Originally Posted by Roger
Nickolas, I respect your position, but stand on "too many variables" in determining costs.
When anybody starts, there is little understanding of maintenance costs. How long will a machine last? When I bought my Exmark w/b in 1995, I never believed it would be running well in 2011, ready for another season. I didn't know how long hydro pumps would last, the cost of replacement, etc. Also, I did not know how many miles to drive for a season. I didn't know the whereabouts of my customers, hence I didn't know how many miles to drive. In the early years, I was thrilled with five jobs per day. Now, I'm disappointed with seven. Advertising, ....? Who knows what will be needed? I spent $18 the first year, no other direct costs in the past 15 years. I am doubting many starting out can make a good estimate on what expenses will be associated with advertising.
Yes when they start they don't know any of that information. But those are the questions these people should be asking, instead of "what should I charge." Of course you're not going to know the exact location of each customer, but you can select a service area and there for determine the approximate number of miles you'll be driving for each account. That's the problem no one does there research.
Much is said about "cost of doing business" in these kinds of threads. In reality, there is much more discussion in more threads about "what the market will bear," "what others are charging," and "why won't people pay more for my services." In these discussions, "cost of doing business" has little to do with pricing. The "cost ...." has much to do with longevity and profitability, however. The 500# gorilla sits in the corner at all times.
This statement again just shows the problem with the industry. You can't base your business on "what the market will bear." I agree that you do need to determine what the market will bear, but you shouldn't determine the price of your services based on that. You should determine what you need to charge and then find out if it is higher or lower than what the market will bear. If it's higher, find a way to cut costs or find another business to start. If it is lower than charge it and you'll be happy with what you're making and you'll accumulate more customers because you're charging less than other companies.
The turnover in this industry is so fast that most never reach a point of understanding their business, their plan, or a realization of something of longevity. For most, the tasks to be done are the menial ones of grass cutting, trimming, mulching, etc. There is nothing unique about these tasks, nearly everybody can do them. Any business built on these asks is vulnerable, highly subject to pricing pressures. There is no shortage of posts on LS, "... I have been in business for five years .... I need a program to make invoices ...." When asked, rarely does somebody offer how they have been managing their finances for the previous five years. The answer is undoubtedly, "not." In these cases, nothing is being done to build a base of information to understand "cost of doing business," even though they have all the information to understand a basic concept of financial management. Strong, straight stripes, having a diesel powered mower, ... all more important than managing finances.
Here you're describing the perfect employee and the last person who should RUN a business. The thing is if it took you 5 years and you still have no clue what your cost of doing business is you really need to get out of the business. The reason the turnover is so high is in direct correlation to the lack of research being done before starting a business.
On the other hand, tasks of wall building, landscape design, plant selection, and install, and the like, are more specialized and not everybody can do this work. Pricing is much more leveraged because of the unique nature of the services being offered.
These principles are not unique to this industry.