FYI thought it might be helpful to raise the bar

Discussion in 'Lawn Mowing' started by LawnsRUsInc., Jan 26, 2005.

  1. LawnsRUsInc.

    LawnsRUsInc. LawnSite Senior Member
    from midwest
    Messages: 916

    Your Top 4 New Year's Resolutions

    By Roger Stanley

    Many contractors wish their companies could stand out more clearly from the competition. They wish customers would buy smarter and pay for the services they get. So, in 2005, Lawn & Landscape is going to cover marketing, sales and pricing more than ever.

    An underlying aspect of the value/pricing issue is that lowball competitors often set the price bar so low. In response, I’ve thought about some good advice I’ve picked up along the way regarding profitability, and I’d like to propose four New Year’s resolutions for you to consider regarding getting paid what you deserve for what you do.

    Resolution #1: Recognize Your Costs. The owner of a Denver remodeling company shared some powerful pricing advice with me a few years ago and it applies to any contractor. This owner had grown his company from a one-person start-up into one of the largest companies in the area. His key to success came from a seminar on estimating. The seminar trainer convinced him of the power of accurate estimating – that if you really know your bottom line job costs and your profit goal, this empowers you to set your price with total confidence. If a prospect won’t pay you what you need, then you have to walk. Simple, powerful and absolutely true. No one can knowingly afford to take jobs at a loss. But if you don’t know the real cost, it is possible to take such jobs in ignorance.

    To make money – guaranteed – all you have to do is know exactly the minimum price you need to cover your costs and then add your profit. If you do this and make the sale, you will make the profit. Do that a lot and your business will be a success.

    Resolution #2: Recognize What You Deserve. My first boss taught me the difference between pay and profit. As a business owner you are entitled to be paid for your work and time. Beyond this, your business also needs and deserves a profit. As was explained to me in a conversation about setting advertising rates, a business profit should be greater than what the owner could get by selling the company assets and then investing the money. For example, if your business assets total $500,000, and you could earn a 7 percent annual return on that investment ($35,000), then that fact should help you create a minimum profit target for your company. And that profit is for your business; it is above and beyond your fair compensation for working.

    The idea that customers "give" you a profit is wrong. The owner of a business deserves a profit for that business for the risk he or she is taking and for the asset value tied up in his or her business.

    Resolution #3: Recognize the Value You Bring. If you are selling mowing, weed control, tree planting, retaining wall construction or other services, you might not be getting as much profit as your competitor who is selling the same services, but pushing the fact that his clients can have "the best looking lawn on the block," "weekends free" or "a space to entertain friends on weekends." The customer decides the value of the services and expertise you sell. So, before giving them a proposal priced at what you think they will buy, ask the prospect enough questions to find out what they expect and then propose the job and price accordingly.

    Resolution #4: Recognize Time Wasters. Sandler Sales Training teaches you to get money on the table early in the discussion. In fact, talking about money right away helps contractors separate the tire kickers from the serious buyers. Your time is worth money, so why waste it hoping some prospect might be serious or that they can afford your services? You’re better off disqualifying tire kickers and people pumping you for ideas as fast as possible, and then use that time that you saved to qualify other prospects.

    By the way, tire kickers and dreamers won’t be convinced by your time investment to agree to your outlandish price. Now, if you think your price might be outlandish, then please refer to resolutions No. 2 and No. 3 again.

    Here’s to a prosperous and profitable 2005!
  2. tonygreek

    tonygreek LawnSite Gold Member
    Messages: 3,852

    excellent posting, lawnsrus. this should be bumped once a week from here on out.
  3. wbw

    wbw LawnSite Fanatic
    Messages: 6,077

    Thanks. Some really good info. Too often we seem to lose sight of the target.
  4. Yes, I agree
    thanks for posting it
  5. LawnsRUsInc.

    LawnsRUsInc. LawnSite Senior Member
    from midwest
    Messages: 916

    Back up top
    Just helping drive up the price and your pay!
  6. LawnsRUsInc.

    LawnsRUsInc. LawnSite Senior Member
    from midwest
    Messages: 916

    bump it up to the top
  7. smcunningham

    smcunningham LawnSite Senior Member
    Messages: 775

    everybody should read this post once a month
  8. topsites

    topsites LawnSite Fanatic
    Messages: 21,653

    Recognize your losses, and educate your deadbeats.

    As business owners we are the leaders of this nation, and as such we set pricing standards among other things, and certainly some to most our customers can afford this.

    There are those who feel or think they don't have to pay, but the savvy business owner simply sees this as yet another opportunity to raise his or her prices. While at first it is unfortunately the affluent customer who sees the increase, for one because they can afford it, it is also the affluent customer who is first to react. And, it is the affluent customer who is next in line to be in the position of leadership, the affluent customer might see this as opportunity as well.

    While some business owners fear this reaction, others such as myself do not. There are only two types of affluent customers, those who have it, and those who think they do. The only reaction that comes from these is positive, and negative, in that order. The latter kind unfortunately does leave us, but on they go seeking out the next lowest bidder. The first kind however, reacts by raising their own bar, they set their standards in whatever aspects they can, and in short order someplace else the price goes up, perhaps they fight for the next promotion, either way on the other side of the spectrum wages for the hourly worker fail to rise.

    In this fashion a chain reaction starts and prices start to rise while lower income wages stay in a jam, to which guys like myself only react by raising my own prices yet again, until such time a reasonable balance is achieved, at which point most folks are screaming bloody murder, but their screams fall on deaf ears. Because either you're in a position of leadership or you follow, and so long you follow the leaders will lead, but lead and watch who follows.

    While at first the prices are only high on the outer reaches of the business world, eventually this chain reaction reaches those services that can not be avoided, such as electricity and telephone. Eventually it gets to the point that no matter how much money someone got away with, everybody pays for it, deadbeats included. That, or they can go homeless, at which point they can not call us for lawn services any more.

    Because so long there are those who rip off businesses, there will be businesses who continue to accept this as a guideline, and simply raise their own prices in response, one could see it as setting the bar, but it is simple leadership.

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