What is your Profit Margin?

Discussion in 'Business Operations' started by landscaper22, Nov 9, 2007.

  1. GreenT

    GreenT LawnSite Fanatic
    Posts: 43,014

    Alright wski4fun, since you are bored please educate me.

    Can you give some examples of these large companies?


    How do you know the new customer is a good one? Was the bad customer bad from the beginning, or was it a good one that went bad? The higher rate of return, does it mean you underbid the first customer? And if so, then is that what makes him/her a "bad" one? Is that the customer's fault? Or is it yours for not living up to whatever original agreement there was?


    Define a "problem" customer. And why would you spend too much time with them? Again, is it because the account was underbid? Was the service clearly explained and agreed in writing with the customer?


    Business 101, define your customer profile and then target them.


    More resources than they are worth? Not if priced correctly, right?


    Let me share with all what my understanding of a pita is as defined on this site:

    "I screwed up and lowballed/underbid this account and now they expect me to do what I promised I would, but now I realize I can't do it and make decent money, so I'm going to fire them because they are a pita."

    With some exceptions, a lot of posters here haven't got a clue how to communicate/manage customers while providing quality service. Everyone wants to be their own "boss" but what that really means is that they just want to ride a mower and not be bothered with people's problems, specially customer's.

    Sorry for the long rant.
     
  2. Az Gardener

    Az Gardener LawnSite Gold Member
    Posts: 3,899

    Amen to that. We have built our business being the Pita pleaser's.

    I have lost one client that was a pita to us and she was only too happy to drop me a line and let me know she found someone to service her account at 20 more dollars per man hour than I was charging. She was paying well over 1-K per month with me. It was a great reminder. We are not perfect, we make mistakes but we communicate a lot with our clients and do our best to be proactive.

    Servicing the demanding clients is not for everyone though, some are just not cut out for this type of work. Fortunately there are all kinds of customers. I do think there are fewer people servicing the demanding clients and therefore there are bigger margins to be had.
     
  3. wski4fun

    wski4fun LawnSite Senior Member
    Posts: 323

    I think most large companies state in there agreements all the reasons they can terminate a contract. In my cell phone agreement I can be terminated for being abusive to a rep. I could be paying my bills on time but sometimes the money is just not worth it.

    I think we all know the customer that every week has a new complaint or wants you to come back and do something more for free. It could be that they are slow payers. I think it is different for everyone what they are willing to put up with. Put mulch down for a customer. Customer asked how much I put down. Told him how many yards and it was about a three inch cover. He went around and measured and had little sticks in the mulch where it wasn't three inches. I can not charge enough to deal with that. It was always something every week. Some customers are just not happy no matter what. Every year I have a few customers that just are not worth it. If I can pick up another customer that I do not have to make an extra 15 min phone call to then that's fifteen minutes more time for which I am still getting paid for. Less time for the same amount of money is a higher yield.

    To jump to your last point. I totally agree that most do not understand what it takes to be an owner. I veiw every one of my customers as my boss. Sometimes I do under bid. I will usually complete the job to the best of my ability. I never fault the customer for my lack of charging enough. But I do agree that it seems like there are a few on here that let the customer dictate the price. If it is not worth it to you then you only have yourself to blame if you take it.

    This is just my 2 cents. Personally I know there are always a couple customers that change maintenance companies every year. I guess to me those are the biggest PITA'S.
     
  4. Puddle of Oil

    Puddle of Oil LawnSite Bronze Member
    Posts: 1,203

    A 5 year bump for a good and intelligent thread.
     
  5. Charles_4

    Charles_4 LawnSite Member
    Posts: 5

    Thank you for bumping this thread. It is quite thought-provoking. I do notice, however, that it was started before we started our nice little "recession." I am going into my 3rd year of business. Last year I had about 25 customers and made very little "salary" from the business after expenses and uncollected payments. This year I decided that I was going to have to do more marketing, and take a hardline stand--increasing my price by $5/mowing and $10/application and $10/hour for landscape work. The result? So far, it appears that my quote-to-customer ratio has plummeted from 66% down to about 20%. This is even with a strong reputation among current clients. Theoretically, I agree about the profit being what is left after salary. That is the technically correct definition. And the business man in me says, yes, pay yourself a firm salary. On the other hand, if I listened to the business man in me, I would probably have no customers left! I have so much to learn, I think.
     
  6. Puddle of Oil

    Puddle of Oil LawnSite Bronze Member
    Posts: 1,203

    Yeah I agree, my winning bids are around 20 percent a year. Trying to figure different ways to bid a job job and still turn decent profit can be a bit tricky nowadays. Having more productive equipment and learning more efficient ways of doing things may lower your price but how low can you go?! I'm glad I'm not the only one losing what seems like most of my bids. Lol
     
  7. landscaper22

    landscaper22 LawnSite Senior Member
    Posts: 829

    Haha, I remember this thread!!! Wow, I can honestly say, the economy has not hit me hard. Maybe in 2010 I took a small hit. But this year should be my best yet as far as gross goes. The main problem I am running into is, even though people still want to hire out lawn services, they are pinching pennies and I am having much greater problems getting paid on time.
     
  8. Puddle of Oil

    Puddle of Oil LawnSite Bronze Member
    Posts: 1,203

    Yeah I agree, my winning bids are around 20 percent a year. Trying to figure different ways to bid a job job and still turn decent profit can be a bit tricky nowadays. Having more productive equipment and learning more efficient ways of doing things may lower your price but how low can you go?! I'm glad I'm not the only one losing what seems like most of my bids. Lol
     

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