RAISING PRICES?

[Mowman]

How often do you guys/gals raise your prices? 2001 will be my third season, and have not raised my price since starting. Some of my good customers would through in an extra $5.00 or so to help offset the high gas price. How can I raise my price and not lose any customers?
Won't be able to RIGHT!!! Your advice will be greatly appreciated.
Mowman

 

[1MajorTom]

This too will be our third season in the business.

Last year we did raise some of our customers, but it was only for a few dollars. We felt that since it was a small increasment, we just told them in person at their first cut of the season.

Now with the upcoming year, we will again be increasing some of our customers. There are a few of our customers that will be raised $5.00 or more. Those customers will be receiving a letter. Anything less than that, we will just be telling them in person.

Last year we did not have one complaint. We feel that each year, prices should increase. We will not just be focusing on the cost of gas. Because if that is only reason for the customer's increase, IF the price of gas should decrease, we wouldn't want the customer to think that their cost would go down also. So what we tell our customers is that the COST OF LIVING has increased including gas, insurances, and equipment costs. This helps the customer understand better.


Jodi

 

[RYAN]

You can check the search on this one to get a lot of info. This year I plan on raising prices as well. I will send all my customers a letter a few weeks before the cutting starts to let them know what will be going on this spring as well as the price for the 2001 season. If you don't want to loose customers I would inform them of the price for the upcoming season just before it starts so the don't have as much time to shop around. Most customers will be fine with it as long as it is not a real big increase. If you lose a few of those penny pinchers, who cares. You will be able to findbetter customers when the season starts

 

[RB]

This will be my forth year in business and I raise prices each year.

The first year I sent a nicely worded letter to all customers. I only raised their prices a couple of dollars each. The second I didn't say anything and raised prices about a dollar. The third year I didn't want to raise prices, but I did, some only .50 cents.

I was told by a old landscaper that not raising prices, if only .50 cents a year, was one of the biggest mistakes he ever made. He said that the longer you wait to raise prices the harder it will be.

My advice would be to raise prices each year, but onlyl very small increments. Customers will see you grow each year and hopefully continue to service their property with excellent and they won't mind. If they balk at a .50 cent or $1.00 raise, it probably means they will drop you at the first site of a lower bid. Don't sweat it.

Ron

 

[jaclawn]

Tip 'O the Day...

When sendind a letter to announce a price increase, state the following; "The price for your lawn service for the year 2001 is $XX.xx". If you tell them that you need an additional $5 each week, they may be more likely to bark. The first way does not state the actual increase, but rather a new price.

 

[eslawns]

If a client is marginal or profitable, I'm leaving them alone until things in the economy settle down some. I think you should use whatever method you use to keep track of time spent at each job, to determine if the client is profitable overall. I use CLIP, but you could use a spreadsheet, or a calculator and pencil.

 

[JimLewis]

I have raised prices almost every year since I started except this year. Mostly because I started out doing work for way too little. So as I grew I could afford to be more choosy and raise prices.

First, the best way to start with raised prices is on new customers. That is, make your new clients pay the increased amount. You probably already figured that out. But just wanted to add that.

Second, if at all possible, raise prices in the spring time, when you can afford to lose a few because you are so busy with new work coming in.

Next, with existing customers I have always just sent them a letter. The first several times I raised prices I lost a few clients.

Finally, last year had to raise prices pretty significantly. So I asked one of my client's, who owns and is editor for a large magazine, to review my letter and revise it for me so my clients would understand more. They revised it and worded it much better than I had. And the revised letter is what I sent out. It worked wonders! We barely lost any customers as a result. And we increased our revenues a lot! What's more is, because I raised prices so much last year, we didn't have to this year.

Below is the text of that letter;

Dear Sir or Madam:

I wanted to send you a letter to update you on our new rates for fall 1999 and next year. We value you as a client and hope that our service to you over the last year has been up to the standards that you expect. Your opinion matters--without you, the customer, I would not have the opportunity to create my own small business. If there are things we can do to improve our service to you, please let me know.

I started this company on the motto: "Setting the Gold Standard in Landscape Maintenance," because I really believe that it is possible to build this landscape business on integrity and value received. I know that sounds kind of corny, but I really do believe it. If my company works hard, each and every week, to deliver value--I believe we will keep you as a customer for many years.

Due to the tight job market here in town, increased equipment repairs, and training for employees, it has been necessary to incur higher expenses than I had last year. That means that I will need to increase my rates $15 a month --just $3 a week-- this fall.

Because of the increase in rates, you'll see us working even harder to keep your trust. We believe we're still the best on price and service in southwest Portland and expect to keep continue proving it to you over the next year.

If you have any questions or comments, please give me a ring at 555-555-1212

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Hope that helps! - Jim

[Edited by jimlewis on 01-02-2001 at 04:30 AM]

 

[Scraper]

Great letter Jim! Printed and stuufed into a folder (where I can hopefully find in the future ) Thanks!

 

[Mueller Landscape Inc]

Just some thoughts on raising prices.

If you practice job-costing then you know what your production hour rates are.

Lets say that you need $50.00 per production hour to pay all expenses including owners salary and with a 15% profit margin.

Job A pays $25.00 for a cut. It takes you 15minutes to complete. You made $25.00 in 15 minutes. That's $100.00 per hour. So, you are $50.00 over and above what your production hour rate is. This is good!

Job B pays $25.00 per cut and it takes you 60 minutes to complete. You made $25.00 in 60 minutes. That's $25.00 per hour. So, you are $25.00 short what your production hour rate is. You are losing money. Or in a sense, paying this customer $25.00 to cut his lawn.

Now if you raise prices across the board, say 20%.

Job A would have an increase of $5.00 per cut and probably find someone cheaper. Remember you are already making a handsome profit with this job.

Job B would have an increase of $5.00 and still look for someone else and find that you are still the cheapest in town and stay with you.

Now will job B be profitable now? No! you will ony make $30.00 per cut and it still takes you 60 minutes to do it. You are still paying him to mow his lawn. However, Job A, who was already very profitable for you, went somewhere else.

The point in all this? Job-costing. Learn how to do it and blow your competitors away!!!

John

 

[JimLewis]

John made some very good points. I should note that when our company raised prices last year we didn't do it for every client. For the ones where we were already making a killing on, we left them alone. I'd encourage everyone to make this kind of evaluation before raising prices. You definitely don't want to loose your most profitable clients. So better to not raise prices on them, or do so very infrequently.

Jim