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Customer count vs profit....

Discussion in 'Lawn Mowing' started by Soupy, Mar 8, 2005.

  1. Soupy

    Soupy LawnSite Gold Member
    Posts: 3,125

    I have mentioned on occasion (as others have too) that the amount of customers isn't something people should base their success rate on.

    Example: The other day I got a call from a customer (old friend) asking me a question about her lawn. While talking to her she told me that she got an estimate left on her door for $26. I charge her $35, she has a 10K lawn. She wasn't trying to get me to match it, but was giving me the usual friendly ribbing over it. Neither one of us ever heard of this company and she told me that if she is paying someone it might as well be someone she knows. But the point is this guy underbid me by about 30% or $9. My profit is better then $9 on this lawn, but with this guys prices he will have to do about double (he might gain a little on efficiency, but believe me I run a tight ship) the accounts like this to profit the same. So he might be one to brag about having X number of accounts, but does that mean he is doing better then another guy with 1/2 or 1/3 less.

    With that said, I can see how a business bidding $26 on a 10K lawn can be profitable if worked right. But he will need lots of them, more then double (which he might get a lot with that price) but that brings more expense and makes profit even lower. To make a plan like this really work you have to have many crews with a lot of investment working. That is fine, but most start off a lot slower then that and still seem to price this way and eventually max out and stop taking new customers.

    My point is, don't get all worked up about landing every job and lowering prices because you think you need a high customer account. You do need a good steady work load, but giving up half the profits to gain it isn't going to benefit a small to medium size operation.

    Also $26 might not be low in your area, so don't take that number out of context. It is just a comparison to two prices in my area.

    Another Example that I used recently. There is a company in my small town (across the river from St. Louis) This guy landed the grounds maintenance for the final season at Bush stadium (Go Cards). In the article it mentioned that his company maintains about 50 accounts and they are mostly multi million dollar estates. (a million dollar house in my area is huge). I'm sure this guy is turning more profit then most with 100, 200 even 1000+ properties. In this case customer count means nothing until the scope of clientèle is laid out. If he came on this forum and said, Hi my name is so& so and I maintain about 50 accounts and just wanted to say Hi to everyone. None of us would think much about it. We would give him a warm welcome and leave it at that. Once we all found out that one of his customers is Bush Stadium, we would be highly impressed.

    I hope you new guys understand the meaning of this thread. It isn't about Scrubs, lowballing, etc. It about working smarter and not harder. Not that harder doesn't have it's advantages, but for an industry heavily saturated it is hard to grow into that big profitable company by offering a low price. There is just to many other guys offering that same low price. Lets try to bring it up a notch, and if you can't then maybe there isn't the demand for all these new LCO's in certain areas.
  2. MarcSmith

    MarcSmith LawnSite Fanatic
    Posts: 7,157

    One customer at 0% profit is just as good as 100 clients with 0% profit...

    Well said and good points which can often be overlooked....Its not always quantity but quality....
  3. TScapes

    TScapes LawnSite Senior Member
    Posts: 453

    I totally agree! I know a company that has between 50-60 accounts and runs 3 crews to service those accounts. His annual contract sales on these accounts is somewhere around $300k, but my one crew does $250k. I would much rather have my one crew, one truck and three mowers versus his 3 trucks, 6-8 employees and numerous equipment. It has been said many times, it's not how BIG you are (meaning number of accounts) it is how GOOD you are at what you do! Starting out, one should not strive to get as many accounts as possible, you should strive to be the most proffitable with the least amount of accounts.
  4. Carolina Cutter

    Carolina Cutter LawnSite Senior Member
    Posts: 987

    This could not be more true. I have one commercial account that makes up probably 50% of my revenue. Last year I had a total of 15 customers because I was feeling lazy but in the end had a great bottom line figure. I think if you could make it off of just one that would be great!
  5. DFW Area Landscaper

    DFW Area Landscaper LawnSite Silver Member
    from DFW, TX
    Posts: 2,116

    Be careful if you're filling the schedule with only premium priced properties, especially if they can cancel service at any time. If you've got them roped into a one year deal, that's one thing. But most LCO's aren't signing residential clients to those terms, at least not in my area.

    Last year, I noticed the good margin accounts would weed themselves off the schedule over the course of the season, leaving me with only the low margin accounts. I've also noticed that the accounts I'm servicing too cheaply are staying with me season after season. I've only got one or two really good accounts left heading into this year. Customers will focus on price and assume the quality is the same with either company.

    It also depends on your demographics. If your clients are not able to do the work themselves, they're probably more likely to stay with you long term. However, if they're capable of doing the work themselves and your service is a luxury, be prepared for high churn. I've found that the "luxury" customers are much more likely to stay on the schedule longer if the price is a little lower than it should be.

    DFW Area Landscaper
  6. MOW ED

    MOW ED LawnSite Fanatic
    Posts: 5,028

    There is also a difference between doing just mowing as opposed to what I like to call premium service. I love my customers that have me do it all. Spring clean, mow, mulch beds, fertilize x4 or 5 , weed control, edging, fall clean. These people realize the value of a true one stop shop, me. I do have some that I just mow for and that is ok but the premium people pay my bills. I guess I could classify them as high end but the properties are not mansions. They range from 7 to 16k sq ft and they make up 70% of my profit.
    Year after year I have acquired better properties and trimmed out some losers, I can say that I am working smarter and not harder. I still have some fine tuning to do but I am on the right track. It not how many you maintain, its how you maintain them that makes you money.
  7. Soupy

    Soupy LawnSite Gold Member
    Posts: 3,125

    That is my point. Everyone is out there lowering prices making your business suffer. You are losing good payers to a cheaper price. Your not losing the cheap cuts because you are cutting them cheap and they like you for that. But are you profiting off these customers that you claim to be loyal. Sounds like you are in a very bad market. Part of the problem is people don't think things through when starting a lawn service. They think it is easy to get started and when they realize there isn't a demand for another lawn service they lower prices. (not talking about you DFW, rather the new guys starting this year).

    Let's face it, we need more lawn services like I need a virus on my computer. But yet we see new guys coming out of the wood work every year. I don't mind competition, but obviously these new guys are not looking at the market and assessing the need of their service. Supply and demand is what drives a business and there is no demand for grass cutters. The supply is so high that prices come crashing down and equipment etc. prices go through the roof.

    Also this thread isn't about premium services or full service accounts. It's about making a profit. You can make a good profit on mow and go, but not if everyone is driving prices in the ground. I understand that the new guys will come and go, but a lot of veterans are stooping to their level for some reason. I read on here how the next guy is going to land 100's of new accounts and he is going to do this and that. If he is new he isn't building his business on nothing but price. Maybe a little charm, and what not but why are these people worried about 100's of new customers. How about 50 new customers with a high profit. But wait, that would be to hard to do. Duh! no one said it would be easy. these guys only have it in their imagination that it should be easy. I say it again, there is no demand for new lawn services (in most areas). That fad has past and you new guys missed the boat. Move on and create the next big thing.

    Not trying be harsh, but it is true. I'm not trying to scare competition away. What I say on this forum isn't going to help my market. I am not in a big city and none of my direct competition is on this site. If they are then they are ghost members. My business is on track of were I want it to be. I'm just talking common sense here. Don't open a fishing bait shop in the middle of the desert and expect miracles to happen.

    I'm not trying to alienate all new guys either. If there is a demand for your business then great. Welcome to the lawn care industry and good luck with your business. I'm sure there are markets left out there were some new guys will have great success.

    By the way, I just landed a job for $90 were the other guy was charging $78. I didn't land the 3 bids before that, but hang in there and let the business grow at a profitable rate. Anyone closing more then 25-50% of their estimates should re asses things and make sure they are not leaving money on the table. If you Can not close enough customers at a premium profit then you are in a bad market. Sorry, but maybe Amway would be better.
  8. Mo Green

    Mo Green LawnSite Bronze Member
    Posts: 1,487

    Great post Soupy! :waving:
  9. Precision

    Precision LawnSite Silver Member
    Posts: 2,995

    You got it down Soupy.

    I have been fighting against the mentality of getting more accounts now matter what. It just doesn't pay when you dread doing a lawn because you know your cost is about what you are being paid.

    Year 2 for me and I already know a few people that are getting price hikes or dropped as soon as I get someone (with a higher profit margin) to take their place. 33 accounts to end the year last year and I paid myself decent.

    10 Estimates and 5 accounts for maintenance

    5 estimates for clean ups and 3 signatures. 1 I under priced. OOPS

    But that has the law of averages waiting to catch up with me.

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