Cheap prices will get you no where.

Discussion in 'Lawn Mowing' started by AB Lawn Care, Feb 8, 2000.

  1. AB Lawn Care

    AB Lawn Care LawnSite Senior Member
    from Ontario
    Messages: 585

    I thought I would start a discussion about why we should charge good money for what we do and always do a good job.Here is one example of my own. <p>When I started out in this business 5 years ago I had my largest paying job taken from me.The company who under cut my price to get it had started his business around the same time I started mine.At fist I was really mad becouse like most of us I was just starting out and I was living off kraft dinner.I thought of under bidding all of his jobs but I soon decided to give up on that.Over the years he gobbled up all the work he could,did a lousy job and charged way too little.He also went nuts buying trucks and equipment.In five years he went from a old truck and a garden tractor to five trucks and trailers with the needed equipment.Well this spending spree caught up to him.This year was his last in business if he had charged good money and done a good job he might still be in business.<p>If anyone has any experinces like this please give your examples.<p>from:Adam<br>AB LAWN CARE
  2. nlminc

    nlminc LawnSite Bronze Member
    from GA
    Messages: 1,671

    I have a guy like that in my town. He is doing the same thing only he is still in business. I the thing that gets me is that people see the quality of work that this company puts out and still hires them. Unfortunatly people like to go for the low price to often.<br>Chris
  3. Nilsson Associates

    Nilsson Associates LawnSite Member
    Messages: 243

    Low price may get you the work, but over time leaves you &quot;cold&quot; because of high effort, low return. There's no need to underprice in this kind of an economy, the question is what price should you be using?<br>It's not easy to answer because there are so many variables at work. Nevertheless, if you want to &quot;simplified answer&quot; first it comes down to making sure you have covered your costs. Do a cost analysis at least once a year, and adjust it to changing conditions. Relate all of your costs ... down to the hour. Over at my link at (right now) we have a sample P & L on the board. Estimate what your total labor hours will be for the upcoming year, divide those into indirect<br>overhead, to determine hourly overhead costs,<br>add your direct costs to that figure. Direct costs are shown at the top of the sample P & L. Then add an hourly profit figure on top of costs ... a figure that will motivate you, justify your efforts. After you get that number, test it against what you've been using as &quot;per hour bid figures&quot;. The number you have may be higher or lower than what you're able to sell your work for. It's not an easy &quot;quick and dirty&quot; thing ... to &quot;get at&quot; but it's worth the trouble to find out. <br>Nilsson Associates, Consultants
  4. lawngator

    lawngator LawnSite Member
    from Florida
    Messages: 78

    The area of central Florida that I'm in is booming right now. Houses are going up everywhere. This has led to two negative factors. 1st, anyone with a murray and a pick-up is out there mowing(for pennies) and 2nd, people are living beyond their means to be here so they're cheap. I am only part-time, so I can afford to be choosey, but it has taking me a while to build a quality customer list. I spend a little extra time at these places and don't leave until everything's just right. I refuse to compromise on my price because I refuse to compromise on my quality work. For every 10 lawns I bid on, 9 of them were just price shopping. One thing I learned was to look to the older, more established areas of town. Leave the new neighborhoods, with their $60 - $75 per month accounts to someone else. Oh well, that's enough venting for me. Thanks, Bill
  5. AB,<p>Explain what you mean by cheap?<p>Do you consider another contractor &quot;cheap&quot;<br>if he can underbid you and has met the licensing and insurance requiremnents needed to work in your market?
  6. Charles

    Charles Moderator Staff Member
    Messages: 10,857

    I would say cheap or low ball company is one that undercuts the going rate in an area by $10 per yard. Lets say you call 5 lawn service companies to give you an estimate on your yard. 4 of them bid $35 and $40 on the job. The 5th guy comes along and bids $20 on the job. If you undercut the going rate by that much you might as well go to work at walmart. To all the new people out there and the lowballers too. This cut rate stuff is hurting you and everyone in the long run. There are alot of lawn companies charging the same rate as 9 years ago when I got into this business. Some charging less. While the cost of living and the cost of equipment has gone way up. Do you see anything wrong with that? I sure do. Once your murray mower falls apart and you have to buy commmercial equipment. You will be wondering as we are why you can't raise your rates to pay for it. And make a decent living for you and your family. Inflation will eat us all up now and in the future if the cut rate pricing continues. I think in this type of business it will continue to bring us all down.<br>
  7. AB Lawn Care

    AB Lawn Care LawnSite Senior Member
    from Ontario
    Messages: 585

    Lawrence Stone<p>Thanks for all the replies.Lawerence when I said cheap I mean he charges well below the set standerd.In our area most people will not charge below $30 an hour.Some companys that have been in business for 20 years are charging between $60-$80 an hour.Becouse we have not been in business very long we charge $5-$10 over that standerd.The guy I was saying was cheap charged about $20-$25 dollars an hour witch is nuts.Some may be able to charge this in the U.S but I'm in Ontario so that figure is way too low.You also asked if he had licencsing and insurance.I sure he had insurance.When you say licensing do you mean for pesticides?If that is what you mean,he contracted that out to an other guy.If you mean some other form of licensing let me know.<p>Thanks!<p>from:Adam<br>AB LAWN CARE
  8. Jay Raley

    Jay Raley LawnSite Member
    Messages: 13

    Mr. Nilsson,<p>I have a question that perhaps deserves it's own thread but I stuck it here and we'll take it from there. Our economy is booming, no question about that. But what do we, as business owners, have to look forward to with the change of Presidents in the next 1 1/2 years. Is there a historical record that we can look to and maybe expect some things. I don't want to get into a political debate, this certainly isn't the place for that, but as business owners we have to make ourselves aware of what to expect. This bull market and high times can't last forever. I mean, what goes up has to come down, eventually. I keep hearing analysts calling for a &quot;natural correction&quot; of the markets. But if you couple this correction with a change in the Executive Office couldn't we be in big trouble? I just really don't read market trends well and I was hoping that you could maybe shed a little light for us. <p>----------<br>Jay Raley<br>The Good Earth Grounds Management
  9. Lazer

    Lazer LawnSite Bronze Member
    Messages: 1,446

    Certainly there is a difference between competitive and cheap.<p>I think the difference takes 5 years to decipher completely. Can a lawn company do a property for less money and be around ON THAT SITE for 5 years or more. <p>Generally what happens is that the lower price preciptates the following: Low wages, employee turnover, cut corners (or in the case of mowing: UNcut corners) Improper equipment maintenance, etc. All these things lead to customer dissatisfaction.<p>When the price is lower and the cheaper guy get the job, 1 of 3 things happens:<p>1.) He does it cheap and slowly degrades service, equipment and employees from lack of money. End=looses customer. Too Cheap.<p>2.) He realized he's too low and raises prices the following year(s). End=looses customer. Too Cheap.<p>3.) He truly is competetive and makes money. End=customer happy. Competitive.<p>It has been my experience that #1 and #2 happen far more often than #3.<p>I think this process takes 5 years to fully realize. It's just part of the business. Everone wishes prices were higher, but that's not always reality.<br>
  10. Charles

    Charles Moderator Staff Member
    Messages: 10,857

    I agree Lazer.When I got into business I called around and found out the going rate. I then bid the same or close to what the going rate for that size property. Why would I want to work as hard as they do and make a lot less money?The profit margin is just not that high in the lawn service business to cut the bids. Some contractors say wahoo I am making $20 or $25 per hour profit. Without any thought to expenses. New people come from another job and compare there hourly pay with their lawn service rate. Without including benefits or lack of expenses with that other job. As for the economy and presidents. The economy has never effected me in this business. Grass keeps on going no matter what happens.<br>I lose customers mainly through death and relocation. Then I have to compete with 10 year old pricing bids. Wahoo

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