Reducing labor rate for larger contracts

Discussion in 'Lawn Mowing' started by DFW Area Landscaper, Aug 8, 2004.

  1. DFW Area Landscaper

    DFW Area Landscaper LawnSite Silver Member
    from DFW, TX
    Messages: 2,116

    I'm bidding to maintain the landscape for an HOA. I'm estimating 532 man hours per year to maintain this property. That breaks down to 44 man hours per month, or a little over 10 hours per week, 52 weeks per year.

    Here's my question: I know that a lot of folks have thrown around the $40/hr figure. However, if you can tie the customer down to a 12 or 36 month contract, doesn't it make sense to discount that labor rate and give yourself a better chance at winning the business?

    By the way, doing this isn't without risk. All labor requirements are guesstimates only. Some of the work may take more time, some may take less time, than estimated. So if I'm understimating the time requirements, it could very well be that a $40/hr bid actually works out to $35/hr in the end.

    DFW Area Landscaper

    HOOLIE LawnSite Gold Member
    Messages: 3,981

    Give them the option of a longer than one year contract, locking them in at the same rate for the extra year or two (i.e. no price increases) That can look as attractive as a discount.
  3. Precision

    Precision LawnSite Silver Member
    Messages: 2,995

    Just understand that HOA are notorious for the little add ons, recuts, you missed a spot and the like. Not to mention that any sprinkler head that malfunctions "was damaged by your mowers".

    I have one HOA now and they aren't bad, but when I worked for someone we had a couple of doosies.

    If you really think you get an ecomomy of scale then discount, but IMO if you figured out the time (and I know you know your expenses), you are just lowering your profits by dropping your rate.

    I wouldn't bid for anything less than 12 months. Hoolie has a good idea, so long as you know they rebid upon expiration. If they don't actively bid after each cycle I would make the contract auto-renewing and add a COLA based increase or a flat % increase per year.

    Remember it isn't how many bids you win, but how many profitable ones you have.
  4. Randy Scott

    Randy Scott LawnSite Bronze Member
    Messages: 1,915

    Will your hourly costs go down with a larger contract?

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