fundamental changes: consumers vs. green indiustry

Discussion in 'Business Operations' started by HBFOXJr, Nov 10, 2011.

  1. HBFOXJr

    HBFOXJr LawnSite Bronze Member
    Posts: 1,706

    I read in a green industry trade mag the other night about one alleged guru saying that prices will continue to drop under pressure from consumers. Not only are they putting on the price squeeze, but he said they are expecting more.

    So many publication consultants and writers, seem to be talking about doing more for your client while getting paid less or getting no bump up in price. I want to know who is doing what for me.

    I like to cook, there for I grocery shop from time to time. I've noticed prices are really up. I used to make fun of how my mom talked about pennies in the store. I'm a many of dollars and pennies didn't matter to me. Especially when mom would drive 1/2 hr out of her way to save a dime.

    Today, it is dollars in the grocery store, and the gas pump, electric bill, shoe store, Costco. Every where I go, prices are up. Bubba burgers not long ago were $7.99/2 lb box. Add $2, today. "1/2" gallons of ice cream are now in "cute little" containers of 48 oz. I think a pint is still a pint, but when will that be 12 oz? My favorite whole bean coffee at Costco used to be maybe a 2.5lb bag for $5+/lb, $13+ total. Now $6.30+/lb and a 3lb bag, total $19+/-. I've noticed many things at Costco now come at prices and multiples to make the purchase approximately $10-20/cart item. You all know more stories including the price of brooms, shovels, rakes, mower blades, etc.

    So my question is when is the industry going to get a set of testicles and say we've given enough. If you are doing residential work, the sweat off our backs, and the backs of our employees allows people to make what is essentially a discretionary purchase of green industry services.

    Personally I am tired of people in $300-$600k+ houses and real nice cars, complaining about fert prices, sprinkler blow out prices, or any thing else. I'm even more tired of the morons in this biz grovelling at the consumers feet for the privilege of serving them.

    Why o why are guys winterizing sprinklers for 1970-1980 prices? The people have to have it done. They will pay the price.

    2012 looks to be about the last year I can do anything to hold prices or give my customers more value. I have been doing it for several years now, by changing the way we do business. More pre paid irrigation plans get us to more sites in the spring for more service. Telling people when we are going to come and winterize their system, rather that calling them and asking when they'd like it done. That way we get better route density and more done for time worked. We've gone to robotic phone calls for some sales promotions to clients and appointment announcements and reminders. That cut mailing and office time.

    Next year I will route all my sprinkler start ups and winterizing with mapping software with out regard for what month they have had service in the past. that will make for even better routes than this year. It's the only ace I have left. I know I'm not alone. I'm not saying we haven't grown sales and profits the past 2 years. We needed to after 2008 and 2009, and we deserve it for how hard we have innovated and worked.

    Despite the success, we're just getting back to normal and have yet to make up for what we lost over those 2 bad years. I'm afraid if the industry doesn't not start to change how we operate and price, we will have established a new kind of normal for the consumer. It will be a normal, we can't live with.
     
  2. wbw

    wbw LawnSite Fanatic
    Posts: 5,404

    The blame doesn't lie with the consumer. The blame lies with your competitors. And with you. And with me. We chose an industry that requires very little in the way of start-up capitol or licensing requirements. This low barrier to entry allows for a lot of fools (self employed people many times working for wages, sometimes working at a loss hoping to make up for it in volume) as competitors. You will always battle this, always. It will always be a little worse with each economic downturn and a little better when things are going good. The only way to make it go away is to change industries.
     
  3. HBFOXJr

    HBFOXJr LawnSite Bronze Member
    Posts: 1,706

    I'm hoping to retire with in 3 yrs. *trucewhiteflag*

    You are right in all you say. However, consumers no matter whether residential or commercial are going to get a reality check pretty soon. Even low guys can't get much lower.
     
  4. HBFOXJr

    HBFOXJr LawnSite Bronze Member
    Posts: 1,706

    The National Farm Bureau says the cost of making a traditional holiday dinner will increase about 13% this year.
     
  5. PROCUT1

    PROCUT1 LawnSite Platinum Member
    from TN
    Posts: 4,909

    wbw said in a few words a perfect summary of what i have been talking about on here for years.

    Supply and demand.

    Over the years the supply of lawn guys has grown like crazy.
    Get laid off. Buy a mower, and live the dream of being your own boss.
    No education, experience or training necessary.

    Yes, Many if not most will fail...........Eventually.....

    But there are 10 lined up to take their place.
     
  6. HBFOXJr

    HBFOXJr LawnSite Bronze Member
    Posts: 1,706

    Ever since the late 70's I've seen tons of guys come in to the industry. What do you think, 5% had a business plan?

    So they say, "I can do it for half of that". No one ever says, I can do it for 96% of that. It's so easy to divide by 2. Even a kindergarten kid knows what half is today. You don't have to be smarter than a 5th grader. You just need a kindergarten education for this business. :laugh:
     
  7. muddywater

    muddywater LawnSite Bronze Member
    Posts: 1,813

    I don't think it is the industry. I think it is up to the individual company.

    I have seen one local company build a solid company on service, quality, and effective branding. They are almost always the high bidder, but do somewhere in the 3-4 million a year range.

    I blame myself for my shortcomings...not the industry.
     
  8. HBFOXJr

    HBFOXJr LawnSite Bronze Member
    Posts: 1,706

    In all my griping I'm not saying I don't have a solid company, and I know darn well what mistakes I've made. I divorced the biggest one 8 yrs ago, and business has gone much better since. Seriously.

    I beg to differ about problems not being industry problems. I agree with you on nearly every point you make. My experience tells me even more.

    3 yrs ago I reroofed my old farm house. Tear off to the rafters, plus aluminum trim and soffit. Siding ready job. Big roof and project, $17,300. 2 other bids in the 17s as well. You can't get that in the green industry. Same thing when I shopped for replacement windows. Yes I have found variations in home work pricing, but there always seems to be kind of a going rate where guys are clustered.

    The same close goes for auto repair and we can name more. Customers over the years are always amazed at the wild and crazy swings in our industry pricing. Although our prices are determined by individuals, the individuals we attract often appear to be the least savvy in pricing.

    You can't talk about the low cost of entry, because if we take roofing, replacement windows and siding for examples, the investment is very low as well.
     
  9. thunderthud

    thunderthud LawnSite Member
    Posts: 127

    We've been in a race to the bottom in terms of pricing. I came from the heavy and highway construction industry. I'm thankful to not be doing that right now because the race to underbid and keep working has depressed prices across the board. There are jobs I looked at the bid package, came up with what I would have bid, and watched the job be awarded for 3-4 million less than I thought was a bare bones bid.

    Lawn cutting is really a business competing with a kid and a 21inch Craftsman as a barrier to entry.

    We bought a complex in Florida this past year from a large bank and the company that was maintaining the property quoted me a price that I could not come close to touching doing it in-house. I paid to move three employees to FL, moved equipment and bought a shop just to do two properties in state and someone who did a decent job could do it for 15% of my cost without my moving expenses. Subtracting out my Union employee expenses, which are much higher than theirs most likely, how can they be making money? I pay roughly the same for a mower, I pay roughly the same for an edger, my insurance has to be less because of my size and buying power. My trucks are probably more expensive, but I still can't imagine doing the work for 15% of my cost and still making a living. I don't need to make a profit on my crews because they're a fixed cost of the property, not an hourly expense. The number they offered frightened me.

    My employees are well paid, have excellent benefits from the Union, and retirement accounts to provide for them and their families after they're sick of working for me. These guys are the last of the middle class working right now. If you can do what I do for 15% of my fixed cost, and still profit what are you going to do in the future? Do you have health insurance? Can you retire?

    In reality at the prices I have come across, perhaps we're not competing with the kid and the craftsman, we're competing with the guy who figured out a decent home mower costs $5,000 plus repairs and gas, and that is quite a few cheap mow and blows that require none of his time or effort.

    What is the solution then? Should we be pushing for some kind of equipment license to operate a mower? Should be require a lawn care horticultural license to mow professionally? If you drive any commercial truck, you need a graduated CDL?

    At what point can you change a dude or dudette with a mower into a pro who knows his or her business and gets paid what his or her skill level is worth? Or are we at that point where the pro can get paid what he or her is worth and the lowballers will continue unabated because they are basically unskilled lawn jockeys anyway? Because even in a prevailing wage state like Massachusetts heavy construction has state approved contractors working for less than I think the job is worth, and I have 20 years of bidding experience. What hope is there for the non-prevailing wage landscape industry?
     
  10. HBFOXJr

    HBFOXJr LawnSite Bronze Member
    Posts: 1,706

    Great commentary from a different perspective. Years ago I said that there would one day be a whole new category of poor, older people. We have a few years yet to see that. They will come from the self employed service industry such as the green industry and similar.

    They be be those that worked for less than real job wages and often off the books. Their SS will be low to non existent, there will be no pension, no savings and no health care.

    Much is made of the single, unemployed or under employed black men in this country and the women than support them. I'm thinking there are a lot of under performing white men in this industry and others, pretending to be in business, while their significant other brings in a decent paycheck with benefits.

    Maybe it's natures way. Look at male and female lions. Males do battle and the females support the troops. Who am I to figure this out.

    I see irrigation jobs all the time where after the cost of materials, the job could not have generated more than $20-$25/hour. Even with $10/hr cash labor that only leaves $15 for the owner, equipment and operating the business. Huh?

    Long, Long ago, in a far away mind, some moron arbitrarily decided landscape (installs) work should be sold for 2 or 2.5 times the cost of material. So a hundred pieces of rooted ground cover costing $20 and taking an hour to plant sells for $40-$50 dollars. 15 potted shrubs worth $10 ea. sell and planted in an hour yields $300-$375+. A large caliper tree costing $175 and taking 2 hrs to plant might go for $350-$410. Experienced guys will know their production time and costs and bid this job differently than the 2x company. 2x may win jobs that will hurt, experience will win jobs that pay.
     

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