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Price increases

Discussion in 'Business Operations' started by Kristan, Oct 10, 2005.

  1. Kristan

    Kristan LawnSite Member
    Posts: 2

    We've been doing alot of the same commercial and multi-residential complexes for several years now with no price increase- in fact, we lowered our price slightly on a few last year because a new start-up had given some of our customers an extremely low figure for maintenance. This year,
    for the first time in 10 years, we are barely breaking even on expenses (labor, fuel, insurance are our highest expenses, in that order)- In the last 3 years, I would say that price has increased 3x on everything but labor (my power bill for the office, for example is now about $200 per month, when it was a steady $57 per month 3 years ago). As I am going over current rate and expenses, I'm realizing that I'll need to increase price on some of these older accounts by as much as 25% to make them profitable, continuing to provide the level of work they expect. I'm curious as to how increasing prices have affected you and how often you increase your price on contract customers to recoup.
  2. Az Gardener

    Az Gardener LawnSite Gold Member
    Posts: 3,899

    I made the same mistake in the beginning. I just "fell on my sword " and went to each client and outlined the problem and asked for the $$ . I made sure everything was perfect before I did it. I was fortunate I didn't loose anybody. Now I keep a closer eye on that stuff. I raise almost everyone every year a small percentage. Another factor in my area is there is so much plant material that the time required from say a first year install to a 4th year can be 30% or more. I try to make the increases so low that its not worth them going out to bid. Commercial is a different animal though thats why I don't do commercial. It's always about the $$$$$
  3. LB1234

    LB1234 LawnSite Gold Member
    Posts: 3,210

    I disagree completely...

    Its not ALWAYS about the mulla. If it is you are working for the wrong commercial.
  4. Az Gardener

    Az Gardener LawnSite Gold Member
    Posts: 3,899

    Ok, I have had mostly bad experiences with commercial accounts I guess you are more fortunate than me, congrats. I worked for a large commercial company servicing very upscale clientele they always loved my ideas but it took longer to do a bid and get approval for a stupid 1,000.00 bed renovation than it did to do the work. I am just lucky/spoiled call it what you want but I make a suggestion to my clients and 9 out of 10 times they say do it and don't even ask the price. I shoud have known better to say anything is absolute. I do this because I enjoy it and its not very enjoyable when the majority of the job is spent on paperwork . I better just stop here.
  5. topsites

    topsites LawnSite Fanatic
    Posts: 21,653

    For the price increases, I learned over time I can NOT force or even ask for an increase from everybody at once, sudden increases just don't work (and I can lose a customer merely for ASKING)...
    Thus this year I learned to do it like this:
    - Brand-new customers see the higher prices first, and foremost.
    - With regular customers, the bottom-of-the-barrel customers are slowly forced into an increase one way, or another. Even if it's only a 5 or 10% increase, that helps a lot even if it SHOULD be 25%, 5 or 10% evens things up a bit and I can go another year before worrying about it again.
    In the end it has to do with how profitable an account is but also how long they've been with me, how good they are to me, etc, etc... I mean, someone where I come in, do my stuff and leave without ever having to bs around, they never pick on me and never call to pester me with the 'emergency omg I need it cut yesterday' stuff and they always pay on time, hey, that's worth something, too...

    In the end, I gradually raise prices over time... I learned to go slow, this year I managed to go from $45 to $50 / hour... In this process, some of the bs no-profit accounts are dropped in an inconspicuous manner while I pick up better-paying, more frequent visit accounts. There are many ways to drop one for another, doesn't have to be nasty and of course in the end for some dumb reason we ALWAYS get stuck with a few of THOSE yards anyhow.

    Some customers volunteer the price raise, this helps also... It's just a gradual thing, prices go up slowly is better than suddenly because the sudden price increase is ONLY apparent to the customer, for me I HAVE to go slow or it's TOO much for most of them.

    You know, it takes 6-12 months for the price to eek it's way up by 5 bucks one way, or another (maybe you just get the same-paying jobs done a little faster, a tiny drop in quality over time) and to the customer that is STILL very SUDDEN so I've learned never to raise prices overnight.

    Always work on it over time, 6-12 months for 5 bucks, couple years max thou.
    Sometimes, merely mentioning a possible price increase here and there (what I do is say something to the effect of 'one of my OTHER services did go up a bit but yours hasn't {meaning it WONT right now}) helps prepare the customer as well as they can now kinda see it coming. Sometimes it does take me a couple years to get another 5 bucks out of an account, but for a good account, the wait is worth my while.
  6. electro

    electro LawnSite Member
    Posts: 6

    We discovered in November of last year, we were under charging by $ 3.00 per man hour. We raised our prices that minute and did not lose 1 account.
    All of our work is contract work, not hourly. Clients expect raises. For most contractors, fear prevents them from achieving, not reality.
    Gas stations raises their prices daily, Home Depot the same. Fed Ex and UPS charge a gas surcharge. Act like a professional, treat your customers with professionalism and they will return the act. If not, find new customers.


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