# How does 5% sound?

Discussion in 'Lawn Mowing' started by WoodBrothersLC, Sep 1, 2005.

1. ### WoodBrothersLCLawnSite Senior Memberfrom Kansas CityPosts: 418

Going to send out a letter indicating there will be a fuel surcharge on their bill at the end of the month. Do you think a 5% increase should cover our butts for the time being? Talked to a friend's dad who cuts grass and he's doing a "sliding scale" system and he's doing around 4-5% depending on the yard right now. Thanks.

-Mark Wood

2. ### i_plant_artLawnSite Senior Memberfrom Oakland, TNPosts: 558

here is what i have posted in a nother thread... these are my thoughts on increasing:

nor is it your clients so why pass it off.....

lets says avg price to cut is \$40.00

let say you have 100 yards and it costs you\$200 per week in fuel for truck and mowers (lets says 80 gallons total of regular gas @ 2.50 a gallon= \$200)( i know it would be more but for the simplicity sakes) thats \$2.00 per yard in fiel costs.

Huricane comes gas goes up.....

now your fuel expense 3.60 a gallon still the same 80 gallons this would be a total of \$288.00 a week for the same amount (80*3.60= 288.00)for the same 100 yards thats now 2.88 per yard a mere .88 per yard increase.

Ok now so yeah there are 4 weeks in a month assuming gas stayed at 3.60/gal thats \$352.00 more a month.

Big whoop.... considering the high profits in mowing as they are......

100 clients @ 40.00 (the orig avg)= 4000.00/week in gross revenue or 16000 per month so why complain over a \$352.00 monthly expense increase????

lets say u sent out a letter to each client explaining it b4 the invoice went out ok so now u have 100 clients plus .37 for each stamp (\$37 for stamps) plus let make up .15 for an envelope and piece of paper .15*100 = \$15 plus computer itme and envelope licking time say it costs you .07 for each one in time to lick and stuff. .07*100= 7.00
thats a total of \$59 to let people know of the increase subtracted from the original 352 only leaves you with 293\$ more dollars for your pocket

thats only 2.93 per client for the month that you would increae your profits.... not to mention out of that 100 say u lost a few clients b/c of it lets say 3 3/100 not too bad huh... yeah til you do the math............ now thats an additional \$480 (3 clients@40 a cut for 4x a month) a month you would loose so now your actuall y making less gross not to mention instead of having that \$288 a week cost split amoungst 100 clients its now only over 97 which now makes your per client gas costs go up to 2.96 instead of 2.88 so in reality if it happened this way and it is bound to when raising prices you always loose a few now ur actually making LESS with a fuel surchage than had u not raised prices in the first place......

SO... is it worth it??????????? or can you live without eatting out and cable t6v for another 6-10 weeks (depending on where in the US you live and mowing seasons)

3. ### i_plant_artLawnSite Senior Memberfrom Oakland, TNPosts: 558

sincei originally made this post on another thread i think im goignt o take my original \$59 and send out letter indicating to my clients that there will be no need for a price increase that i am operating a stable lawn care business and can more than absorb the increase and also that if they hear of any of thier friends talking about how their lco has increased rates that if they will refer them (homeowner friend) to me and mention that i am not raising rates that i will send them a \$30 gift card to any business of thier choice as my way of saying thank you. this way i will then have more income per month and be spreading out the gas costs over more lawns thus causing my cost per lawn to go down. yeah it willl take a little more gas but at 2.88 per yard (hypothetical) vs \$40 more income its well worth the investment if i sign on a new client for the year.

4. ### WoodBrothersLCLawnSite Senior Memberfrom Kansas CityPosts: 418

I think you have a good idea there, but seriously man, why should you have to lose money to gas when you do the same amount of work, but have to spend more to complete it?

-Mark Wood

5. ### yrdandgardenhandymanLawnSite Senior Memberfrom midwestPosts: 953

Also, remember that gas prices affect more than your direct price of gas. Your price of equipment is rising and will rise more. This disaster of biblical proportions in the south of the USA will cause insurance rates to rise. Price of parts will rise as a result of increasing transportation costs. Also, couldn't the argument be made that if you don't have to raise prices in the face of all this, then maybe you have been charging too much all along? Always leave the customer feeling they are and have always been getting the best value for their dollar. Even the ones who aren't price shoppers care about value for their dollar.

6. ### SoupyLawnSite Gold Memberfrom IL. (St Louis Metro)Posts: 3,125

I think you should charge a fuel surcharge. But, 5% might be too high, depending on your situation. I am charging 3.5% and this more then covers the expense at the pumps, but there is more to it then that. We all know that our vendors will in some way pass their expenses on to us as well.

We have to remember as business men to never eat an expense just because we think we can. Other companies/industries won't. What's next we just keep eating every expense just because it's only a couple hundred hear and there.

I understand this might be temporary, so if you feel you will lose customers, then at least call for a voluntary surcharge. I think you will find that your customers will understand and pay it.

What I did was add a surcharge of 3.5% for 89 octane between \$2.49 - \$3.49/gal. An additional 3.5% will be added for every \$1 increment after that. When/If gas drops back down to/below \$2.49/gal we will remove the surcharge. If it does not drop we will eventually drop the surcharge and make it a permanent increase in our price. I have seen surcharges on some of my vendor invoices for a couple of months now. My signed agreements have my fuel surcharge set to take effect at \$2/gal, so I have been more then fair about holding out.

7. ### SoupyLawnSite Gold Memberfrom IL. (St Louis Metro)Posts: 3,125

Oh I want to add that I raised a couple of borderline \$30 lawns to \$35 the other day as part of the result of fuel. I was planning on raising them next year, but instead of charging them a surcharge I decided to just make the move. They were going to get this increase eventually, so fuel prices was not the main reason I raised them. I just decided since I'm raising them I would not add a fuel surcharge on top of the increase.

Anyway, I cut one today and the lady came out and said, "I got your letter and I don't blame you with the cost of gas". I just went along with it, but it shows that people do understand more now, then ever that we have expenses.

8. ### FozLawnSite Memberfrom Commonwealth of VirginiaPosts: 143

The mowing part doesn't hurt here, it is the trucks & heavy equipment. Our monthly fuel bill has been averaging \$3,200.00 with diesel around \$2.55/gal. With the latest increase to \$3.19/gal it will change our monthly bill to around \$4,000.00. I am not going to lose \$800.00 per month just to keep lining the pockets of greedy oil companies. If diesel makes it to \$4.00 that is a change of nearly \$2,000.00 per month, sorry but not out of my pocket. We are taking each job & looking at fuel use on the job and adding a % just enough to cover the added fuel costs, in most cases approximately 2%.

9. ### RogerLawnSite Fanaticfrom McMurray, PAPosts: 5,929

For those who added a fuel surcharge a couple of weeks ago, are you now going to rescind the added fee? In this area, gasoline prices have dropped back to near pre-Katrina levels. From the news reports, other areas are similar. A couple of weeks ago, LS had numerous threads about the jump in prices, but I find none in the past couple of days that speak to dropping gasoline prices.

A local talk radio station host brought up this very topic today. I wasn't able to hear the whole discussion (in/out of the truck, moving from job to job), but, I understand he had somebody come to his house for irrigation repairs. Added to the bill was \$3.50 fuel surcharge. He was outraged and others were as well.

In a short time, he was able to do the math in a similar fashion as I_Plant_Art's post above, and declared the charge as ridiculous. The contractor was doing a rip-off based around the fuel price hystiria. It didn't take much mental capacity to see that he was right.

For those who added a surcharge, what was the reaction? Or, were the threats do add such a surcharge just talk, no action?

For me, I made no changes.

10. ### JamesgateslandscapingLawnSite Senior Memberfrom Amherst NHPosts: 421

Im just absorbing it, its not a big deal. I make enough money in other regions of the business (construction) that mowing is not a huge deal if I have to spend an extra \$20 a week to fuel the mowers. It shows people that you have a stable company and you do not have to adjust your prices if the gas prices hickup.
Thanks
James