Bidding commercial HOA and condo accounts. Its not a great as you think

Discussion in 'Lawn Mowing' started by PROCUT1, Apr 26, 2009.

  1. PROCUT1

    PROCUT1 LawnSite Platinum Member
    from TN
    Posts: 4,909

    Years ago when i got into condo work, it was a difficult market to crack. I had a couple hundred residential lawns, a couple crews, lots of equipment, and it took me a couple of years pressing the management companies before I got my first invitation to bid.

    The management companies were very strict on who they would solicit and allow to bid on a property. It was a pretty closed club of only the few mid to large sized companies competing.

    You needed references for other jobs that size, which made it hard for anyone who wasnt already "in"

    You needed to provide an equipment list, employee list, and the property managers actually would physically come see it to verify.

    You needed higher than normal insurance coverage. You needed a few years experience on large properties.

    Overall you needed to prove that you we;re equipped and able to handle this job easily. Nobody would take a chance on a small guy, or a new guy.

    If you passed all of that you MAY be invited to bid. You would be bidding against other long term qualified contractors. And there was little price spread in the bids. You won the job based on your references and how good of a salesman you were.

    When you got the job, you had it for a long time. The contractors were all pretty equal, all did equally a good job, and all were close in price.


    The trend that I saw unfold is that the condo directors started putting pressure on the management companies to trim budgets.

    The management companies started taking many many more than the standard 3 bids and they opened up the bidding to anyone who called and asked to bid.

    The property manager would then present the board with 10 or so bids with a HUGE price spread and they would make their decision.

    I found they started taking the attitude, (Its just grass, its not life or death)

    So they started to take chances on less than qualified, less than proven, contractors who bid the job many times at half of what they have been paying. Their attitude was "If he does a good job, we save $20,000 a year, if he sucks, we'll get another guy, its just grass"

    So you saw this huge upset in the industry of the big guys losing the work and everyone who mows 20 lawns on the side is now fighting for the "big condo work" so they could live their dream of being a "real contractor"

    Now some of the guys who were under equipped did fall on their face. Others did a good job but didnt last too many years because they ran out of money not knowing they're working for a loss. Others lasted a real long time.

    Either way, the customer saved tons of money.

    The big guys held out and waited for the "little guys over their head" to fail and figured after the wave the work would come back.

    When that happened, it wasnt the qualified contractors that the customer went back to.

    Even though they paid $50,000 forever to have their place done, now that they hired this guy for $25,000, even though he failed, the customer now is not looking to go back to a qualified guy for 50k.

    They put it out for bid and look for the guy who is going to do it for $25,000 like the other guy but not fail.

    And this keeps repeating itself. Every year more and more guys wet their pants to get condo or commercial work, so every year the condo and property managers have a new pool of guys to try out.

    The job now will always be $25,000. It will never get back up to $50,000 where it belongs.

    The managers know they are dealing with eager starry-eyed guys and are able to put the squeeze on. They will even take that $25,000 bid and get the guy to drop $5000 and promise him the job. Most everyone says yes.

    The customer will keep trying the cheap guys, and eventually, more often than not, will find a company to do it that cheap, do a good job, and stick around for a few years.

    Where you used to see the guys around here that did condo work. It was 3 or 4 companies that had them ALL.

    You dont see that anymore. Now most condos are being done by the same guy you would see mowing your neighbors lawn with his pickup and 2 machines.

    The condo market is not much different than what everyone is seeing in the residential market. Except the costs of failure are much higher.
     
  2. Field King

    Field King LawnSite Senior Member
    Posts: 266

    I would like to add a perspective from a new lawn service owner! I am in the lawn service to make a few extra bucks in addition to my full time job, I have only advertised to residential customers! In this I have encountered 2 people who have said that they are unhappy with the quality of work being done by their current LCO for their HOA! They asked me if I did those jobs, I replied no as I do not have the equipment or time! Also I have recieved 3 of my 12 residential jobs due to unhappy customers, one did not like the fact his previous service had 3 guys jump out of a truck and blaze his lawn and leave clippings all over the drive and street and two did not like the job teens were doing on their lawn! I also had a call from a guy who complained about the quality of the service he was recieving from his LCO, I went to bid it (they mowed 2 days prior) and I could not believe how nice it looked, it was obvious they were very good at lawn care and I knew I could not do better so I passed knowing he was fishing for a lower price or was just hard to please, that is all just thought I would add how a new guy sees it so far!
     
  3. hitechlm

    hitechlm LawnSite Senior Member
    Posts: 260

    its very sad but its true, you hit the nail on head. I have seen, especially in the past couple years these beautiful properties turning into nothing but burnt out grass and weeds. Its starts with them taking bids from every joe blow with a mower doing it for have the price, then joe blow falls on his face like you said. Years later when they go back to the big companies that want twice as much as joe blow was charging the say they need to cut back to get it back to half the price, so they take out the fertilizer apps, the bed edging and the insect and disease, etc. now your mowing nothing but a $hit hole.
     
  4. nosparkplugs

    nosparkplugs LawnSite Gold Member
    Posts: 3,445

    Yep I experience this first hand each year, I have gained some contracts & lost contracts becuase property management companies & HOA's went with a cheaper bid only to not get the results they wanted for the money. I then get that phone call we all want. The last LCO was the cheapest, but his work was crappy, do you still want the contract. Stick to your business model, produce quality work that is not the cheapest, and respect yourself.

    In this economy price point is ALWAYS first, you need lots of LUCK too, in that I mean the incumbent LCO does not hold up to their end of the contract. I do have a select few commercial customers whom are loyal, and for that I am thankful.


     
  5. DennisF

    DennisF LawnSite Bronze Member
    from Florida
    Posts: 1,381

    There is a new trend in HOA's here in Florida. Many of them are purchasing their own equipment and hiring a full time employee to do things like mowing the common areas, applying fertilizer, and doing general clean-ups around the club house and recreation areas.

    One of the HOA's that went this route was paying an LCO $125,000 per year for mowing alone, plus paying True Green to apply chemicals and fertilizer. They hired a full time employee to do the mowing work and fertilizer apps, and another to maintain the recreation areas (pool, tennis courts, etc). The two employees were hired at $10 per hour and both are former LCO employees. The board of directors of the HOA put out a letter to residents that the association saved over $60,000 the first year.

    I know the LCO that lost the account and he said that HOA's are no longer part of his business.
     
  6. nosparkplugs

    nosparkplugs LawnSite Gold Member
    Posts: 3,445

    Nothing wrong with saving money, But is the HOA now in the grass cutting business? or serving the home owners true needs, granted their saving money. All it will take is one accident, and the HOA will get the snot sued out of themselves, and wish they never got in ground maintenance:). I have a church/school that has ALWAYS/7 years going wanted to purchase it's own equipment, and have the members do the work, but every time their insurance company SAYS HELL NO.

    Secondly Florida is a "F" up state anyway it's about in the worst financial shape it's ever been, and has been coined the foreclosure capital many times buy Obama. If your still in business good for you. I cannot stand going to Florida all the Old Farts, I will be down their in August for vacation pumping some deflated American dollars into the Geriatric State





     
  7. PROCUT1

    PROCUT1 LawnSite Platinum Member
    from TN
    Posts: 4,909

    Im seeing that as well. Condo complexes are starting to bring a lot of things in house to save money. They are getting rid of the management company and setting up their own office. They are buying lawn equipment and having the maintenance people that they already employ do the work. Same with snow. As much as it sucks to say. It does make sense in a lot of ways.

    Why pay a lawn company if you already have full time maintenance people with time in their schedule. It kinda makes sense to divert them to lawn duty a day a week.

    Same with snow. A complex can easily pay $50,000 a season for snow or more.
    They already have maintenance trucks. Add a plow, use your own people and when it snows divert them to snow duty and then back to whatever else they do.

    Not the answer anyone on a lawn forum wants to hear. But looking at it from the other side, I can see why a lot of complexes are going that route.

    Other types of properties such as townhouse communities where the owners are 100% responsible and the HOA doesnt do building repair and maintenance will probably always contract out their mowing and snow.
     
  8. nosparkplugs

    nosparkplugs LawnSite Gold Member
    Posts: 3,445

    I have a new contract with an apartment complex that purchased their own Home Depot ZTR's weedeaters etc the employee's managed to blow up the ZTR's, and complained enough about doing it, and finally the Owner & manager of the complex realized it was a mistake. When I took it over it looked like a foreclosure.

    This is the best thing going here in Memphis becuase it's breaking the contracts with current LCO's, and their rebidding it out after their done wasting money trying to save money. Yes i have been on the looseing end of this trend too.


     
    Last edited: Apr 26, 2009
  9. DennisF

    DennisF LawnSite Bronze Member
    from Florida
    Posts: 1,381

    If you think about it...it makes sense for an HOA to maintain the common areas. They already maintain the roads, entrances, pools, tennis courts, club house etc, so doing the mowing is the next step. They already pay for liability insurance on all of the common areas, so all that is needed is to have their insurance carrier add lawn maintenance to the coverage.

    Look at it this way. Instead of outsourcing work...they are in-sourcing work and saving money at the same time.
     
  10. ed2hess

    ed2hess LawnSite Fanatic
    Posts: 13,142

    A lot of commerical are starting to bring stuff in house. A rather large Lexus dealer has two of his guys do the lawn. Then they wash cars the rest of the time. Large HOA has a three man team that works for them 24/7. Both of these properties look just as good and ones done by LCO. And some resturant and hotels let their employees do the work on off time. Some of those don't work so well but they do save money.
     

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