Consciously Becoming a Low Baller

I have been in business for 15 years now. I have been in the industry for 25 years. I am feeling pretty beat up mentally after the last couple years, I have to admit, I love what I do but I hate most of the people that do it for me and most of the people I do it for. Plain and simple, I, like the rest of the country am having serious employee issues. Also, we were probably a bit on the low side for several years but, starting in about 2014, I raised prices gradually to be more fair, not only to me but to the industry.

I cost track intensely, we are operating at a 62% Gross Margin overall divisions. How did we do 62%?? Well, as it pains me to say, we didn't complete all of our work. We do Commercial and HOA only on 12 month contracts. So we track what we do vs. what we are supposed to do, I can say, we missed a bunch. Our QC system grades 1-100 and our average was mid 80's for last year. We think anything under 85% and our client might be looking. Properties looked good over all though.

In September I increased our contract revenue by 24% (in new contracts). Between January 1st and now, I have lost 22% of total contracts. I regained about 7% so far. There were a few reasons given; 1. too much irrigation billing 2. found someone cheaper 3. lack of attention to detail. The two jobs we lost due to lack of attention to detail were actually two of our best looking communities scoring on average in the low 90's. Furthermore, they were properties that we put a LOT of work in to in order to get them looking the way they did, they scored low 70's when we picked them up.

The properties we lost due to too much irrigation repair really irritates me. You see, we sell ourselves on being proactive. I had over staffed irrigation techs last year so that we could be sure to go through systems every two weeks. In the past, I had lost jobs because we didn't do enough system checks, we were always "reactive". I have built this entire company, our systems and values on being proactive. In fact, our motto is "Your Proactive Solution". People loved it and when they saw the result they loved it even more. Some just got pickier however.

Most of this resulted in the #2 category, found someone cheaper. This makes me sick!! I bust my ass for these people and get let go because they want to save money? What's even worse, I am being under cut on a few of these jobs by almost half!!! How in the hell do these people stay in business?? Well, over the last few months I have really analyzed the companies beating us out on price. I have visited the jobs they took from us. Two of them look like total hell. The other 6 actually look pretty good. In fact, the ones that look pretty good are the ones that left us for better pricing. The companies that took over are not small by any means, two of them are nationwide.

After doing some digging, I find out that some of these big companies will have a fire lit under their asses to get more work so the business developer will go out and slash throats to meet some kind of quota. I am not surprised by this since I have been an account manager for a huge corporation at one time and remember very well the tactics we used. The reason they can afford it is volume! We did 750k in sales last year. Our goal is to hit 1m by the end of 2020.

Knowing all that, I am starting to see that around here, customers want cheap. I can't afford cheap! I feel like we are being squashed like a bug. We pay our people competitively (for this town anyway) and most other companies think we pay too much, especially for what we get out of these guys. If I didn't know any better, I would think we were in a recession based on the way customers are seeing us right now. I am becoming of the mind that purposely low balling is the way to go here. I would feel like a total loser doing it but the truth is, these bigger companies are crushing me and I think my only option is to fight fire with fire.

What would you do?

 

We have a large company that moved into our city a few years ago. They have taken over most of the local government contracts and many large HOAs. I always wonder if they are “buying” the contracts to take over the market or do they know their numbers so well they are able work on tight margins and still make a profit.

 

So how can you love what you do and hate the people involved? This is a service business-meaning you are serving people. Maybe you are just venting, but if you hate your clients and your employees, that's like 85% of your business right there. Maybe you love your equipment?
Consciously low-balling is not a bad tactic to keep in the back pocket for the right occasion-but stick to it too much and you'll just run the company into the ground. Which actually sounds like what you might unconsciously be wanting to do since you hate your company personnel and clients so much...

 

Are there some divisions of your company that are still profitable and not being poached based on price? Perhaps there is merit in not attempting to be all things to all people but rather find your niche of services and doing those only.

Just a thought.

 

I've seen some numbers from larger outfits that would make people sick. They bid maintenance labor down into the gutter, talking man hr rates like 32/hr.

There's enough irrigation, apps, enhancements etc to still make a nice profit. They're really just selling their maintenance to break even and get good contracts on high margin services.

 

From what you wrote here, I agree that is what is happening and not just to companies like yours. It's happening to companies in all industries. The big money (large corporations & such) are continuing to knock out the little guys. It's scary and will continue to create a rich or poor society with no middle class in between. In the future there will only be corporations to work for and most likely at minimum wage.

I also agree that the economy is not doing the best right now.

 

It's called burnout\sick of the BS in this industry.

I bid a couple apartment complexes...specs are unbelievable. Didn't get either because I bid the specs. The contractors given the contracts are not working according to specs. Stuff like that. I won't be providing bids to them anymore.

 

I hear ya brother. But I will not participate in the race to the bottom. If that means not hitting sales goals and getting rid of equipment, so be it.

 

Brightview has a few larger contracts around me. They all look like crap. Clumps left all over, mowing patterns never varied, weeds, etc.

Shoot, I bid a couple large complexes a few years ago because the property manager requested us to, because he knew we worked according to the specs. We asked if that was going to factor in, because our price would be higher. He said that is why they were rebidding.

Didn't get the work. Brightview was the current contractor. No idea who is doing it now. Shrubs weren't trimmed, curbs not edged, where annuals had been installed were now mulched, irrigation was crap, weeds in the turf.

As I said above, once I find out specs don't mean anything, we tell the person requesting the quote that we will be declining because we bid to specs and they don't follow them.

 

BTW, around 5 years ago, maybe longer, Brickman was pricing mowing at $22\hour.