What's the best way to raise prices?

Discussion in 'Business Operations' started by Woodland, Nov 17, 2006.

  1. Woodland

    Woodland LawnSite Member
    from Maine
    Posts: 207

    As my second season draws to a close, I'm starting to take a hard look at the numbers and what I'm finding is startling to say the least. While I'm not finished, it is abundantly clear that I need to charge more money per hour...significantly more. I raised my hourly rate this spring and didn't hear any rumblings, but two years in a row? How do I do this without upsetting my current customers? My suspicions are that many are aware that they have been getting a good deal, but will they be put off by a large jump in my prices.

    Obviously new customers are not an issue, and I plan to adjust how I bill next year. These past two years I billed for time and materials and everything was itemized on the invoice. Next years invoices will be more general, i.e.

    Spring cleanup $250.00

    There was an article in a recent Lawn&Landscape discussing this and it seemed to work well for most who billed this way.

    How have you dealt with this issue? Any suggestions or thoughts?
     
  2. ECS

    ECS LawnSite Bronze Member
    Posts: 1,732

    This past spring I sent notices to my people to confirm that I still had them and informed them that the price was going to go up. Everyone said fine and only one asked what the new price was going to be. I raised my prices by 46% which allows me to go without raising them for a few years. It is not that my prices were too low because they were pretty much in line with everyone else. Where I really make oout is that I do not bag just about everyone else does and that in itself saves me about 30% time on each lawn plus the time to haul the clippings to the dump.
     
  3. Josh.S

    Josh.S LawnSite Bronze Member
    Posts: 1,085

    Its hard to believe you raised them all by 46% and no one cared....I would certainly lose several if I did that...

    Also it shows the difference in your area about tha bagging, because NOBODY around here that does commercial lawn care bags... I might have seen one a few years ago, but none recent that I can remember.... if I had to bag every lawn, I would be in a different business...
     
  4. jasonnau

    jasonnau LawnSite Senior Member
    Posts: 454

    I think I would loose most of my customers if I did that! In fact, It wouldn't suprise me to loose all of my customers if I did that! Maybe he meant 4%. I raised a lot of my customers blaming fluctuating fuel costs this year. I got lucky. I'm not lowering them, but there are very few that I am raising.
     
  5. ECS

    ECS LawnSite Bronze Member
    Posts: 1,732

    No, 46%. That actually was an average for all properties. One property went from 100 a week to 150. One went from 60 to 75, one went from 130 to 175. My price last year was based on $35 per hour, this year it was based on $50/hr. My goal this year was to increase produtivity and I ended up with an average of $63/hr for mow, trim and blow. So as you can see the difference I increased from $35 - $50 is indeed correct and in all reality it waseven more.

    I had no choice but to go with an hourly rate the first year, which was last year, because the person I was going after was the rate they were charging and they bagged every lawn. After talking to several other companies, their price was about the same, meaning they based their set fee on $35/hr and they also bagged every lawn. After a lot of learning from here and on my own, I raised my goal tremendously, still did not bag, saved 30% of the time the others take by not bagging, worked smarter and faster and instead of a 46% increase, it ended up being more than I anticiped. The one that questioned my increase only wanted to know by how much and why. I told them how much and that the cost of running a business dictates that I need to raise their price and they said fine.
     
  6. JFGLN

    JFGLN LawnSite Senior Member
    Posts: 942

    We usually raise our prices 4% per year. It's a small enough increase that people don't complain much. If a large increase is in order we send a letter explaining why.
     
  7. Team-Green L&L

    Team-Green L&L LawnSite Bronze Member
    Posts: 1,776

    We raise prices 4% each year also due to inflation rates. The minimum wage increase will justify any price changes next year.
     
  8. Uranus

    Uranus LawnSite Bronze Member
    from Mass
    Posts: 1,624

    I'll average a 5% increase on 80% of my lawns. The other 20% I overcharged and I dont think it is fair to them to pay more. Example- 20 min. lawn next to another account, I charge them 60 per week. I thought I had to us a 36"wb in the back yard. I didn't see the 8 ft section of fence that was modified into a gate. All 60" rider work. That works out to 180 dollars per hour when I do it solo. Just a little high, but they are great people and I enjoy working for them so I'm not increasing this one. Also my new minimum is going to $40 per cut, at $35 now. Labor rates are going to $55 per man hour, up from $50 per man hour. Small growth
     
  9. Woodland

    Woodland LawnSite Member
    from Maine
    Posts: 207

    This was my thinking. I don't do many lawns, mostly landscaping and maintenance, so as I said in my original post, new customers are not really a big problem, its the ones that I do spring cleanups or regular projects for each year that I'm worried about. I'm talking about a 40% increase in my hourly rate. I'm hoping that a letter describing the business aspect of the price increase, maybe through in in some important terms like overhead and company's long term viability will help explain things. The letter would probably be followed by a phone call to explain further and answer questions.
     
  10. rodfather

    rodfather LawnSite Fanatic
    Posts: 9,501

    Want to know how to raise your prices? Buy out your competition and gain market share, that's how.
     

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