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why large companies can work cheap

Discussion in 'Business Operations' started by YardPro, May 22, 2005.

  1. YardPro

    YardPro LawnSite Gold Member
    Posts: 3,563

    we all have heard the complaints about the big companies that are doing work for cheap....and still make money

    they can afford to work cheaper due to volume.

    here are some examples....

    when we were buying mulch from the local supplier we were paying $25.00/yard whosale.. we started buying it by the tractor trailer and are now paying about $10.00/yard. we can easially underprice the samller local guys if we wanted, but since we have plenty of work, we keep our normal price..and pocket the extra $15.00/yard. that really adds up when you're seling several hundred yards per year.

    Pine straw. whwn we buy tractor trailer loads of pine straw we only pay $3.25-$3.50/bale (wholesale from the local places is $4.25 -$4.50.)
    not much but multiply that times the 5K bales we lay and that's an extra 5K in our pocket.

    the same thing goes for all our other materials. We get better pricing on all our landscape products becuase we maintain more than $25K in sales from john deere.

    the main reason i posted this is to give one of the many advantages of growing your business with employees to reach the "bulk materials" level.
    you can keep your prices the same and turn much better profits.
  2. BCSteel

    BCSteel LawnSite Senior Member
    Posts: 876

    But on the flip side you generally lose efficency of a small operation when you start dealing with multiple crews and big business. A small operation can keep a lid on the little things that speed up the process and keep the costs down. But I understand whay you are saying.

    Recently I looked into getting bulk deliveries of mulch delivered. I can get it for around 15/yrd if I pick it up myself from one place but I can only handle 4 yrds or so at a time with my trailer which isnt usually a problem because most of my jobs are 5 yrds or less. Normal retail is around $25/yrd. Too bad its so far out of the way. Anyways, the bulk price for 10 yrds to 50 yrds, delivered, is $18. For those kinds of prices I just may start to pass on the small jobs and take the bigger 15-40 yard jobs instead since fewpeople out here by me use a delivery service. A tractor load will drop the price to under $10/yard, delivered.
  3. NickN

    NickN LawnSite Bronze Member
    from Alabama
    Posts: 1,010

    IMHO,yes and no.If you're selling lots of mulch,buying in bulk would be cheaper.On the other hand if you buy a trailer load and sell half of the load in the spring and the other half sits,it's composting and will useless.So,you've actually lost money.
    Kinda like buying plants in bulk.It's cheaper for me to go to the nursery,pick the plants I need,and install them.It would cost me more to keep them irrigated,pruned,sprayed,etc.,,not to mention the inventory space,which costs business' money,believe it or not.
    The big reason large business' are able to offer better pricing is volume sales combined with diversity.They're not doing one thing.They've diversified into many jobs,which enables them to keep workers busy.Also,most large business' have investors which equals capital.Capital is the number one killer of small business'.It doesn't hurt that many of the larger companies are also employing illegal labor.They save a ton of money on bypassing payroll taxes,workmans comp,etc.,,If they get caught,it's a slap on the wrist and they're back in business.I've learned alot by watching the larger business' around me and also by gauging customers.Most everyone wants extremely cheap prices along with good quality,but not great quality.
    I'm hiring some illegals in the future.Our own government encourages it.
  4. BCSteel

    BCSteel LawnSite Senior Member
    Posts: 876

    If you cant beat 'em, join 'em! :rolleyes:
  5. lawnman_scott

    lawnman_scott LawnSite Fanatic
    Posts: 7,547

    How is that?
  6. Equipguy

    Equipguy LawnSite Senior Member
    Posts: 370

    Just look a Wal-mart, huge company, low prices and putting lots of little guys out of business. Seem like it should work in the service business too.
  7. YardPro

    YardPro LawnSite Gold Member
    Posts: 3,563

    we are not a huge company at all. i have 5-8 seasonal employees (working under me) 0n the grounds side of our company (we have 3 on the pool side) i only have 2 year around people....

    i am pointing out the benefits of going up ONE level in your business.
    if you use in a year's time close to a bulk amount, then buy in bulk. you'd be suprised how much several of these small things add up to.
    just in pine straw, mulch and plant savings this year we will be able to pay for the new 04 2500hd i bought last november.

    the other reason for this post is to help companies that are starting up understand how other larger companies can either do the work for less, OR why they are making enough money to have the new trucks, insurance, etc...

    not all companies are full loaded with debt...so don't assume that just becuase a company is large they are in sooo in debt.. i have heard that statement here a lot.
  8. Tn Lawn Man

    Tn Lawn Man LawnSite Senior Member
    Posts: 479

    Yard Pro is exactly right gang.

    Many of you are disagreeing with him with some excuses that don't hold water.

    Bulk purchasing saves money. And if you are running crews you should be running them cheaper than you doing it yourself. If not, then either you are paying them too much or charging the customer too little.

    It truly is the Walmart principle. Employees there do not get rich. They barely pay their bills. Yet, the owners are the richest in the world.

    Mulch here costs $27.50 at yard a local distributors, $19 at volume "landscaper only wholesalers", and $10 a yard if you buy in bulk (tractor trailers full). If you do a lot of installs you save BIG TIME!!
  9. NickN

    NickN LawnSite Bronze Member
    from Alabama
    Posts: 1,010

    <i> not all companies are full loaded with debt...so don't assume that just becuase a company is large they are in sooo in debt.. i have heard that statement here a lot.</i>
    Please tell me where I made this statement.
  10. NickN

    NickN LawnSite Bronze Member
    from Alabama
    Posts: 1,010

    <i>How is that?</i>
    Take a look at the border.Look around your town or city.How many roundups do you see?How many illegals are working for landscapers and construction crews?Now,take into account the fact that ICE doesn't even show up when local police call them when they have pickeed up illegals.Also,GW turning a blind eye,along with Congress,and asking for basically what amounts to amnesty.That enough to tell me not to worry about enforcement.

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