those days. remember, your mowing prices go up alot, so do trimming, and all the extras. and now, you arent throwing in any "freebies" (or i should hope not). i think you will have to rebuild, almost start from scratch.

Husky03
11-19-2004, 06:21 PM
Unfortunately I think you are right Bobby. And actually I think that will be about the only thing to tell them for such an increase.

paponte
11-19-2004, 06:26 PM
Can I ask why you underbid yourself so low in the first place? A price increase is usually a smaller gradual amount over a period of time. Most I have raised at a time was $5.00, with little or no "casualties". :)

Husky03
11-19-2004, 06:30 PM
I had no freaking idea what I was doing. I said that in the post. I have learned so much just since last spring.

bobbygedd
11-19-2004, 06:35 PM
tell them either they pay the increase, or you call the cops..........

paponte
11-19-2004, 06:47 PM
I had no freaking idea what I was doing. I said that in the post. I have learned so much just since last spring.


In that situation, I would sit down with each customer in a 1 on 1. I would think that they are all happy with your work. Tell them that you value them as a customer, but your not making any money. If they were to get someone else in there they would charge more, and that you have to raise them to the "going rate". I would tell them the price that you would need to raise them to. If any complained I would either drop them, or make them sign a 2 year contract, and raise them over the 2 years. :)

packerbacker
11-19-2004, 06:49 PM
The good customers will not fire you. Send them a letter and explain to them about inflation. Explain the cost of running a lawn service goes up every year and you need their help in biting the cost of it. The good customers will keep you, the others...well F*** em if they cant take a joke :)

Husky03
11-19-2004, 07:02 PM
It would be dificult to set up a 1 on 1 appointment with everyone. I would also feel very out of place doing it this way. If I was to send a letter when would be the best time? I plan on sending out holiday cards, but I do not think that would be the best time to tell tham my rates are going up. :p Anything else I should include in the letter? Thanks a lot.
Bobby: Nobody's scared of Lafayette cops :p

packerbacker
11-19-2004, 07:12 PM
It would be dificult to set up a 1 on 1 appointment with everyone. I would also feel very out of place doing it this way. If I was to send a letter when would be the best time? I plan on sending out holiday cards, but I do not think that would be the best time to tell tham my rates are going up. :p Anything else I should include in the letter? Thanks a lot.
Bobby: Nobody's scared of Lafayette cops :p





Send it out a few weeks before the first mow. I raised prices on 75% of my customers this year and only 1 complained. He's a single doctor living in a $400,000 house and was complaining about 5 bucks.

Husky03
11-19-2004, 07:29 PM
Sounds good, any other opinions welcome.

Thanks... :)

HOOLIE
11-19-2004, 08:00 PM
Tell them the old price was just to "lure them in" Ha Ha!

You're 16 years old, you screwed the prices up, live and learn. Like Bobby said, looks like a rebuilding year, much like my beloved Redskins.

Since you're young hopefully some folks will cut you slack.

paponte
11-19-2004, 08:07 PM
It would be dificult to set up a 1 on 1 appointment with everyone. I would also feel very out of place doing it this way.

Why would it be difficult? No offense meant, but I can't imagine you having a ton of customers to set up meetings. If you feel funny, honestly that's something you need to work on. If you feel funny asking for money, your not going to make it. Also from a sales point of view, it's alot harder to tell someone no to their face then over the phone or through a letter. Just my .02 :)

grassyfras
11-19-2004, 08:14 PM
Just raise them five bucks. Your 16. Ive been there in the same situation. PM me and I'll explain more.

Husky03
11-19-2004, 08:31 PM
I think if you were in the situation that I am in right now you would feel funny sitting down and talking to the people also. What am I supposed to say when I call them? "We need to set up a meeting to discuss prices" I gurantee 75% of them will be like I'm busy can you just tell me the situation over the phone. I am going to have to think about this. BTW I mowed weekly for like 12 people at the end of this season.

Husky03
11-19-2004, 08:33 PM
Maybe I could send the letter and specify clearly that if they want to set up meeting to discuss the price it would be no problem. ;)

bettergrass
11-19-2004, 09:00 PM
I write out a letter, and bring it to their house. I knock and if they are home ill have it on my board and sorta give them a summary of the letter and explain why I am doing this.

For instance when the gas rates went up this summer i did a emergency price raise.

I didnt loose one of them, people like to see you there in person when your asking them somethin like this.

And if not, just leave the letter in the mail box and hope for the best....good luck

Husky03
11-19-2004, 09:21 PM
Moef: I like that idea. Sounds like the solution.

Thanks... :)

TClawn
11-19-2004, 09:50 PM
instead of worrying about losing the customers you have you should be pounding the pavement looking for small commercial accounts. they will make your insurance worth the $$$

raise the price in increments on your current customers to ease the transition. wright a letter clearly stating that in the coming months there will be price raises due to inflation and a rising overhead. scheduale it so that that by the end of next year you will be up to the going prices in your state. btw, I find five dollar increments work the best.

I am doing this very thing with my customers and I haven't had a complaint yet. we are now in the second stage with two more to go. I already have on small commercial and am looking at getting another.

billc
11-19-2004, 10:02 PM
If you can afford to wait, raise prices later in the spring. If you raise them now, the customer has time to find someone else. If you wait until their grass is really growing, they have less time to call around. If they do try to find a new company, many of the LCOs they call will be too busy.

out4now
11-19-2004, 11:31 PM
Like you said you'll most likely loose them all anyway. Keep them and shed slowly while selling better paying accounts elsewhere or just say this is what I'm raising prices to next season and start looking to replace those that drop. Not much else you can do from the sound of it.

JimLewis
11-20-2004, 02:59 AM
Husky, don't worry about it too much. I started out just exactly the same way - probably worse. I didn't know nothin' about nothin' when I started my business. I honestly didn't even know how to mow or edge properly. I was really pathetic my first year. I look back and can't even believe people paid me for the work I did. Fortunately, I did learn a little.

I think it's totally understandable from a customer's standpoint that you would be increasing your prices. The thing is - probably half of them expect it. They KNOW they are getting a killer deal. After they first met you and they signed up on the spot probably most of them said to themselves as you drove away, "$20?? HAHA! What a steal! I was planning on paying $35. I can't believe he said $20. What a fool! Oh, well. I'll take it for $20, heck yah!" So don't be so concerned that they are going to all freak out. Probably a lot of them expect it.

As for how you approach it, I think there's a very professional way to do it that most people will totally understand. I'd simply write a letter like this;

Dear Customer, I am writing to let you know about our new rates for 2005. As a valued client, I hope you have enjoyed our service for over the past year and I hope I've met your expectations. If there's anything I've overlooked -- or anywhere I can improve -- please don't hesitate to let me know. I want to continue to build a business where value to my customers is my first priority.

In so doing, I've learned a lot over the past year and have learned that there are certain aspects of my business I need to improve on in order to improve our service. Things like liability insurance, more reliable equipment, and more training are things that not only help me improve and legitimize my business, but also help protect you and help me to be more knowledgable and reliable for you as well. But to make these changes, I can't continue to do work for the prices I charged last year. If I am going to run a professional company with real expenses, I am simply going to have to charge more. Hopefully, you will receive more in return.

So our new rates for 2005 will be $35 per cut. I know that's a sizable increase. And in addition to the things I mentioned above, we are going to upgrade your service as well! Our new service will include lawn fertilizer applications and in-lawn weed control.

We hope to continue to earn your business and we're looking forward to servicing your landscape again this year.

Sincerely.....

As for that paragraph near the end where I mentioned the additional services - it doesn't have to be the ones I mentioned. But it would help to think of SOMETHING you could throw in, that you aren't doing now, that would at least make them feel a little better about the price increase. Like they were getting SOMETHING more for their money.

I think you'd be surprised to find out that you'd keep 50% or more of your current customers.

JimLewis
11-20-2004, 03:09 AM
I should add this;

No matter what you end up saying - my point is that you need to put the focus on the customer. Many people end up talking about themselves way too much in situations like this. Here's a common mistake people make...

You: "Dear Customer, I am writing to let you know I am raising my rates this year."

(Them): "Oh grrrreat. I can't wait to pay more!"

You: "In order to expand my business and become more legitimate, I will need more money."

(Them): "You need money? Dude, we all need more money. You're money issues aren't MY problem!"

You: "And so we'll be increasing our rates this year by $15 per week. I hope you'll stick with us."

(Them): "Yah right! A 75% increase! You gotta be kidding, kid! I'd MAYBE pay that much for a professional company. But for the town lawn kid? Don't think so. Plenty of you "lawn kids" around. I'll just find another one who will do it for $20 and doesn't have so much "money problems"

Anyway, you get my point. When you talk to them or write your letter to them, explain why this change will benefit THEM! Don't bring up ANYTHING unless it's something that benefits THEM!

DennisF
11-20-2004, 08:50 AM
The bottom line here is that regardless of how much you have to charge for the business to make money, you will not survive if your prices are not competitive. If you can't make a profit at $25 a yard and some other LCO can...you're out of business.

Mo Green
11-20-2004, 09:00 AM
I would send the customers a letter telling them that you will be increasing your rates by $5.00 next season to cover rising costs. I wouldn't say a word about "going legit" to them, they don't need to know that, just do it. Use your current customers as a base while you seek more customers at your new, higher rates. Then, if your current customers are still with you next year, repeat the $5.00 raise again. Two $5.00 raises over time is easier to accept that one $10.00 raise.

This way you can mantain a customer base while you seek more.

Husky03
11-20-2004, 12:45 PM
Thanks a lot for all of the help especially JimLewis. I really appreciate the example letter. I will type something very similar to that keeping your advice in mind.

I would think smaller increases would be best too until you think about it. Do you want to be known as one of those companies that is raises your prices every year? I realize a small increase is to be expected over time, but yeara after does not seem like the way to do it.

Thanks...

JimLewis
11-20-2004, 03:06 PM
The bottom line here is that regardless of how much you have to charge for the business to make money, you will not survive if your prices are not competitive. If you can't make a profit at $25 a yard and some other LCO can...you're out of business.

No. This isn't true.

I live and operate in the world of postage stamp lawns. Most lawns around this area take a crew of 2 guys with 21" mowers maybe 15 minutes to mow, edge, and blow. And there are HUNDREDS of lawn care guys in my area who mow for $25 per week. Literally, HUNDREDS. Many of them will do it for even $20 per week and some even less.

And yet we charge more than that all the time and are one of the largest residential LCO companies around this area. Why can we get away with charging more when there's so much competion? Because we're selling MORE than just the mowing. In addition to offering additional services, we also put a lot of time and effort into being as professional as possible. The $20 guys have beat up rusty trucks, we have nice clean trucks all painted the same and with professional lettering. The other guys mow in a rock concert T-shirt and a bandana, we wear professional uniforms and hats. THe $20 guys come when it's convenient for them, we come at the same hour of the same day every single week. The other guys aren't licensed, bonded, and insured. We are. I could go on and on and on with 20 more comparisons like this.

The point is; you don't have to compete with the cheapos. In fact, I would say, you don't even WANT to try to compete with those guys. Make yourself more desirable and attract a better clientele and you can charge more without worrying about the competition.

DennisF
11-20-2004, 03:55 PM
No. This isn't true.

I live and operate in the world of postage stamp lawns. Most lawns around this area take a crew of 2 guys with 21" mowers maybe 15 minutes to mow, edge, and blow. And there are HUNDREDS of lawn care guys in my area who mow for $25 per week. Literally, HUNDREDS. Many of them will do it for even $20 per week and some even less.

And yet we charge more than that all the time and are one of the largest residential LCO companies around this area. Why can we get away with charging more when there's so much competion? Because we're selling MORE than just the mowing. In addition to offering additional services, we also put a lot of time and effort into being as professional as possible. The $20 guys have beat up rusty trucks, we have nice clean trucks all painted the same and with professional lettering. The other guys mow in a rock concert T-shirt and a bandana, we wear professional uniforms and hats. THe $20 guys come when it's convenient for them, we come at the same hour of the same day every single week. The other guys aren't licensed, bonded, and insured. We are. I could go on and on and on with 20 more comparisons like this.

The point is; you don't have to compete with the cheapos. In fact, I would say, you don't even WANT to try to compete with those guys. Make yourself more desirable and attract a better clientele and you can charge more without worrying about the competition.


Jim
I agree with you to a point. But in this area of the country (Florida) the customer only cares about price. Most of the accounts that I service are retired people living on a fixed income. They don't care if you look professional or if you're licensed. They don't care if you drive a $40,000 truck and have the newest mowing equipment available. If you don't price your services in line with other LCO's you won't have any work.

I've lost mowing accounts for a $3 difference in price. I've bid $25 for a 1/4 acre lawn only to be told the price is too high and that another LCO would do the same lawn for $20 or $22. To a retired person living on a fixed income a few dollars can make all the difference each month.

There are 3 very large lawn and tree service companies in my area that are throwing in the towel after this year. One of them has over 2000 accounts and 20 full-time employees. I spoke with the owner a few weeks ago and he told me that he can't raise prices high enough to keep the business profitable. He said that the market is so saturated with low priced LCO's that prices are actually declining while his costs are rising. If it wasn't for the hurricanes this past summer and the resulting tree work he said he probably would have folded earlier in the summer.

I'm not complaining, just pointing out that many areas of the country are highly competitive when it comes to pricing and if an LCO can't price his services competitively in his market, he won't survive.

bobbygedd
11-20-2004, 03:57 PM
face it kid, you're screwed

Lux Lawn
11-21-2004, 11:31 AM
Husky
Lots of good advice here for you I hope you make the right moves for yourself and future but me personally I would never try to raise a customer from $20-$25 a week to $35 a week because I know what they will say and your age might not help you.But the advertising in other areas to start over and get new customers is a good idea also.
Good Luck.