Marginal Accounts?

Discussion in 'Lawn Mowing' started by MOturkey, Sep 30, 2010.

  1. MOturkey

    MOturkey LawnSite Silver Member
    Messages: 2,782

    I realize that most of us have accounts that can vary widely in profitability, and was wondering what criteria you use in deciding when an account must have a price increase, even if it means you lose the customer? I realize that in the real world, there will likely be other factors which effect such decisions, such as location, PITA factor, etc, but those are subjective, so for this example, let's use only the numbers.

    I'm speaking more to solo operators here than I am to those who run crews, because labor costs define the parameters under which you must operate, but you may chime in as well, if you want. Hypothetically, let's say you have decided that you need to gross $50 per hour to cover your overhead, fund your IRA, pay taxes, and have an adequate net income to provide a reasonable standard of living for you and your family. Obviously, in most cases, you can gross much less and still show a profit, just not as much as you desire.

    So, the question is, do you kick an account to the curb if it grosses $49.50, or do you keep it even at $35? No need to give actual figures, if you are not comfortable doing so, just a percentage will do.
  2. mowerbrad

    mowerbrad LawnSite Fanatic
    Messages: 6,268

    Just to make things simple, I'll use the $50/hour you mentioned. So if I need to gross $50/hr at any given account to pay my taxes, IRA, etc., then its simple, if I don't gross the $50/hour I need to on certain accounts then they are gone.

    Now there are things that need to be considered here. If you are only making $45/hour on an account then you just are basically putting less in your IRA and taking home less at the end of the day for your own pay. But none the less, you are still bringing home some profit. I would keep this account IF I had no other possible accounts to replace that one or it was a long time customer. You have to remember, you are still bringing in some profit just not as much.

    Now if I had multiple potential customers calling me wanting to start working for them, then my customers who didn't meet my $50/hr need would be asked to either pay me more or be dropped. I only say this because then my time is obviously worth much more when I have people "in-line" wanting to be my customers than when I have no one waiting to hire me.
  3. kilgoja

    kilgoja LawnSite Senior Member
    Messages: 944

    i shoot for $50/hr as well but i keep a yard at $40 an hour because i may have another where i make $60/ it evens out

    if you are asking would i do a 1 hour job for $25 then the answer is no...but if it's for $40-$45 then yeah i would keep doing it...because you may have another job where you make $50 and it only takes you averages out in the end for the most part in my experience

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