Bidding Lawns?

[Lee Homan]

I know this discussion has been brought up many times before but I have a few questions of my own I would appreciate some input on. first off I own and operate a one man lawn business in the south with about 40 regular accounts. I have been doing it for three years now, part-time the first two years and full-time in 1999. At first I would take anything at almost any price. Now my yards average between $30.00 and $45.00 but no less than $25.00. This is based on an hourly rate of $30.00. I have no basis as far as &quot;Cost of doing business&quot; for my $30.00 hourly rate only that talking with other people in the business that is pretty much the going rate. I have also tested the waters and have found that most of the people I deal with won't pay higher than $30.00 dollars for what they see as an hours worth of work, they always assume that that is $30.00 of pure profit. So this brings me to my question. Do most of you guys figure your rate based on your actual cost of doing business plus a profit or just some arbituary number? It seems to me that if your a legitimate tax paying business your going to have to mow a whole lot of grass to make a good living. When I say good living, for me that would mean a gross salary of somewhere around $30,000-$50,000. <br>

 

[nlminc]

Hi Lee, Good question. I've been in business for 10 years in the northeast and believe that lawn care business owners will always be under paid due to public perception. It's not possible for a company to own new trucks and ztr rider mowers and survive on $30-$35.00 per hour of seasonal work. You figure taxes, insurance, fuel, etc, etc...into the the equation and 30 - 35 is not going to cut it. With the cost of labor, materials and equipment going up every year and our profit increasing at half that rate we have to be creative in adding in extra cost to boost our profit. In the lawn care industry that is pretty difficult unless you are doing installs where you can mark up the materials. I have customers in the middle-upper class and some millionaires and 4 well known billionaires in my area. I run a 1st class operation, new equipment/trucks all less than 3 years old, uniforms, professional billing and marketing. Customer service that is second to none. I still hear from middle class to the billionaires about the kid around the block mowing lawns for pennies. I hear often that what we do is unskilled labor and that we don't need a licence or diploma therefore we should'nt have to charge a lot for this service. Very rarely will someone understand your cost of doing business. Plumbers and electrical workers get paid 45-65/hr with less than half the overhead and only 6 months to 1 years worth of schooling. Residential window washers in my area earn between 35-60/hr and the overhead is a truck/van and topps $150.00 worth of equipment. I remember Phil from Nilsson Associates saying in a post last month that we earn about half that of the fert. guys make in a day. Look at their overhead. We all know(should) what trees, shrubs, perenials/annuals and grasses grow and survive in our regions. We know the diseases and insects that inhibit the growth and life cycles of these trees and plants. That is a lot to know and keep up with an environment that continues to change and challange us to educate our customers. After all we are the ones who are going to warn the customer that a row of 12' Hemlocks may look nice but are not likely to survive the devastation of the Hemlock Woolly adelgid that will soon destroy all the hemlocks in our area in the years to come. Many customers will apreciate your professionalism and won't dicker with you. I love what I do even though I sounded like a negative bloke, I wouldn't trade this job for any office or pipe fitting one. To be out there in the good weather and nature makes up for the headaches.<br>Chris

 

[OBRYANMAINT]

I LEARNED MUCH OF MY BUSINESS SENSE FROM THE CYCLING INDUSTRY where the average markup is 35 to 40 % and operating cost is 30 to 35 % not much to grow on. so now when i am getting into the green industry i see much bigger margins w/ proper business techniques the green industry has it better than many others even w/ mistakes being made by first timers have not crunched my numbers for 99 yet but to stay in bussiness i figure around 50 per hour and there is still much competition in my area.<p>i am still small so my cost of doing buss. is still small but at third year of commercial accounts expect it to be around 30 % but w/ markup being around 50% i feel it will be a good living in the future even w/ growing pains added in<p>even at 20 % profit even after taxes beets working for some one else<p>doug

 

[Nilsson Associates]

What you can get for prices depends on two things ... what the &quot;collective&quot; body of contractors are willing to work for in any given market ... and the perceived value of those services by the &quot;collective&quot; body of customers in any given market. So, even if you're the only contractor in town, doesn't mean that a customer will pay you $500 to mow a small lawn. Pricing is a very complicated matter in spite of costs. Just one &quot;loose cannon&quot; can upset any market by taking away the majority of business from the others by pricing way below them. If they can afford low profits, don't need to make a lot of money, or can afford to take losses, then large customer counts can be gotten very easily. Imagine what will happen to residential markets if a &quot;major player&quot; decides to ... market by market ... capture the majority of business<br>in that market, by either pricing lower than the total competition, and taking lower profits, or pricing at a loss until the competition is wiped out. It could happen and that's why I've been advocating that small business on a national scale merge in order to protect their income. It's a big undertaking, but something that I personally want to work on to achieve. <p>Demand for the work enters in, supply of contractors enters in, perception of the overall general economy on the part of the customer enters in, and the &quot;financial strength&quot; of each individual contractor within a market enters in. Those who are willing to work for less and less, will get more and more work until ... they go broke ... or until they capture all the business ... or until they raise prices above costs and produce a profit that's acceptable to them. Acceptable profits are &quot;optional&quot;. In the &quot;eyes&quot; of the beholder. For example .. one company does $100,000 in sales, the owner is happy with a net profit (in his pocket) of $35,000 while another company does $1,000,000 in sales and the owner is happy with $70,000 (in his pocket) That's ten times the sales but only two times the (in the pocket profits). <p>This doesn't answer the question of the original post ... hope you don't mind me &quot;throwing it into the discussion&quot;.<br>Nilsson Associates, Consultants<br>

 

[AandB]

Lee...<p>For any service that the client perceives as being non-technical, you will always find people not wanting to pay a decent price. I've been maintaining a roofing & painting company for about 8 years. People don't want to pay more than $25-30 an hour for painting but will pay $75 or more for residential roofing. I have always found this strange since roofing is much less technical than painting. I believe it has to do with the fact that most homeowners have probably painted a bit, but almost none have done any roofing so they perceive roofing as more difficult.<p>The other problem in painting, roofing, and lawn maintenance is that many customers believe that every contractor is the same. If this is indeed true, then the customer is right in choosing the lowest priced contractor. The only way to overcome this perception by the customer is to differentiate yourself from the competition. If you cannot convince the customer that he will be purchasing a more valued service from you than from the neighborhood kid, then you won't have much chance at getting the job at a decent price. The customer doesn't really care about your business expenses, he just cares about value.<p>----------<br>A and B Lawn Services<br>

 

[thelawnguy]

I can usually get away with charging a few bucks more than the next guy since Im the owner/operator, and the customer usually likes the idea that the guy mowing his/her lawn is the guy who owns the business not some $6.15/hour migrant who most likely wont be back next week. Which also brings up another point, I dont try to compete with the companies who advertise $19.95 mowing specials mainly because I cant. I dont have the luxury of putting two minimum wage workers in a ten-year old ford ranger with five-year old lesco mowers and turning them loose, I need to earn a wage for myself, also a drawback to not having crews. But there are still enough folks who are willing to pay the extra to have a nice lawn done by a nice guy, who moves the picnic table instead of going around it.<p>I read Phils earlier post, and shuddered at the thought of the new Chem-lawn (dont remember the name) conglomerate which will soon do to us small operators what Home Depot did to the corner hardware store. And homeowners should shudder too, since after guys like me and you bow out to the 19.95 specials, suddenly when Home Depot Lawn Care is the only game in town lawn care will triple in price, kinda like plywood did, get my drift?<p>I know kinda rambly but thats what happens when I get torqued up.<p>Bill

 

[KUTTERS]

I agree that some people will pay a certain amount for cutting their lawn, once they can not get someone to do it for that price they will do it themselves. We have plenty of competition in this area, each year we probably have as many people start a new business as we have people getting out of this business. <p>Most Clients shopping price will hire the companies advertising the lower price. When this new company determines they are not making a profit they drop the client or get out of the business. <p>I think that you must operate your business properly to obtain maximum profit from getting paid this $35 per hour rate. I have hit this barrier with one two man crew($70 er hour) and will operate one more one man crew this season eventually building it to a two man crew, while maintaining optimum profits. Which generates about $27,000.00 net profit per crew after taxes for the labor free owner.<p>A few very large contractors have tried to price everyone out of the business but failed in this area. It may work in the future, I may be the one to do it. But as you know customers will only pay one price and all it takes is someone willing to do it for that price. Good Luck. <p>

 

[ashlandscaping]

For the person who first posted. You are at a level that you can make and good living. (30000 to 50000) Your over head is less then a larger company. Iam ran a small company was at one point small to med. size company. But find that if you can keep it smaller easier to handle east to keep overhead down to a minim. As far as what chem-landcare is doing is they arenot going after the small or middle class res. lawns. they are buying out large companies that are doing highend work large office complexs, muiltifaimly and so forth. When I was selling my first landscape co. I recievecd 2 calls from them wanting to know all about my custmer how big of properties they are how many complexs and so forth. All they are going for is high end stuff. Example I was looking to buy out a other company this summer small company 1 truck trailer 4 mower 75 accounts. Chem-landcare had called looking into it they could buy him out in a minuite way before i could put it all in line and the price was only 35,000 so it was a little price tag but all the work was small postage stamp size lawn they backed out. Other company that I have heard that is buying out smaller companies is Brickman Landscape. Not sure how many of you guys know of them but I know they are in 17 states now. First One being IL right in long grove which is 10 minute from storage yard. They to from what I have seen are looking for highend type work only. So afar as the big guys they are no t problems for smaller company doing mostly res, work. Speaking of buyouts last winter here Chicago land IL a company boughtout 1 of his major compertor makeing his company grow twice the size that it was which now means they have 3 yards and a hell of a lot of trucks trailers and work. But by them buying them out it helped a lot of little company get into the mulitfaimly work since lots of properties would use one or the other now they wont use either opening up for others to step into the doors and pick up some nice easy money jobs. So their can be some big benfits to the smallll companys by large ones being taken over. OPening up doors to all diff. markets that have been closed for years. Good luck to all

 

[thelawnguy]

Regarding Chem-Lawncare they ARE buying up the little guys they bought a friends business in Meriden CT sold off the lawn accounts to another big company and kept the application accounts for the Chemlawn side of it and sent the pest control accounts to the Terminix branch.<p>Please dont think it cant/wont/shouldnt happen, we may all be surprised.<p>Bill

 

[Lee Homan]

Hey Guys, <p>I appreciate the feedback. It's good to know what other people out there are doing. In response to ashlandscape I kinda of agree with the whole idea of staying small. Sure I would like to go out and get more accounts but thats going to require hiring people and investing in more equipment. The taxes and regulations required for having employees sounds like a lot of extra headaches, not to mention the added maintenance on equipment. I guess it just depends on how much money your content with making. One other question I meant to throw out there regarding bidding jobs was if most of you guys charge the same rate for cleanup, shrub trimming, leaf removal and other misc. work as you do for mowing? This is an area I ran into trouble with on a few of my customers, it even caused me to lose a couple. They assumed that I would charge them the same rate for shrubs and cleanup work as I do for mowing. Instead of being charged for $30.00 per hour I charged them for $45.00. The bad thing is, some of the people become close and trust you real well then you drop that bomb on them and they have a whole new perception of you. I don't know I may have to change my rate. Well I get off here and any feedback will be appreciated. <p>