Fuel Prices and Billing....

Discussion in 'Business Operations' started by Lawn Pawn, Feb 25, 2012.

  1. Lawn Pawn

    Lawn Pawn LawnSite Senior Member
    from zone 3
    Messages: 568

    Sending this letter out next week... may have a few tweaks yet, but seems a good way to go. Share your thoughts?


    As the first of March approaches and regular gas fluctuating around $3.50 a gallon, I have done the best to hold my rates steady for the last year or so, even when my insurance and other expenses have risen.

    This season I will be adjusting my rates based on fuel prices with $3.50 being the baseline. My rate may vary month to month, up or down, and you may choose to pay or not to pay any increase if there even is one.

    Choosing to pay the previous months rate without adjusted increase is acceptable, however all future services will then be discontinued, and our service agreement void.

    Call as needed accounts will be quoted a price prior to each service if you like.

    This seems a simple and straightforward way to address the uncertain fuel pricing, with no surprises for the client. I will contact you prior to any mowing this Spring to determine if this will be acceptable for you.

    Your business is always appreciated, I'm looking forward to an early Spring!
  2. wbw

    wbw LawnSite Fanatic
    Messages: 5,930

    No way on earth would I send out a letter like that. Either raise their prices by a few bucks or don't. I have chosen not to raise my prices this season for existing customers. I have mixed emotions about that as I had previously intended to raise prices this year.

    You are raising uncertainty. Never a good thing. People want, crave stability. This week I will service your lawn for $42.50 but next week it might be $52.07. WTF? Terrible from a marketing and customer relations point of view.

    As always, I could be wrong, but I do know that I wouldn't like it.
  3. xclusive

    xclusive LawnSite Bronze Member
    Messages: 1,054

    I agree with WBW above. If you have an agreement why not put a clause in it that say if the price of gas reaches $3.50/gallon then you will assess 3% fuel surcharge. Or you can say the fuel surcharge will be X amount per week when gas rises above $3.50 gallon. I have this listed in all my agreements and last year when I put a fuel surcharge into effect I sent a letter out with everyone's invoice telling them that it would be happening and once prices declined I would eliminate the surcharge. I had a couple people call about it but they all understood.
  4. Lawn Pawn

    Lawn Pawn LawnSite Senior Member
    from zone 3
    Messages: 568

    WBW... That is just what I wanted, an honest reply.

    In fact it would be more like a fifty cent to a dollar per cut increase. I do realize some customers may think it could be five or ten dollars per cut. May need to address that misconception.

    I do agree with you I could be slitting my own throat.
  5. Kelly's Landscaping

    Kelly's Landscaping LawnSite Platinum Member
    Messages: 4,631

    That letter needs to be scrapped or your going to lose 90% of your accounts.

    Like most fuel prices killed me last season we used about the same amount of fuel. How bad was it we went from nearly 11,000 in 2010 to 16,500 in 2011. So we absorbed a good hit there and are ready for another but I would never make the prices fluctuate month to month. We went through our lists and raised about 1/3 of them or just over 65 accounts. I don't raise across the board ever I do each on a case by case basis am I making money or am I breaking even or worse do I lose money. In that way I am able to trim wasted ventures and despite identical fuel usage and nearly identical payroll in fact it was 2k less we showed a 8k increase in sales so we absorbed the gas inflation by growing out of it.
  6. wbw

    wbw LawnSite Fanatic
    Messages: 5,930

    Just price the service based on todays gas price. If gas goes up by much more than .50 per gallon then contact your customers and raise their price accordingly. I personally feel that unless you are a huge operation working on razor thin margins I would just absorb the increase. Even the guy that posted he spent $5000 more in fuel probably has a partner, they increase efficiency in other areas and split the expense. It cost him $50 a week. Don't get me wrong, having $50 is better than not having it, but if it kills you your business is screwed anyway.
  7. Pressedun

    Pressedun LawnSite Fanatic
    Messages: 41,851

    Thumbs UpThumbs UpThumbs UpThumbs UpThumbs Up

    Completely agree here, absorb the costs and maybe adjust next spring if prices continue to rise.
  8. ENL11732

    ENL11732 LawnSite Member
    Messages: 24

    With the last major fuel increase a few years back, all my supplies and dumping fees increased. After the price of fuel declined the prices of dumping and supplies never went down, so not only is your fuel prices going to go up this year, everything else with your business will also. You can eat the increase only so much or you will be working for free.
  9. greg8872

    greg8872 LawnSite Senior Member
    Messages: 300

    Speaking as an "outsider" (not in the industry), if I were a customer and got that letter from you, my immediate concern would be your business stability, having to change rates month to month would raise flags for me. Granted, as an established customers, I would seek to discuss it with you and negotiate a flat steady price for the whole season. But that is me. I like knowing fixed costs for things I'm spending money on.

    The main reason I would have concern about business stability is that I have had the experience in the area of calculating overhead and burden costs for small blue collar businesses, and seen the effects of companies that do not have have a good handle on their base price to break even. Now I'm not saying prices can't change based upon your costs, but month to month would worry me. Again, I have a more unique perspective on this.

    Also, with (at least in my area) talks of gas possibly going up to $4.50-$5 gallon by end of summer, you stating you are starting with base price of $.3.50 would have me thinking that I need to plan on prices to keep going up all summer. (But damn sure hope the predictions are wrong).

    I agree with others that either you bump up your prices, justifying it with a general matter of fact additional increase in costs if asked, or leave them the same and keep track to where adjust next season.


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