Need Help Understanding Pricing

Discussion in 'Lawn Mowing' started by SeedSquirter, Jun 29, 2004.

  1. SeedSquirter

    SeedSquirter LawnSite Member
    Posts: 18

    I have been asked to bid grounds maintenance on a 750,000 sq ft commercial property. This would be my first commercial property and I need to make one pricing issue pass the common sense test before I attempt to make a bid.

    I have performed a reasonable number of searches on this site and read literally thousands of posts on the subject of pricing and bidding. There is alot of outstanding advice from some very smart and experienced people, but there is still something that isn't passing the common sense test for me. Allow me to explain.....

    I know the average price per hour locally for commercial work is in the range of $45 to $55 per hour. I also know that a simple sq ft measurement won't always be an accurate way to figure pricing because each site has differences that might slow down your productivity. Many of the posts on this site talk about pricing by the hour OR by the sq ft. For me either method leaves some unanswered questions.

    My common sense tells me that the customer in this case pretty much knows what the maximum price he is willing to pay for grounds maintenance services. It also tells me that my pricing has to be just low enough to beat out the competition - or I won't get the work. The third factor here is that I need to take home as close to $42 per hour after expenses as I can get to replace my current income (maybe this is an impossible figure in this business, I don't know).

    So, how do I make this happen? As I see it, the variable that I have to work with is to have more productive equipment and processes than the competition to reduce the time spent actually doing the work (same winning bid price, more productive per time spent, my take home pay goes up) - easy enough to understand that one. What I don't understand though is how to apply this concept to a calculation that I can use to give competitive bids while maximizing my take home pay.

    To explain my question another way (and simplifying to just mowing for purposes of discussion):

    If you have two LCO's - one with a mower that will do 3 acres per hour and another that will do 6 acres per hour on the same property, it stands to reason that the 6 aph LCO would make more money per time spent. The issue for me is that the posts on this site explain the hourly pricing calculations from the angle of "I want to make $XX per hour" to figure what you should bid. To me that method might answer the question of how competitive I can be - but it doesn't answer the question of how to pocket the difference that my extra productivity gives me while still giving a competitive bid. In other words how do I convert my extra productivity into a competitive pricing strategy?
     
  2. bayfish

    bayfish LawnSite Senior Member
    Posts: 641

    I think the only way you pocket the difference is to do more work with the more productive, more expensive equipment. You have to increase your gross. For example:
    My crew consists of myself and 2 employees. We use 1 Hustler Z and 2 walkbehinds. We got a lot of mowing work as the spring progressed and could not take on the one time projects. We were in danger of falling behind on our scheduled maintenance at aour commercial accounts. I bought a second Hustler Z to replace a walkbehind and freed up a whole day per week. Now I can use that day to take on the projects I would otherwise put off or turn down. That allows me to make an extra $1000.00 or more that I was not going to make otherwise. What time you save with faster, more efficient equipment and processes, you have to use to make more money.
     
  3. PMLAWN

    PMLAWN LawnSite Gold Member
    Posts: 3,535

    You need to make money---That is the point----so you have to make money on all your jobs--- Stay with me on this--

    A lot of people need to have their cavities fixed (yes Dentist work)
    You have a drill and some caulk at home and you know that there is a lot of money to be made so you start doing it at home. Well we don't need to talk about the outcome---You can not do that work because you do not have the right equipment or facilities or training, so you crash and burn.
    Back to reality-- the job you are bidding is being bid by other LOCs that have the right equipment for the job, can do it in the most time efficent way for the most profit and have the experience to know how and what to do. This is what you have to compete against--CAN YOU? If so, Great .go for it, If not than find jobs you can do and get good at that and grow slow. As you get more equipment that can do bigger jobs and the people and talent than start bidding the jobs that fit your business plan.
    The customer does not care how much time it takes you to do the work, only the price to him. If it can be done in an hour and somebody has the tools to do it than they will charge for that hour. If it takes you two to do it and you charge for two hours work (because you know your costs and have to make money) than you are going to be twice as much and will not get the job. If you cut the cost to match the other LOC--Well, crash and burn!

    Good luck with this.
     
  4. Ax Man

    Ax Man LawnSite Senior Member
    Posts: 446

    Yup, and if you think you'll take home (keep) 42$ per hour on 1 account, let me know how you did it.
    Cause that new z that you got, and the extra help you hire are all going to want to take home some too.
     
  5. Mikes Lawn Landscape

    Mikes Lawn Landscape LawnSite Senior Member
    from Texas
    Posts: 458

    I don't mean this to offend you but you are not qualified to perform this work heck I'm not either. Were talking a 17 acre complex that will be bid on by LCO's who have been in business 10,15,20 years. Do you really think a hydroseeder that has been in business for 2 years has the knowledge to compete with much more experienced LCO's and do you have 2 days a week to devote to only this one job.

    I personally would bid it but you can bet my price would be so high there is no way I would get it but it would give some experience in bidding larger projects that I could use in the future.

    What ever you decide good luck.
     
  6. SeedSquirter

    SeedSquirter LawnSite Member
    Posts: 18

    Mike,

    I knew I would get the response you made from someone on this board - and no offense taken as I agree to a point that I don't have the experience to draw from......

    BUT, in this case I was asked to bid on this property because one of the decision makers knows the quality of my residential work and the current LCO at the site has a host of problems and the property is in bad shape. I may not have 20 yrs experience to draw from but I can assure you that I can do much better than what they are getting now.

    I doubt that you will find too many operators on this board that would have turned down an opportunity such as this back when they were just pups in the industry. What would you have done?

    I work 12 hr shifts at night on a 4 day on 3 day off / 3 day on 4 day off schedule, so I will have the time to do this.

    I currently own two Wright Standers, but if I win this contract I will probably buy a Ferris 3000 series ztr to have something that holds better on the slopes of the berm running across the front of the property. Considering that purchase is why I started this thread - I wanted to find a way to figure out what that extra 9k purchase would provide to my take home pay.
     
  7. LwnmwrMan22

    LwnmwrMan22 LawnSite Platinum Member
    Posts: 4,372

    That extra 9k purchase will eat all of your take home pay, pretty much plain and simple. You're buying a piece of equipment for the sole purpose of that property. If you get the property, then 1/2 way through the year you decide it really is too big, or next year someone underbids you, then you've made this purchase for one account.

    If you can keep the account for 3+ years, then your take home will be better.

    Now, you may be able to work it on your other properties, but if you don't have the big one, then you're not going to need the Z.

    Also, the $42 / hour AFTER expenses? What expenses are you talking about? Truck? Gas?? Any helpers?? Possible add'l insurance?? I don't think $42 after expenses is possible, or feasible. But then, that's all up to your accountant too.
     
  8. Norm Al

    Norm Al LawnSite Bronze Member
    Posts: 1,227

    "In other words how do I convert my extra productivity into a competitive pricing strategy?"

    let me start by saying there is no way you have a competetive pricing strategy over your competition "IF" you have limited experiance!

    MOST pricing diferances in our industry come from the idea that one guy thinks he can do it faster than the next guy OR by a mis calculation of the hours needed or the mis measurement of a property!

    so most jobs with a low bid,,,,low bid is created by MISTAKE!


    everybody is this industry has the same equipment! everybody in the spray bidness has the same chemicals! what makes the differance? YOU and the PEOPLE you surround yourself with! work on having a winning attractive personality to your customers and you will WIN bids and be busier than a one legged man at a butt kickin contest!
     
  9. txlawnking

    txlawnking LawnSite Bronze Member
    Posts: 1,905

    Squirter asked a question I was almost affraid to. And the responses reinforce my feelings that for my own situation, I have a steep learning curve on job bidding. When I first came to this site I had a similar mental attitude, however the best thing I have learned here is to take it easy and try to do what I can do instead of biting off more than I can chew. And the second ultra important lesson I've learned is Stick to your guns on your prices. If you feel that, after measureing and/or walking the property that it's gonna cost X amount of dollars after expenses, then stick to that price. If you don't get the contract, it beats the heck out of feeling like a heel because you lowered price to compete. Just find your niche and work it..... I'm still trying to find my niche!! LOL
     
  10. Norm Al

    Norm Al LawnSite Bronze Member
    Posts: 1,227

    txlawnking with an attitude like you have,,,,,you will go far in life and business! keep it real!
     

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