Would you give a 5% price reduction to renew a contract?

Discussion in 'Business Operations' started by Toro 455, Jan 21, 2013.

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  1. weaver

    weaver LawnSite Bronze Member
    Posts: 1,388

    You took the word out of my mouth...
     
  2. GaryBK

    GaryBK LawnSite Senior Member
    from Canada
    Posts: 253

    That's another serious problem. Don't have so few and big jobs that if you lose one it will hurt you. A few years ago I looked at my accounts and dropped all my big ones and ones that were not as profitable. I did an analysis and found I made way more money per hour on small jobs than big jobs. I left the big jobs for the big guys. It actually hurt a bit (lots) the first year, but I didn't have to work weekends anymore. I have made up that business with smaller jobs. Forward 2 years and my revenues have doubled. All from reading some good business books and taking my business seriously and operating it as a business. I still have lots to learn.
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  3. yardguy28

    yardguy28 LawnSite Platinum Member
    Posts: 4,464

    don't get me wrong weaver, 20k is a lot to me as well.

    but my comments are coming from the view point of what if it weren't.

    sure if you actually applied a 20k job to my business right now. i'd be done if i turned away 20k. thats a huge amount of my income right now. so i probably would do a 5% drop if i could still make a profit and didn't feel the word of mouth would hurt me too much.
     
  4. GaryBK

    GaryBK LawnSite Senior Member
    from Canada
    Posts: 253

    20k is a lot to anybody. But the problem is it SHOULD NOT be so much of a percentage of your total revenue that if you lost the job it would seriously hurt you. I've had contracts in the past say we are not going to use you anymore and they are not going to use a competitor either. They are going in house. Boom that contract is gone. But I've never taken a job so big that a loss of one customer hurts me and is not easy to pick up business to replace it. That is a dangerous business model. My biggest contract was for an owner of 8 commercial buildings. I had them for years. A great customer. Renewed every year for about 15 years. Then one year they said they are selling out to a huge company that already had lawn guys they were happy with and did it for less than I would charge. I did not like losing that contract because it was a lot of money but percentage wise it was not significant I easily replaced that business. And it ended up being a blessing as they wanted all their properties done the same day and they were all over town. Lots of wasted time driving. My new business could be scheduled in with my territory routing which makes for a more productive day which actually makes me more money per hour.
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  5. Darryl G

    Darryl G LawnSite Fanatic
    Posts: 8,033

    I agree 100% I had one customer that I did 2 apartment buildings and a commercial complex for, and it was a big chunk of my total income. The guy was always difficult to deal with, but he paid his bills and the accounts were priced right. He asked me for a quote for mulching the commercial complex and flipped out over my price for the job, including my mulch price, saying he could get the same mulch down the road for $20/yard or something and told me to put it down without worrying about the weeds, which were pretty well established. He started cursing at me and I pretty much told him to stick it and find someone else. He stiffed me on everything he owed me for the 3 accounts to that point and I had a big hole in my schedule. It almost put me out of business.
     
  6. yardguy28

    yardguy28 LawnSite Platinum Member
    Posts: 4,464

    personally I don't have so few big accounts that loosing one will hurt. up until this post my comments have been from the view point of if I hypothetically had a 20k account.

    I'm solo and currently do only residential properties. 90% of my business is mow, trim, edge, blow and go. if any one of them wanted me to drop my price 5%, they'd be saying bye bye to me for sure. I don't dicker on my prices for anybody or anything.

    but yes it's an excellent point to not put all your eggs in one or a few baskets.
     
  7. weaver

    weaver LawnSite Bronze Member
    Posts: 1,388

    Ya but hey, if that's his only jobs and that's all he can get you got to do what you got to do. He said it was his second biggest job. .I agree don't put all your eggs in one basket BUT if those are his only jobs and those are the only one's he can get, what's he gonna do. I think it's safe to say you would'nt take the 5% cut while most it looks like said they would if they still made good enough profit. Everyone's different..
     
  8. weaver

    weaver LawnSite Bronze Member
    Posts: 1,388

    Totally agree.. If someones gonna bicker over wkly residential it's like good bye, but he's probably making pretty good off that job and most people could'nt walk or would'nt walk over there request...
     
  9. Toro 455

    Toro 455 LawnSite Member
    Posts: 238

    Thanks again for all the interesting replies. Let me say mine are contracts you dream about. They treat me like a department head instead of a vendor. My bills go straight to their accounts payable department without crossing anyones' desk. Extras are never questioned. In return I give them service like I was their own personal groundskeeper.

    People ask me "How do you get jobs like that?" My response is that you have to earn the customers' loyalty. You have to deserve loyalty to get it. I always give them 110% of every dollar they spend.

    I've been mowing this particular property 30 years. This new corporate takeover makes them the third owner.

    This is just a little test. 5% is nothing. Two years ago at the beginning of the recession they came to me in a bit of a panic. "All departments have to reduce costs by 50%!" They were ready to let me go and hire some guy on a YardMan tractor to cut the front lawn. Other departments were cutting personnel left and right!

    My response was, "You really don't want to let property maintenance deteriorate because it'll cost more than you save to restore it. I'll cut costs by 50% for the rest of the summer." The plant manager agreed and I saw when he walked away that he was smiling! It cost me a few bucks for a million dollars worth of good will. And saved my job. And kept MY lawn from getting all overgrown.

    It's really difficult to keep jobs with new ownership or new management. The new guy always has a "better way of doing things". I'm going to show them all the cooperation I can.

    Can I afford it? Heck! I was making pretty good profit at 50%!

    My question at the beginning of this thread was, "Could you? Would you?"

    I ain't gettin rich with this business philosophy. Never thought I would. But I'm living a pretty good lifestyle. I'm writing this from my winter residence in Florida.
     
  10. yardguy28

    yardguy28 LawnSite Platinum Member
    Posts: 4,464

    I would if I could. but wouldn't if I couldn't. but only the 5%.

    50%. that's a WHOLE different answer and a whole new can of worms to open with it.
     
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