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Fuel surcharge

Discussion in 'Lawn Mowing' started by brentsawyer, Oct 3, 2004.

  1. brentsawyer

    brentsawyer LawnSite Senior Member
    Posts: 663

    First off, I'm curious if anyone else is doing/has done something like this.

    With the national average of 87 octane right at the $2 mark right now and the same for diesel, I enacted in June a fuel surcharge for maintenance customers of 2%@$1.75+.25% every $.10 increase so now prices are at $1.95, I am charging a 2.5% surcharge on mowing but it is costing me a fortune to now fill up my diesel truck for landscaping and I'm thinking of adding a surchage for my landscpaing work since to fill up my F-350 is now over the $70 mark up from $50 just two months ago. The reason I left it off landscaping work was diesel prices were steady until the last month and they shot up $.40 and this really makes a difference. What I was thinking was adding a 1% fuel surcharge to all landscaping bids to cover this since I have had no problems with adding it to my mowing customers. This way for every $1,000 in landscaping work, $10 will go to the fuel surcharge which is an average day for landscaping and this should be sufficient to make up the difference. As with any other major increase in landscaping work that shoots up rather quickly, I think that it is unfair and stupid to keep absorbing this cost. Once prices stabilize and it is known if they will stay at this level for the long term or lower themselves back down, the surcharge will become apart of normal business expenses and be built into the bid.

    PS I think that itemizing this out defines that prices for our work have to go up for now and this will distinguish a little bit of our profit margins to customers as a legit expense.
     
    Chris Wagner likes this.
  2. sprout

    sprout LawnSite Member
    Posts: 94

    Some customers may accept this---most will not. For mowing customers I will just raise there price. For landscaping just add a fuel charge into your bid. People are being pounded with the high cost of life, don't make it harder to do business for yourself.
     
  3. Mark McC

    Mark McC LawnSite Bronze Member
    Posts: 1,565

    I often wish I'd added a fuel surcharge or a rate adjustment when fuel prices started heading for the sky, but I didn't. At this point in the year, I'm just not sure it makes sense, frankly, but I'm doing mostly lawn maintenance right now. Not the same situation you're in.

    By and large, I did nothing because I was not (and still am not) sure if the increase in petroleum prices was structural or just the result of the feeeding frenzy that passes for normal behavior at the New York commodities exchange. By spring, we'll know pretty much for certain if only because Iraqi production will largely be back online. Of course, as many excuses as the traders come up with for bidding prices sky-high, we're liable to find out in April that the uncertainty of the penguin population in Antarctica is driving prices.

    My rates are going up in spring no matter what, it's strictly a question of how much. I would like to avoid citing energy prices as a driving force behind my rate increase, only to find oil selling for $30 a barrel and have customers calling me and asking if I can bring their rates back down as oil prices start to fall...assuming they ever do. It probably won't anytime soon, but as we all know, adjusted for inflation, even $50 a barrel is not an all-time high.
     
  4. Fantasy Lawns

    Fantasy Lawns LawnSite Bronze Member
    Posts: 1,913

    I just raised my monthly rates
     
  5. brentsawyer

    brentsawyer LawnSite Senior Member
    Posts: 663

    fantasy lawns.....If you don't mind stating, how much?

    PS always a possibility of raising prices next year primarly due to fuel prices. I calculate that it is costing me about $100+ per month in mowing alone this year compared to last year. Another $75-100 landscaping adds up over the year to something worth mentioning and passing on to customers that I do not feel that I should have to bear the cost of since it was not planned and to add when I but anything from LESCO now, it includes a surcharge.
     
  6. Mark McC

    Mark McC LawnSite Bronze Member
    Posts: 1,565

    Yeah, but by how much? If fuel costs hit me to the tune of an additional $100 a month and I have 25 customers, I cannot rationalize anything more than a buck or so more per cut during the height (no double-entendre intended) of cutting season.

    Frankly, two or three of my customers are getting SUCH a deal 'cause I did a lousy job of bidding, so the sticker shock to them is liable to drive them away, but the others are paying reasonable rates. Still, it's all going up by at least $2.50 per cut next year.
     
  7. pjslawncare/landscap

    pjslawncare/landscap LawnSite Bronze Member
    Posts: 1,410

    Trucking companys do it, courier services do it, even our garbage disposal service has added fuel surcharges. This country runs on fuel so when it keeps going up, people can expect service providers to to adjust rates as well for it.
     
  8. Fantasy Lawns

    Fantasy Lawns LawnSite Bronze Member
    Posts: 1,913

    On average it was $5 per resi under $100 monthly .... those over some got more .... n others got a raise just cause it was time ... NO commercial got raises this spring as the contract dates are locked ... but will when due

    We are different as we work year round n never have to "send out" spring letters confirming next years service n I only due landscaping for my customer base only .... I sub out to those not on yearly service .... as a landscaper I would adjust my bids according to the cost of living in today time n avoid a written down "surcharge" on the contract ... I would keep it in mind as any cost .... after all fuel is a direct cost in the pie

    Other than that my service area is no bigger than 10 miles in radius with +100 accounts (1 of them is 127 homes thou)

    I just don't see a "surcharge" as an effective way to compensate increase in fuel cost ... those prices are NOT going down ..... we will never see the price of fuel in today's prices the same or even near what it was 1 year ago

    And it may be that the price of fuel today may hold it's price for a year or two .... than another world event will cause another rise

    Rising Cost of business is just that .... business
     
  9. dkeisala

    dkeisala LawnSite Senior Member
    Posts: 911

    Fuel surcharges and all these little formulas I've seen people propose, what a nightmare to keep track of. Just raise your prices across the board and keep it at that.

    The days of cheap gas are over, you've got to accept that. Just look around the planet at other countries and what they pay. Our prices are nothing comparatively.

    This last spring I raised all of my annual maintenance customers by 5% and my hourly rate went from $37.50 to $40.00. This has been more than sufficient to cover the increase in fuel expenses.
     
  10. LwnmwrMan22

    LwnmwrMan22 LawnSite Platinum Member
    Posts: 4,372

    I've been in conversations with my clients the last few weeks, since I'm dropping some next year. The ones that I've been wanting to keep, I've raised 10% with a cap at $50 / month for those that are over $500 / month.

    They all figured they would be getting an increase notice, since I haven't raised my prices for 2 years.

    I got them all back, even with an increase in price because they appreciated the way I did business.

    I didn't try adding a fuel surcharge in the middle of the summer, I just waited it out and raised my prices for next year.

    Most of my clients (3 out of 4) are looking for new people that aren't going to be tacking on a surcharge, ie garbage people, electricians, etc. that'll do it for the agreed upon price at the beginning of the contract.
     

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