Good Time to raise prices?

Discussion in 'Lawn Mowing' started by Jason Pallas, Mar 7, 2003.

  1. Jason Pallas

    Jason Pallas LawnSite Bronze Member
    Posts: 1,325

    Given the economy and everything else is this really a good time to raise lawn care/service prices?
    Here's the boat I'm in (much like everyone else): Cost of business is up (fuel, parts, labor, insurance.....etc.), the economy sucks (lots of people re-evaluating their household budgets), every unemployed scab with a craftsman is out there muddying the market with crack-head prices and I was planning on raising my prices by about 5% just to HELP cover my increases in costs of business.
    My market is full of million dollar homes with penny pinching millionaires. They'll drop you for a couple of uninsured crackheads working out of a van if their price is $1 cheaper - nevermind that those same rocksmokers will be back later to burglarize the house when they leave to go to the yacht club.

    Anyway, how does everyone else feel about raising prices in this economy? I've got to do it just to continue to make it - but I'm real nervous about customer revolt. Anyone else feel the same? Different? Thanks.
  2. Harvestman

    Harvestman LawnSite Member
    Posts: 233

    I'm just setting back and watching the fuel prices and waiting. There will be an increase i'm just not sure how much yet.Let the costumers react how they are going to react I;m not responsible for that. But I'm responsible for my family.
  3. landscaper57

    landscaper57 LawnSite Member
    from zone 7
    Posts: 9

    I faced this same dilemma last month. I went up on about 20 customers that had not been increased in the past year or more. I was not sure if this was such a good idea due to the same reasons you stated.
    However, for the same reasons as you stated I felt that for me to stay profitably, I had no choice but to increase prices on these accounts. Of the accounts I sent letters to (1) canceled and (1) asked for me to delay due to them having to pay some unexpected medical cost. I told this customer that I understood and would delay the increase as long as possible by would eventually need to raise our price. The one that canceled had been at the same price for 5 years. This was a multiple account contract. I hated to lose the business but thats the way it goes sometimes.
    Needless to say, I should have gone up sooner but this job was still profitably. The problem with this contract was the profit was to the point that it was to small for the amount of labor and equipment needed to satisfy the job requirements. Yes I could have continued at the rate we were at, but I am in business to make a living and a profit. I have to make a certain profit for each job or is not worth doing. People make a mistake in thinking that all you need to cover is the labor, material and expenses. To remain in business you must make a profit after all cost are deducted.

    The long and short of my answer is this: I can sit at home and go broke. Why bust my *ss doing it for someone who only wants a cheap price. If your service or product is first class, then you should be paid as such. Good isn't cheap and cheap isn't good!!!
  4. landscaper57

    landscaper57 LawnSite Member
    from zone 7
    Posts: 9


    One more thing to remember. There is never going to be a good time in the customers eyes to raise your price. They, like everyone, only want to pay as much as the have to.
  5. About a month into the season, I'm going to raise prices on a few marginal accounts. But that's probably going to be SOP regardless of the economy.
  6. JimLewis

    JimLewis LawnSite Fanatic
    Posts: 6,841

    Well, I'd love to raise prices on about 20-25% of my clients right now. And I would in any other circumstance. But I can't. Like you said, bad economy and all - it just isn't wise. If even 2 or 3 people terminate service due to the increase, than that negates the increase I make for the rest.

    However, I got a good idea the other day. What about a fuel surcharge? You could add a $5 or $10 fuel surcharge to each client. Send out a letter to everyone saying this is just a temporary increase due to the crazy fuel prices and once gas goes below $xx.xx per gallon then the surcharge will end too!

    I think this is a good way to go if you have to raise prices due mostly to fuel costs.
  7. landscaper57

    landscaper57 LawnSite Member
    from zone 7
    Posts: 9

    The problem I see with this type of increase is that most of the cost that are passed along now, due to the increase in gas cost, will not drop if gas goes down.
    While gas is a expense that I see going up, it does not compare to the other cost increase I see in insurance and such.
    I would rather work 2 hours for $80 than 3 hours for $90.

    LAWNS AND MOWER LawnSite Bronze Member
    Posts: 1,129

    Just wondering, would the $5 or $10 surcharge be per/visit,per/month, or per/season?? I never use fuel increases as an excuse to raise prices. I just explain that the cost of doing business has gone up. I can mow $600 worth in one day using 10 gallons of gas. 5 gals. for the equipment and 5 gals for transportation. 10 gals @ $1.25/gal = $11.25 (low end) 10 gals @ $2/gal = $20 (high end). Now some number crunching. For one day at $1.25/gal my fuel cost is 1.8% of my total gross. If gas is $2/gal, my fuel cost is 3.3%. Increase of 1.5%. My average account runs $40/cut. Times that by 1.5% for the increase in fuel and now I'm charging $40.60. Not worth it for me. Just suck it up. As for the original question, yes I will raise about 1/3 of my accounts this season. Mainly the less desirable ones. Best of luck to everybody this season.
  9. mh1314

    mh1314 LawnSite Member
    from Texas
    Posts: 133

    I think sending out letters notifying your clients of your decision and reason for raising prices works best. Like ever other yearly or monthly bill that goes up, we don't like it, but after a day or two we accept it. Sometimes waiting too long and making a large adjustment isn't as well received as smaller ones.

    Just my .02

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