The theory of Lowballing

Discussion in 'Lawn Mowing' started by Texas Mowem, Apr 19, 2005.

  1. Texas Mowem

    Texas Mowem LawnSite Member
    from Texas
    Posts: 59

    Each of has come across some type of lowballing in our business whether it be the $50.00 lawn someone is doing for $35.00 or the french drain worth $1500 the new guy is doing for $700. :dizzy:

    If you have been in business for any length of time you understand what it costs to run your business and what it takes to make a profit but the new guy just starting out does not and will price a lawn that takes him an hour at $25.00 and come home to his wife and say "I'm making $25.00 an hour mowing I should have done this a long time ago" payup

    Here's the theory:

    The new guy will do one of three things continue to charge the $25.00 and think he is making good money and get so booked he can't even turn around without running into a customer. Once he gets to 100% capacity he will start to do one of two things either start giving bad service to his existing customers or hire another guy and continue to expand. He will hire his paroled wifes cousin to help him out and we all know that never works out. So eventually this particular guy will implode because he has way to much work or his truck just blew up and he doesn't have a $1000 bucks to fix it and slowly but surely start losing customers which we will slowly but surely pick up. :D

    The next scenario is this same guy will quickly realize he is not making the kind of money he thought when it costs him $100 to fill his truck and mowers so he starts to raise his prices but now his route is not as dense and he is unable to get the volume of customers required to make a decent living so he will go back to work at the local factory there by leaving his customers to be picked up by us. :D

    The third scenario is the one that should be of most concern to us. He starts to realize he is not making enough money but his wife makes pretty good money so he has the time to slowly raise prices and the time to aquire new customers when his mower or truck breaks down he doesn't have the cash but he does have good credit. So he raises the $25.00 lawn to $30.00 we are still pricing them at $35.00 it takes a lot longer for this scenario to implode because he only needs to make $30,000 a year to get by this particular scenario will only implode when he starts thinking I'm gonna keep prices at $30.00 but I'm gonna hire a couple guys and triple my business. Now if he is a pretty smart guy he can manage his business effectively enough until he realizes that he needs to raise prices there by becoming a legitimate LCO we have to compete with, if he not so smart his employees will be stealing from him and slowly causing him to lose customers. :realmad:

    There are exceptions to the theory we all know a guy that has been doing lawn care for 15 years charging lower prices but he typically has the older lady bi weekly customers who pay him in cash and he has no desire to expand his customer base he makes enough money to pay his double wide payment and buy a 12 pack on Friday this is the guy to be least concerned with. :sleeping:

    So what does all this mean it means that the business we are in will have low priced competition but we have to be in a position to pick up new customers as the low priced competition goes away which means we always have to be in a position where we can add new customers. payup

    So if your having trouble with lowballers always have an avenue to aquire new customers whether it be advertising, networking, customer referrals whatever works best for you. We all lose customers for whatever reason but its the customers you don't have now that will make or break your business in the future.

    Be consistant be visible and be available the next customer may be worth $10,000. :waving:
  2. Tn Lawn Man

    Tn Lawn Man LawnSite Senior Member
    Posts: 479

    Good Post, many of these variables are true in my area.

    The tuff part is riding out the storm of new LCOs who keep taking their shot at the business.

    My big question is why now?

    Lawn care has been a nice little secret for some time now. How come we have a huge onslaught of new companies that have started in the past two to three years?
  3. pjslawncare/landscap

    pjslawncare/landscap LawnSite Bronze Member
    Posts: 1,410

    Id say its the economy in general. Around here its hard to find a job (with or without an education) that pays more than $9.00 an hour so the lure of "easy money" reels them in untill reality kicks in.
    Oh yea, good post Texasmowem
  4. walker-talker

    walker-talker LawnSite Platinum Member
    from Midwest
    Posts: 4,771

    I sometimes think the scenerio goes....1) he lowballs 2) he goes out of business 3) another lowballer takes his place. After a few LCO's the consumer realizes that they get what they pay for and will pay extra for somebody who is going to stay in business, but who really knows?
  5. mikestr

    mikestr LawnSite Member
    from Toronto
    Posts: 87

    Some people don't care, they just want the grass cut short. They don't care if is it a good, clean job and properly fert. or Aerated. etc...
  6. grassmanvt

    grassmanvt LawnSite Senior Member
    Posts: 906

    good post, but, I'd like to throw another variation in that we see around here. The part-time lco that has a decent part or full time job that keeps him going and basically mows to pay for the fancy new equipment he wanted to do his personal lawn but couldn't justify it to his wife without making money with them.And one more, With all do respect of course, but it seems like every other fireman around here has a lawn service or does odd jobs, etc. due to having a 24 on 48 off schedule. These are typically of the in two years then get sick of it type of operations but there is a line of these guys as far as the eye can see, one goes out, two fihgt for his customer list. I just counted about 12 ads in the local weekly trader paper, I had heard of maybe two of them, and this paper originates in an area with a population of about 15,000-20,000. Luckily, I'm not terribly worried as I have turned away work for the last couple years but, springtime usually brings lots of referal calls and this year only one so far and, she called back to tell me that her neighbor would be doing it for free, but she would keep my name handy if and when it didn't work out. I've got a feeling that I will be too busy by then.Sorry for the rant but I just don't get people sometimes.
  7. anothertractor

    anothertractor LawnSite Member
    Posts: 61

    This is the problem I am having. I am taking these customers until the better ones come along. I want to offer much more than mowing but cannot sell it on the customers that I have at the time.
  8. watatrp

    watatrp LawnSite Senior Member
    Posts: 496

    Having been in business for over 18 years as a part-time owner with a full-time job I can feel the pressure of the lowballers. However, what I have noticed is that my long time customers are very loyal. I know them and their kids. I know their dogs and even their neigbors. So I have more or less become one of the "family". In return, I don't raise prices as much as I should. I try to become more efficient. The lowballers are always gonna be out there. I always point out to my customers that I have reliable equipment, I don't leak oil on their driveway, I have insurance, I show up every week, year after year, I mow the grass a day early cause their daughter has a birthday party,... you get the picture. The lowballers can't keep up those kind of standards for very long.
  9. Doc_77

    Doc_77 LawnSite Member
    from IL
    Posts: 92

    very good post ... i just wanted to kinda post another theory

    what about the smart low baller / scrub ?
    the guy that is insured , a registered business and does fairly good work.
    the guy that charges $10 less then you and has 3 times as many customers and crews.
    we all know he doesn't make $90 per hour.
    we all know he spend's more on gas , insurance , taxes and repairs.
    what if he makes up for it in volume and ends up with more money then you at the end of the day ?
    < if your going to say it's not possible go look at JustMowit's posts >

    the way i see it is like this...all of the high priced / so called quality LCO's are fighting with each other over the smallest customer base.
    i would be willing to bet that 95% of the people you send a flyer to or try to advertise to in any way really don't care what their lawn looks like.
    they just want it to look respectable and they want it done cheap !

    i guess all im saying is their is more then one way to make money in this business. the high prices / so called quality work is a thing of the past.
    only the best will succeed with the high priced quality service.

    < i don't mean to offend when i say so called quality work ... but we all believe we do quality work even if we don't >
  10. mikestr

    mikestr LawnSite Member
    from Toronto
    Posts: 87

    Agreed, I turned a guy away yesterday. He wanted me to bring the price down by half!! I zipped up my organizer and said to him "I will not going sacrifice the quality of my work...." This is shortly after he said, "last year, I didn't even know if the guy showed up, I couldn't tell" Incredible! :angry:

    I said "what do you expect for 5500sf of grass for $20!" Yes $20! I told him to call the guy back, he said, I can't find him. I sais "Yes, that's because he put himself out of business"

    Being only p/t, to me, 15 excellent client are better than 40 cheapskates.

    anothertractor, target other areas, that's what I plan to do.

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