Raising Prices for Inflation

Discussion in 'Business Operations' started by landscapepropertyservices, Feb 19, 2018.

  1. landscapepropertyservices

    landscapepropertyservices LawnSite Member
    Messages: 1

    Its that time of year!

    I would love to hear your thoughts on you raised your prices?

    did you guys raise your property per home? flat rate all around? I would love to hear!

    I am need to raise prices for my maintenance clients! i know i cannot continue to mow for $50 for a client of mine that i priced 6 years ago.

    I am in kinda a bind, do i raise everyone by 2.5%? go through and raise individually?

    I would love to hear from you all!

    Thank you!
     
    hort101 likes this.
  2. jc1

    jc1 LawnSite Silver Member
    Messages: 2,402

    It really is quite simple, raise your prices if you feel you need to. Yes Some customers may complain, some may cancel. If you have good records you know who is too low. Raise them to what you need or want to charge.
     
  3. Todd73

    Todd73 LawnSite Silver Member
    Male, from Florida
    Messages: 2,583

    I raised everyone across the board. Averaged a little over 5%, with the exception of people in my neighborhood who were getting the deal of the century; they went up over 10%. First price increase for some in three seasons with me. Lost one and that was by design. Hated the yard, so gave her an assesine price (yet justifiable) hoping she’d drop.
     
  4. jonnyz37

    jonnyz37 LawnSite Senior Member
    Messages: 431

    I raised 20% of my clients this year . It will result in an overall increase of just 3% assuming none drops me. I told all the increase people they won't go up for at least 4 years. Next year I'll pick another batch to raise. I'm happy so long as I'm at $100 per hour for me and my son ... Go out mowing ... $800 for 8 hours of work and travel and we are happy
     
    13Razorbackfan likes this.
  5. TPendagast

    TPendagast LawnSite Fanatic
    Male
    Messages: 14,333

    Too many people don’t understand this price thing.

    There’s no cost of living ratio in free market pricing.
    Are you making your desired margin?

    Not over all
    Per customer
    Per service.

    Mrs Jones May be $60
    You’ve been mowing her for 6 years
    Every single time you mow her lawn it takes 30 minutes
    You’re making $120 gross per hour
    Payroll costs you $25 per hour
    Overhead burns $20 per hour
    Direct cost $5 per hour
    That’s $50 per hour
    Your profit margin is destined to be 20%
    That’s $60 an hour target.
    You’re doubling your target
    You don’t raise mrs Jones price

    Mr Smith is $60
    It takes an hour to mow his property
    Your target is $60 an hour
    You don’t raise mr Smith , you are meeting your target.

    Ms. Abagail is $60
    It takes an hour and a half to mow her property
    Your target is $60 an hour
    You need to raise the price to $90.

    60 plus 60 plus 60 is $180

    60 plus 60 plus 90 is 210

    If you raise everyone’s prices to 70 (reaching your 210 target) all your doing is making Jones and smith pay for abagails lawn work.
    Jones and smith find someone cheaper and now your left with abagail who’s still getting a hell of a deal at $70 when she should be paying $90.

    Now you just lost two profitable customers and kept the loser.

    Don’t indescriminately raise prices.
    Do job costing for each customer and each job
    Only raise prices on anything that doesn’t reach the profit goals you have set.
     
  6. sailfish27

    sailfish27 LawnSite Member
    Messages: 247

    Sorry but you couldn't be more wrong. There is a cost of living ratio. It's called the CPI or consumer price index. One of it's main functions it to allow businesses to price ahead of the curve instead of behind it. If you ever signed a RE lease you'll notice the rent increases over the length of the agreement. The amount of increase is usually tied directly to the cpi.

    Employees same thing. Most of them have automatic cost of living increases every year.

    The problem with your logic is your basing your numbers on the previous year. The fact is, when there is inflation everything is going to cost more in the upcoming year.

    If you charge Mrs. Jones $60 last year and the costs of goods and services and help are slated to increase over the upcoming season your costs will be higher and your dollar won't go as far. You are now working for less than you were.

    Not a good way to run a business.
     
    oqueoque likes this.
  7. wbw

    wbw LawnSite Fanatic
    Messages: 6,362

    He has already allowed for this in his target number. He is spot on.
     
  8. Matthews Lawn Care

    Matthews Lawn Care LawnSite Bronze Member
    Messages: 1,787

    CPI is for retail goods.

    Employees don’t have an automatic cost of living raise. Maybe a few companies do this but it’s not a standard practice for every company.

    If you budget correctly, your operating costs are fixed to a % of your gross sale. Your operating expenses run say 25% of gross sales(not actual #’s just an example) but you allot 35% to operating costs. This 10% cushion allows you to cover the unexpected, gives you room for growth, give bonuses to managers if they are under budget, wtc. Each company will be different but the basis of budgeting are the same.
     
  9. Todd73

    Todd73 LawnSite Silver Member
    Male, from Florida
    Messages: 2,583

    I never got an automatic cost of living raise. My wife’s been with the same company for the past seven years and never seen an extra dime; although she was offered an iPad once...with a salary reduction to pay for it!

    You’ve must have worked for some good companies.
     
    Last edited: Feb 20, 2018
    Matthews Lawn Care likes this.
  10. TPendagast

    TPendagast LawnSite Fanatic
    Male
    Messages: 14,333

    You’re pulling things out of thin air

    I’ve taught this to hundreds of successful entrepreneurs over the past decade.

    I just gave a plethora of free information I typically charge for.

    I just get tired of so many people getting it wrong
    Do not raise prices on customers who are making you profit
    Raise it on the ones who are not

    Learn to job cost
    Learn why you job cost.

    All these guys with the “I eyeball lawns for their price as I drive by at 20 mph”
    And “ I raise prices because I feel I deserve more money”

    How many of them have sales in the multi millions?
    Someone help me out, I have met one of these guys yet.
     
    gcbailey, matt spinniken, wbw and 2 others like this.

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