Does volume make up for low price?

Discussion in 'Business Operations' started by HBFOXJr, Jan 18, 2012.

  1. HBFOXJr

    HBFOXJr LawnSite Bronze Member
    Messages: 1,712

  2. nwimaintenance

    nwimaintenance LawnSite Member
    from 46307
    Messages: 74

    No Way!! The only time I will do work for a cheaper price is if the account is near another account I already have. High volume and low price usually ends up in poor quality of work.
  3. grass-scapes

    grass-scapes LawnSite Bronze Member
    Messages: 1,552

    The article needed only one sentence. The one that said when you cut your price, you aren't actually cutting the costs, only the profit to you.

    I am guilty of cutting price a bit at times to get a job. I do it as little as possible because once they have the price, they expect it. If you go up, they expect the next person to give the cheaper price. That's why Unlicensed, uninsured, and unknowledgeable people have done so much damage to this industry.

    Messages: 1,343

    Well said grass scapes.
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  5. wbw

    wbw LawnSite Fanatic
    Messages: 6,168

  6. wbw

    wbw LawnSite Fanatic
    Messages: 6,168

  7. wbw

    wbw LawnSite Fanatic
    Messages: 6,168

    Let's explore this topic some more.

    Is it profitble to use one part of your business as a marketing center for another part. I'll give an example of what I am asking.

    I service swimming pools. This business paralels lawn service in many ways. There is little margin in tha actual weekly service but there is very good margin in equipment repair and replacement. Sort of the same relationship landscaping and hardscaping have to lawn mowing. Should I lower my already thin margin on service to increase my total customer base in order to get more repair/replacement work?
  8. HBFOXJr

    HBFOXJr LawnSite Bronze Member
    Messages: 1,712

    I think when services are intertwined as described, you have to simply look at the big picture. You have to focus on your value, to your client. If they can count on your weekly service and it's good, they need to know they can count on you for a bigger problem when they have one. Since repairs are not done often, and knowing the challenges of informing clients of our capabilities, and keeping it in their minds, I'd concern myself with making sure clients call you first in case of breakdown. None of us like to hear " I didn't know you did that".
  9. wbw

    wbw LawnSite Fanatic
    Messages: 6,168

    Typically price is a big part of the customers initial decision making process. However, they very rarely price shop us after the initial meeting. We don't rape them on the extras buy we do far better than we do on the weekly service. I try to never quote an hourly rate for labor ($95). I prefer to give them a lump sum price to replace or repair an item. When questioned about how much we charge I tell them enough to make a fair profit and stand behind what we do.
  10. MDLawn

    MDLawn LawnSite Bronze Member
    Messages: 1,284

    "Does volume make up for low price?"

    If you're selling a mass produced item then yes.

    If this is your business plan then this is the place your business will always be. You'll charge low and EVERYONE will know this due to the volume you'll build and if you try to raise prices those customers will drop you in a heartbeat. Price shoppers are exactly that. If you can't do it cheaper they will find someone who will.

    Is this how I think most of lawn mowing is done....yes. Because everyone prices too low to start getting work and has the starting mentality of "Well if I get 10 more lawns I'll make X more dollars, if I get 20 more lawns I'll make XX more dollars, etc..... Soon enough you're servicing 100 underpriced properties and barely paying expenses let alone any additional labor costs and your quality is starting to suffer. Oh wait it just rained for 4 days that phone wont stop ringing with complaints of why I wasnt able to service people. Or you just work 80hrs a week and dont care about ever having a life. Please dont get me wrong running a business will take far more hours than those with your backside sitting on a mower and hard work should pay off.

    The other side of this is "Well I know my business really needs to make $XXXX dollars per hour/day/week/month to operate, pay salaries, and keep everything running. I'd like to make X% profit so I can expand or upgrade equipment from time to time. I'll will need to hire employees to help with the expanded workload and I cant make them work over 40hrs without overtime. So I have 40hrs/week and X weeks per year to make this work. I need to charge $X/hr/day to make this happen. Whatever that $X/hr/day is will dictate the client you'll search out.

    You can choose any way you like

    Price Shoppers - plenty of them and easy to acquire, will drop you at the sight of a price increase, probably wont give extra work and if they do you better offer it a your same cheapo rate, referalls? yea right they're to busy shopping for someone cheaper than you! Oh yea if they do refer you guess what's the first thing they'll say. "Oh they do it real cheap too!"

    Great Clients - very few and harder to get a lot of them, understand some price increases because you maintain such a high level of quality, offer you extra work that you make much more profit on because they demand quality, refer to their fam/friends/neighbors who also like great work, etc....

    Once you learn how to walk away from underpriced work and not feel so beat up about it (some people take a "no" from a potential lawn mowing customer so personally) you'll never do that low priced volume stuff EVER again.

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