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Discussion in 'Business Operations' started by georgialawn88, Dec 13, 2013.
Economies of scale. Look it up, it's the name of the game.
First off, why would you want to compete to be the lowest low baller in your market?
Secondly, the larger company that services a larger percentage of the market than you is not a "low baller". The company is most likely more efficient at controlling their costs associated with providing service to their clients than you are at controlling costs to service your clients. Right off the bat, their volume will result in lower costs for materials/supplies because they are purchasing in larger quantities than you.
He's not "undercutting" you, he's most likely able to service the market while making a profit at the prices he is charging. The issue is that you aren't delivering $25 - $30 more value than the guy you are trying to compete with
If you were delivering a better value at a higher price you wouldn't be competing with this other company to be the lowest bidder. It seems like the market you are trying to compete in won't support your $25 - $30 higher price tag. You need to either figure out how to make a profit while servicing this segment of the market at a lower price point than you are currently charging or figure out how to deliver a better value at your current price point and market that service to a different portion of the market.
oakleaf, just read it good post. thanks for advice. I believe I'm gonna scale to him and grow quick. I can still make profit dropping my prices at least 30% and see what happens!
So much of it comes down to the tight routes and doing the bulk to get the best prices. We hit the 800 customer mark this year. Taking full trailers of granular fert saves us, products like lime we buy in 2000# lb super sacks, our herbicides come in either 50 gal drums or 220 gal totes. My app prices are still on par with were they were 4 years ago when I began the company (which are at the higher end for my market). With lower product, equipment, and overhead costs, I know I am saving on average $13.27 per app over what it cost year one. I know I could easily drop my price $20 on a 10k lawn and still be just as profitable as most of the smaller guys up here. If I had 5,000 Clint's then I know I could lower my price while retaining more profits.
Agreed. Lowering your overhead, researching more optimal routes, and optimizing your business plan is the best approach you can go. Make connections, get deals at the Feed Stores, everything you can to save you money. But never cut your income down without even figuring out the low points in your business model and where you're spending too much money. If you can lower your prices and survive, that's one thing. But you optimize your budget and overhead, then lower your prices and generate the same income, now you're running a business. I might not have been in Landscaping long, but I've been in business school for a long time along with growing up with parents owning a chain of 500+ sea stores across 17 states. Lowering your price to compete is an easy solution, but not a good move unless you do all your numbers all over again from the beginning. Usually you should be able to cut some overhead expenses to justify your price change. Then you'll have the best of both worlds, a more competitive price, and lower overhead so you still can generate the same income from customer to customer in the long run. Good luck and wish you the best.
He may be adding on insect protection and/or core aeration at a very high price (big profit), thus charging MORE than you for a full package.
His weed control is probably poor. We have a similar cheap company in our area that has thousands of accounts. Their lawns are FULL of weeds, but year after year they service the same lawns. Some customers just want the basics.
Its like the Mercedes car salesman complaining that the Ford dealer is selling their cars cheaper than his.
Whenever I meet a potential new customer, the first thing I say is I'm probably more expensive than your current company. Then I list out the reasons why and the extra things I do better. I offer a Mercedes for people who don't want Fords. I don't want to service Ford people, I want Mercedes people who appreciate the extras that I will do.
To the original poster, do you want to be know as the company who charges the cheapest, but gets the most complaints from customers? Or do you want to go on as you have been doing excellent work and charging for prices that reflect the excellent work?
I want to be the guy that makes the most money.
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You never said that his work is junk just that he was cheap. Is he skimping or do you assume he is? I could make it fine on the 45$ for 10k. Also how is he applying compared to you skid takes three times as long and is a lot harder on your body. When I went to a ride on I was doing almost half a weeks work in a day. Also work your dealers they may not like it but they can always do better. I lost my ass my first year spraying the other half of the business covered it tho. Now I'm golden and do good on both ends. Figure out what works for you and a lot of stress will disapear.
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That's a business owner. Not a landscaper
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