Developing a pricing structure.

Discussion in 'Heavy Equipment & Pavement' started by ksss, Nov 24, 2013.

  1. JNB Construction

    JNB Construction LawnSite Senior Member
    Posts: 282

    My daily rate figures into my pricing, of course, but I do almost zero work charging hourly. I quote every job using my daily rate and material / markup, that way I don't have anyone looking over my shoulder, and then I work efficiently to get the job done in the time I've allotted. Like yellowdog, I like to get things done and get home to my family in eight hours whenever possible.

    The majority of my customers are rural property owners. I'd rather drive an hour and a half on farm roads than work in town. Over the last year and a half there's been a lot of work generated by folks that live in the city that have purchased rural property, usually from landowners subdividing. I usually get in with them at the point where they realize they need their own access to the property (culverts and entrances, etc.) and the relationship just blossoms from there. That may mean clearing and brush maintenance, and a gravel access road for future building. Instead of going after builders, I'm typically introduced to them by the homeowner. I'll come in when the home is near completion to finish off roads, provide final drainage and landscape grading and dress up around septic tanks, utility trenches, stuff like that. That has also led to those same builders calling me to finish up their other projects.

    I hate overhead, so I've built great relationships with two independent rental companies. When it's raining or work is slow, I don't want to sit at home worrying about a ctl, excavator and all of the attachments out there sitting while I'm making payments. I may have a different philosophy on it since this is my second career and I'm not a young pup anymore. My first career involved lots of overhead and a bunch of employees and I specifically looked for a niche this time around to avoid both. It's been working out real well.
     
  2. YellowDogSVC

    YellowDogSVC LawnSite Gold Member
    from TX
    Posts: 3,754

    Very wise.. I keep equipment and like new stuff but I admit I got back into some payments when the interest rates were attractive. That goes against my personal finance philosophy where I won't borrow money. About 6 years ago, we were all paid off and I wanted some new stuff.. Went downhill from there. The only thing I find is that I have the machines for my own little ranch. I like to play on the machines and dig holes, rocks, and mulch trails so my machines get used commercially and privately. I used to rent dozers after I sold mine and need to start doing it again but never seem to have disposable income because of repairs or other necessities. Makes sense if you have the good relationship. A friend has a tree company and he never worries about the big stuff... he calls me or can have materials picked up or delivered. he just focuses on working and keeping his small crew working and has virtually no equipment to maintain or pay for.
     
  3. YellowDogSVC

    YellowDogSVC LawnSite Gold Member
    from TX
    Posts: 3,754

    I reread my post and it made absolutely no sense. ;) Guess I was half asleep.
    My point was it is nice to have equipment the moment I need it but it is not a good feeling having a payment or two when you are shut down for a week due to illness, weather, or breakdowns.

    At some point, the cost-curve of owning versus renting makes owning attractive but what I was saying is in your situation, your logic was sound.
    I still like to play and though i'm getting older, I playing in equipment still beats sitting in the office. Today I'm stir crazy because of the mud and I can see my equipment all lined up just sitting there waiting for someone to come play. :)
     
  4. JNB Construction

    JNB Construction LawnSite Senior Member
    Posts: 282

    Ya, I got your point. :)

    I guess that my point regarding rentals is that I get excellent pricing and service from both companies, I have zero maintenance and I always have just the right tool for the job. I build the cost of the rentals into my bid, so I never notice the cost. Both give me a lot of referrals too.

    I usually only need to rent two or three times a month. I'm an old skiploader hand, and most of my work can be done with my 35hp hydrostatic tractor and a box blade or landplane. It's been paid for for a few years and only uses 10-13 gallons of fuel per 8 hour day.

    My biggest problem is that customers are used to seeing guys show up with skid steers, ctl's,or a small motorgrader and a crew. I get that (hows he going to do this?) look a lot. It used to bother me. In fact, I was going to buy larger equipment just because of it. In retrospect, that would have been a really dumb move. That little tractor has knocked out 12-15 semi loads of roadbase on a finished driveway in an 8 hour day many times, and I've NEVER once had a driver tailgate-spread a load. It constantly amazes me what that tractor can actually do.
     
  5. alldayrj

    alldayrj LawnSite Gold Member
    Posts: 3,761

    I wouldnt even call it upselling. But for example when someone calls me for sod i ask do you need any concrete or brickwork too? My dad always says you dont get anything unless you ask for it. So i have no shame in asking for work !
     
  6. JNB Construction

    JNB Construction LawnSite Senior Member
    Posts: 282

    I'll add that one of the members here on lawnsite actually changed my mind about what I really need to perform my work and what I want.

    I was watching youtube videos and saw him go from having a ctl and all of the attachments to hauling it all off to the auction. I never want to get myself in that position. I have to work for myself...I'm a terrible employee! :laugh:
     
  7. txirrigation

    txirrigation LawnSite Senior Member
    from Texas
    Posts: 977

    We only use the skid on jobs for contractors, all repeat business. They all know the deal, they had better accumulated a full days work before calling.
    Posted via Mobile Device
     
  8. alldayrj

    alldayrj LawnSite Gold Member
    Posts: 3,761

    Back to pricing, i feel like we all need to be getting near 100/ hour to keep these machines running and profitable. Whether youre billing by the hour or the job. Obviously you can make more, but anyone doing less is really just doing themselves a disservice.
     
  9. YellowDogSVC

    YellowDogSVC LawnSite Gold Member
    from TX
    Posts: 3,754

    I do have one customer who is also a friend. He has used me for about 15 years and I will go and do just a few hours for him as needed. Sometimes I break even but it keeps his customers happy and he always makes it up to me.
    I do charity work, too, or deeply discounted work for elderly and that has to be figured into costs since you are still using up hours, components, and fluids. I don't charge someone with money more than someone without as far as a pricing structure goes but I will "eat it" for certain circumstances as a way of paying my blessings forward.

    As a side note, one time I did some pro-bono work for a woman who had her home burned downed. I cleared a path so she could get a used trailer in. She supposedly had no insurance and the community was chipping in.. write up in the paper, etc.
    Let's just say that after that experience, I had to re-examine what is charity work and who deserves it. The woman had an entitlement mentality and I honored what I said I would do, another contractor also chipped in and so she said that I "owed her" more since I had help on the part that I was doing for free! Can you believe that? I should have sent her a breakdown of my costs just to show up and be charitable... but I think I just went home and never spoke to her again. GEEZ:dizzy:
     
  10. ksss

    ksss LawnSite Fanatic
    Posts: 7,128


    I agree totally. This line of work is competitive and its tough to make money. Its even tougher if work against yourself, which is why I try to learn as much as possible from others and try to improve my business acumen. If I learned anything in the last two decades it is to you can never stop refining your operation.
     

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