Residential vs Commercial. Which is more profitable?

Discussion in 'Lawn Mowing' started by RYAN, Feb 22, 2001.

  1. RYAN

    RYAN LawnSite Member
    Posts: 211

    I am almost all residential but got my first commercial job last week and have several others bids out there to get some more. I was wondering what most of you have experienced in the past to be the more profitable of the two. When I worked for other lawn companies in the past it seemed they made more off commercial properties than residential. Are commercial properties generally more profitable than residential? If so, how much? I would like to get more into the commercial side of the biz and was wondering what you guys had to say on this one.
     
  2. 1MajorTom

    1MajorTom Senior Moderator
    Posts: 6,073

    It does seem that a lot of people here at Lawnsite prefer the commercial side vs residential.

    We have a few commercial accounts, two real estate agencies, an apartment complex, a few churches, an auto parts store, and a doctors office, but personally I like the residentials better.

    When we were trying to obtain the commercials, we found that they are only after one thing. The bottom line, which is price. They want the lowest.

    For us, and this is just our opinion for our area, we find that we can bid the residentials higher than the commercials.

    Sure, we have to put up with Mrs. Jones complaining about a weed in her flower bed, but we also don't have to deal with the tons of trash laying on the grass that we find a lot of the commercials have. Commercials are harder on our equipment. It's nothing unusual to find large rocks or broken glass while cutting one of our commercials. We don't have to worry about that with our residentials.

    Now don't get me wrong. Commercials can be profitable if you are going after the big boys.
    Also an added bonus with the commecials is you more than likely will be able to sell them a hedge maintenance and mulching package which will add to your profits.

    The best thing for you to do is to try out some commercials in your area, so you can see which ones will make you the most money.






     
  3. 65hoss

    65hoss LawnSite Fanatic
    Posts: 6,360

    My church account is the most profitable client that is not residential. I prefer the bigger residentials. If they want quality they are willing to pay for it. A lot of commercials (not all) are only looking at the bottom line. I agree with Jodi, to me residentials are more profitable. Add ons add up to your bottom line fast. They are the best word of mouth references. Commercial accounts don't really do this. If you can put together several residentials together you can do those in the same amount of time as a comm'l.

    One last thing, residentials can be a little harder to collect money from.
     
  4. Scape Sculptor

    Scape Sculptor LawnSite Member
    Posts: 147

    This is the very thing I have been confused about. Everyone seems so bent on getting commercials and having alot of them. But knowing most commercials are so botton line conscious, how could they be more profitable, and why all the big fuss?
     
  5. OBRYANMAINT

    OBRYANMAINT LawnSite Senior Member
    Posts: 555

    i see commercial as more profitable because i want their snow removal business which in many cases dwarf the summer revenue.....this may not be a large factor in many parts of the country but it is one thing to think about....also commercial clients are'nt spending their own hard earned dollars, it is the companies so i see them easier to sell to much of the time

    residentials ....yes word of mouth ...........cannot live without them.......keeps your name out there
     
  6. WatkinsLawn

    WatkinsLawn LawnSite Member
    Posts: 40

    With out a doubt. commercial has been a lot more profitable for me. I started out in residential with one commercial account. Now I am all commercial (as far as mowing & maintenance) with the exception of two residentials. The only part of residential maintenance I found to be consistantly profitable was the mulching, pruning and other landscape maintenance. Lawn applications are different story (residential apps. is my most profitable service.) I didn't make nearly as much on the residential mowing as I do on the commercial. The down side of commercial is you better have good cash flow because they take their time paying the maintenance venders. But they do pay and they pay well (around here any way) for the wait. I never make under $45.00 per man hour on commercial (I average $51.00) but when I was in residential I was lucky to get $30.00.
    However, I do wish I had a few more residentials (maybe about 30 or so) to help out the cash flow in the spring. It sure does get tight right about the 30th day of the beginning of the season when I send out my first statement of the season.
    I thought about mowing some of my application customers but I won't be on a mower at all this year. And I don't know if the guys who work for me can deal with residential after always being commercial.
     
  7. Skookum

    Skookum LawnSite Senior Member
    Posts: 675

    Not all commercial accounts are bottom dollar seakers. They are like anyone of us that try to save a buck, but they generally want good service since most are dealing with the public for their trade and they want to have a greater public image than the next guy, which most realize costs money to achieve and maintain. Generally they are more willing to pay for more services than a typical mow and blow residential.

    I have several residentials that I make more per hour on for mowing than on my commercials. But add in the other services that you get on the commercials and the year end results boost the total earnings as well as the actual per hour rate.

    Of course, like all examples here on Lawnsite, it all has to do with you, your business, your area, etc, etc, etc,....
     
  8. TJLC

    TJLC LawnSite Bronze Member
    Posts: 1,308

    For me down here, commericals have been the way to go because they are yearly accounts where my residentials are not. I just can't seem to get homeowners to commit to a contract where as my commericals do. One of the downfalls is commericals are usually loaded with trash but they keep me going during the slow months.
     
  9. JimLewis

    JimLewis LawnSite Fanatic
    Posts: 6,842

    In my area, residential is a lot more profitable per hour. We have a few nice, profitable commercial accounts, but most of the commercial stuff that comes across my desk I can't do because I would make less $ per hour, per crew, per day, etc. than I do with residential.

    Of course, this depends on what you are doing. We get a very high hourly rate because the lawns in this area are pretty small. So I'll have one 2-man crew doing 20-25 lawns a day, all in the same neighborhood, and that brings me in $2000 - $2500 per month. If I sent that same crew to do a commercial account for the day, we'd only get about $1200 - $1500 per month.

    Part of the problem, too, is that the commercial industry in my area is more competative. There are some big companies that use REALLY cheap labor and can lowball me to death.

    Then there are other issues to consider. For instance, if 3 of my residential accounts cancel, it doesn't hurt too bad. But if 3 commercial accounts cancel, that hurts! Then again, it's takes a lot less time to get 1 commercial account than it does to get 20 or 25 residential accounts in the same neighborhood. So that's the trade-off I think.
     
  10. Greenkeepers

    Greenkeepers LawnSite Senior Member
    from NE Ohio
    Posts: 695

    One of the main things that you need to think about that many people don't, are you equiped to do commercials. And can you do them efficiently and effectively? You don't want to have to go out and buy a $12000 mower to service a $4000 year account
     

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