Will high Gas prices hurt the little or big guys more?

Discussion in 'Lawn Mowing' started by CharlieBingo, Sep 1, 2005.

  1. CharlieBingo

    CharlieBingo LawnSite Senior Member
    Posts: 400

    I think the big companies with their multiple "crews" will be hit a lot harder. Most big co's only net 5-10% of their total billing as profit. Small companies often operate at a much higher profit % some claim 40-70% total billing as profit, any other opinions?
     
  2. MBDiagMan

    MBDiagMan LawnSite Senior Member
    Posts: 852

    You make a very good case and point with your statement but I have found that with all things having to do with accounting there are as many different ways to look at it as there are people that look at it.

    One of the other sides of the coin is that the very small operators have lower overhead. That, for the most part, is what makes them a smaller operator. Because it takes roughly the same amount of gasoline to mow regardless of equipment, then gasoline cost is a bigger percentage of the smaller operators overhead. Most larger operators run more expensive and newer equipment and have higher overhead in other ways.

    That said, as you point out, the smaller operator has more room in their margin.

    Have a great day,
    Doc
     
  3. Brianslawn

    Brianslawn LawnSite Silver Member
    Posts: 2,004

    whoever doesnt operate efficiently enough.

    also the small guy at $15-$20 a cut on yards that take an hour with their pos equipment. we do 4 yards an hour that same size an charge double. just have to know your cost and know when you can actually make more working for someone else. payup
     
  4. pjslawncare/landscap

    pjslawncare/landscap LawnSite Bronze Member
    Posts: 1,410

    Its not just mowers that use fuel, trucks eat a bunch too and if u have a whole lot of windsheild time you will pay a lot more at the pump. Also, I replaced all three of my trucks with diesel trucks a few years ago as they are better fuel mizers than most gas trucks of equivelant capacity. That has proven to be a good move for me.
     
  5. Drew Gemma

    Drew Gemma LawnSite Bronze Member
    Posts: 1,510

    I would say it will hurt everyone some more than others. Now the question is do you ease up in your prepartions for next year or keep going full go. Face it their will always be a reason for ppl to raise prices. I see the big guys eating up large commercial to keep their crews busy. Commercial will be cut throat next year. We were gonna hit it hard but now I am thinking the other way.
     
  6. DLCS

    DLCS LawnSite Platinum Member
    Posts: 4,380

    Lets look at the big picture. Its not just what you pay for the fuel for your trucks, equipment, or whatever. You must consider what you pay for goods, like your groceries, parts, and everyhting that is delivered to you. Stop and think about every thing you purchase that has a link to fuel costs. The bottom line is the cost of living is going way UP!
     
  7. Dashunde

    Dashunde LawnSite Senior Member
    Posts: 628

    I'd say the big guys are going to take a noticeable hit with the gas prices.
    They burn ahelluva lot more of it for various reasons (several trucks, bigger mowers, etc)

    And like the guy above said... with all of the equipment and labor their margins are much tighter.
     
  8. MBDiagMan

    MBDiagMan LawnSite Senior Member
    Posts: 852

    DLCS,

    You make a great point. I am old enough that I have seen this movie before in the seventies as a young adult.

    When you do the math, the added delivery cost for goods is not very high. To get a feel for that look at the shipping costs on most anything like a car or a mower. The shipping cost itself will usually be no more than about 5% at the most of the overall cost of the car or mower. From that 5%, only a small portion of that number is fuel cost.

    So, if you sit down with pencil and paper and look at the TRUE increased costs of goods it is not very high as a percentage of the overall bill. What happened in the seventies, however, was that most everyone who sold a product got on the bandwagon and used this for an excuse to raise their prices.

    In fact we are seeing that right here on Lawnsite. With the average mower using 1 gallon of fuel per hour, give or take, then the average residential yard requires no more than $2 worth of fuel as of this past spring. Now that fuel is $3 a gallon it costs $1 more for fuel. Okay so, you have to have fuel for trimmers, blowers, etc and truck fuel. Okay, so let's say there's another gallon total which might be correct for someone with a well laid out route. That means another $1 in fuel cost increase. Let's even add another extra gallon for good measure. That's $3 per job increase in fuel cost.

    SOooo... Why does it seem the most common to see $5 increase per job suggested here?

    Get the point? Just an excuse to raise rates. I'm not picking on LCO's here because their thinking is no different than anyone else in other businesses.

    The problem is that most people just see what appears to be a massive fuel price increase and they never sit down with a pencil and paper to determine the true costs involved. All they know to do is panic and try to find someone to blame for it and a tree tall enough to hang them from.

    Have a great day,
    Doc
     
  9. spin2098

    spin2098 LawnSite Member
    Posts: 131

    Diagman,
    You made a great point as well. If you don't sit down in figure it out you don't know. It is obvious the price is up but to go more than $2.00 per yard is way off base. I have not decided what I am going to do yet since there is only a month of cutting left. If I do decide to go with a surcharge it will be $1.00 dollor maybe $2.00 per cut. I can't justify any more and to be honest it is wrong to take advatage of people in a time like this. Company's should not profit because of a disaster.
     
  10. MarcSmith

    MarcSmith LawnSite Fanatic
    Posts: 7,157

    Some of the large companies have their own fuel islands, so they probably pay a little less per gallon than those who go the quikie mart....Also, some may have Off road fuel already separted, which mens they are paying even less per gallon up front(less taxes).

    For those of us who use gas or Dsl, off road, we generally have to wait until the end of year to get back the extra taxes paid by using Onroad fuel in our off road equipment....

    No its not goingto break the bank, but it does add up at the end of the year....

    I think as a percentage of revenue it will be the smaller guys who fare better sicne the owner is usually closer to, or is, the front line and thus can exert more influence on how the crews operate and keep a better eye on wasteful practices....
     

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