To lower prices or not...

Discussion in 'Business Operations' started by JContracting, Nov 4, 2011.

  1. JContracting

    JContracting LawnSite Bronze Member
    Messages: 1,878

    So long story short, got in an argument with my parents (I'm 20 for those who don't know) about my pricing for work, they say I'm gouging people on my bids and I've hardly gotten any work this year, only a few mowing accts, clean ups, and one decent sized install that brought in a good amt of money. The 2011 season (year 1) is coming to a close and I brought in 20% of what I expected based on my advertising volumes. I look at my prices for estimates I send out to prospects and think they're right in line and competitive. Because I didn't put all the work into starting a full business to work for "lawn boy neighbor kid" prices.

    So my question is, should I lower my prices a tad to obtain the cash flow?? I know that can snowball very badly and then it's expected you work for dirt cheap forever and you're screwed for your career, but is it advisable to lower to an extent where I'm still making money but bank on it leading to a lot of referrals and slowly increase prices of all services and drop extremely low paying customers??

    I'd love to read you guys' opinions on this.
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  2. knox gsl

    knox gsl LawnSite Fanatic
    Messages: 5,970

    Too many variables here, give more details. Are you inline with others in your area for pricing? Are you a know-it-all kid or do you have some business sense? Do you have quality equipment? Does you work sell itself?
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  3. JContracting

    JContracting LawnSite Bronze Member
    Messages: 1,878

    I'd say I'm right in line with the established companies in my area. I have a lot of business sense, I nearly have an associate's in accounting and am currently am almost half way to an associate's in Hort. I have a pic thread going on here and I have my equip info in my Sig which doesn't get posted when i post via my phone.. I have a chevy half ton, 5x8 trailer, Exmark 48" metro and echo and husky handhelds. I'd say I do great work. You be the judge...
    Phone pic but you get the idea, this is from a week ago..
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  4. Glenn Lawn Care

    Glenn Lawn Care LawnSite Silver Member
    Messages: 2,645

    If you are in line with other companies in your area I wouldn't lower prices if I were you. Where in Mn are you from?
  5. JContracting

    JContracting LawnSite Bronze Member
    Messages: 1,878

    Problem is that I need cash flow. Ill try some different marketing strategies early 2012. But I'm out of Champlin, the exact opposite side of the metro as you lol.

    How was the pesticide exam? I'm planning on taking it over the winter so I can offer fert/weed cont services, I've already taken the first weeds class in my Hort program @ Anoka Tech last spring, didn't seem too challenging...
  6. mnglocker

    mnglocker LawnSite Senior Member
    Messages: 758

    The problem is that if you lower your prices too much you can end up in the hole more. The more you use that equipment with increased business the more you'll spend on blades, oil, grease, gas and parts. Same goes for your truck and so on. The biggest trick is to start asking potential customers now about work next season and getting them into a contract.

    SNAPPER MAN LawnSite Silver Member
    Messages: 2,443

    I would lower prices until you get more work than you can handle, then I would just raise rates on new business.
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  8. wbw

    wbw LawnSite Fanatic
    Messages: 5,927

    If you are in line with the established businesses in your area, why should a potential customer choose you over them? My point being that you have to offer something they don't as they are a known quantity. That something is usually price. Don't give it away but you have to be very competitive to gain market share. If you live at home, don't lease shop space and aren't an idiot with your money you should be able to price aggressively and still profit. Keep in mind that this is a short term strategy. I charge much more than I did when I started and I am realizing that it still isn't enough. As your business grows so do your expenses. Get a decent base of customers and then price new work at the rate that you really want/need. As you continue to add new customers raise the rates on 1/4 of the existing ones at a time. If you lose a substantial number of them you will know your pricing is out of line, this is why you raise it on a few at a time. Good luck and let us know how it works out.
  9. djagusch

    djagusch LawnSite Platinum Member
    from MN
    Messages: 4,345

    I'm in Chisago County so not too close to you.

    You mentioned 20% of the expected return to your advertising volume. For the expected return, do you mean net jobs or net calls? If you got calls but didn't close the sales it "could" be a pricing thing but there is alot more to it than that. If you didn't get the calls then you need to find a better means of advertising until word of mouth starts kicking in.

    If it is a closing deal it could be many things presentation, apperance, language, etc. Being young isn't always the easist thing to overcome but present yourself and company it shouldn't be a factor. You can cut the grass, trim like a madman, know every weed in the book and what to do but if you can't communicate it to the customer professionally then it doesn't matter. It seems like you know that stuff maybe spend some time reading how to sell books. If you learn to sell you will do well.

    If it was a call thing how did you advertise this year?
  10. JContracting

    JContracting LawnSite Bronze Member
    Messages: 1,878

    My 20% expected was total revenue, not ROI on doorhangers. My phone rang off the hook, then they saw the price from the estimate for whatever service they wanted, they had nothing to say. I was definitely dressed professionally, company shirts, cleaned up, spoke like a professional. I can communicate well, but I will need to work on some of my sales techniques. Not that I'm bad but there is always more to learn.

    WBW - They're not in business for themselves but they're very good with their money.
    Snapper - I think I will go with that as a short term strategy and see what it yields and as soon as I have the customer base I'll slowly increase prices across the board.

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