Underbidding ruining the Industry

Discussion in 'Business Operations' started by MaidstoneLandscape, Oct 10, 2012.

  1. knox gsl

    knox gsl LawnSite Fanatic
    Messages: 6,251

    I agree with you on this, I have spent the majority of this year's advertising on setting a brand for my business and it has worked so far. I am able to charge a better rate and get better customers because of it. I did like most of us when we started out, I took everything that came along. I learned a lot from this in a good way. I am more selective in the work that comes in and price it higher than in the past, and actually close more sales than when I was starting out. Most of my advertising is targeted at people who make over $100K/year and it seems to work well.
  2. seabee24

    seabee24 LawnSite Senior Member
    Messages: 619

    What i find funny about this industry, Just try and make a compressive budget, leave nothing out, add depreciation, cost for mechanics, managers salary, owners profit, leaf nothing out.... Then figure FAIR labor rates, one that could support a family (10.00 will not do that)

    After all that, I can't honestly see a ton of room for profit.
  3. jrs.landscaping

    jrs.landscaping LawnSite Silver Member
    from Maine
    Messages: 2,763

    My buddies father worked in a factory, after over 20 years he was making a little over $10 per hour which is what we start guys out at. What employees do with their money is their business, if they can get a better wage somewhere else I am more than happy to give them a good reference. It might be different in other areas but around me people WILLING to work would be happy starting at $10 per hour. So what is a fair wage for a lawn worker?
  4. seabee24

    seabee24 LawnSite Senior Member
    Messages: 619

    I know a ton willing to work at 10.00 as well. But they hardly ever have a penny to their name.

    Can $10.00 working 45 hours per week, pay food, rent, electricity, gas, car, insurance and other normal bills for a family of 4 in your area? I know it will not cover it here.
  5. TX Easymoney

    TX Easymoney LawnSite Platinum Member
    Messages: 4,109

    Lots of low bidders in Texas as well...so I'm supposed to be mad because someone can do things cheaper than me? I need to have a better strategy than those folks....I welcome the competition, it brings more business tothe industry as more folks can afford to have work done...after they get burned a few times, they migrate toward quality...and also many of those cheap startups go out of business
    The free market is brutal...especially when the labor does not necessarily require lots of specialized skills....I've had my fair share of customers try and haggle me down and I say adios...and get my fair share back later
    To me there is no such thing as underbidding ....all is fair in love, war and business ....i used to get all cranked up about it too
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  6. Pythium

    Pythium LawnSite Member
    from OHIO
    Messages: 166

    I think the reason for the recent surge in "lowballers" is the economy. So many people lost their jobs and cutting grass is fairly simple to do, anybody who ever has had a lawn has had to do it. You can get a used truck, trailer and home depot mower for cheap and call your self a landscaper.
    I have a good friend who mows, solo and we worked out all his costs and found he was undercharging significantly. He didn't care, won't raise prices because he gets jobs with his. The Wal-mart approach low/no margin- high volume. Yet, he still works a part time job at UPS to make ends meet. SMH
  7. 32vld

    32vld LawnSite Gold Member
    Messages: 3,983

    I know a guy that charges less to get work. Been at it for 12 years. He is afraid to raise his mow rate of $25 week on his long term customers.

    He just bought a new mower. A 36" Toro WB. His daughter had to co sign. He is not interested in joining the debate on open vs closed trailer because he does not use one. The 36" fits in the back of his 15 yo PU bed. The truck looks 30 yo.

    Last week I was talking with a woman at my pt evening job. Cop has a pt mow route. She asked me how much I would charge for her property.

    I said about $60. She said the cop charges her $35. Then said the cop adds a $10 fuel charge. So I said now that lawn is a $45 job.

    Then I pointed out he is using his $110,000 a year job without OT subsidizes his landscape business. He needs a new truck he just pays for that out of his cop salary. That if he did the math and kept his business income and expenses separate from his personal income and expenses he would realize that he probably is not even making $25 hr as a LCO. I finished with that I can't compete with his prices because I don't have a job that pays his salary.

    Yet if he wanted to earn extra money he could work OT at $80 hr as a cop.
  8. MDLawn

    MDLawn LawnSite Bronze Member
    Messages: 1,284

    First guy is just plain wasting his time. But I'm gonna take a stab at your cop guy. First I know A LOT of police officers and their salaries are public record. Not one makes over $105,000 without overtime and those are not just PO's ridin around in cars. Most never touch 6 figures. Those that do are supervisors or at the top of their careers. And those that make these salaries do not have second jobs. I do have a few buddies doing lawn and tree work and they are in the $50-$70k range. I think there is an ex cop on lawnsite and he left the cop job making around $45-50k, so I think $100k is a little far fetched. I almost became a NYS Trooper and starting pay was $70k, but they're the highest paid force in the nation. Second all his expenses such as a shop, mortgage, food, etc are all paid by his salary in this firsr place. So maybe you make $50/hr but lose $25/hr to those expenses so you both are "making" the $25/hr you speak of??? That's the advantage he may have against you and probably does just as good quality. Sucks? Yes but if it's all the same in the end could you just be bitter? Also not everyone wants to work their job more for overtime. Maybe he likes doing lawns? A lot of my buddies with these jobs have unreal equipment too. Top of the line mowers, new trailers, skid steers, tractors, etc....maybe they're more efficient because of that? Maybe having that job allows them to dabble in this industry. I think that just strikes envy in most people. Should he charge more? Sure. Does he need to? Unfortunately probably not.

    Listen this isn't a shot at you. But it's just like the rich kid whose parents buy him a brand new dump truck and equipment. He has a competitive advantage. Plus mowing is just filled with all sorts. If quality is on par it's hard to argue a higher price.
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  9. Think Green

    Think Green LawnSite Silver Member
    Messages: 2,746

    I read that article in Turf Magazine of last month's issue.
    The article was based on lowballing tactics.
    The cliff note's version relates to a smaller company knowing their costs, cutting out useless expenses, and staying on top of their finances. If LCO A bids 2500.00 a month for services and LCO B bids 2100.00 a month, then one of them knows a way to cut expenses to be competitive. If LCO C bids 1200.00 for the same job then they obviously don't know any better.
    As far as a large LCO company competing out the smaller guys will never end as they have the staying power to survive.
    Either we become more expense wise and reduce costs by diverting useless labor, living habits, and useless spending habits, or be less competitive and discontinue to grow in reputation.
    Since customers are buying relationships with their service providers, being at a comfortable profit margin works for most people. However, larger accounts just want the service done for the cheapest price available. If a LCO don't know the market and cannot bid efficiently, they will get the work and the work will lose their shorts and shirts. Next season, they will either expand beyond the profit margins or expand toward the file 13 area.
  10. 32vld

    32vld LawnSite Gold Member
    Messages: 3,983

    Out in the boondocks they don't pay like they do in NYC or it's suburbs.

    NYFD $90,000 without OT. Fireman salary, officers more.

    NYPD $90,000 without OT.

    Nassau PD $107,000 without OT and then they have a 12% night shift differential.

    Suffolk PD $110,000 without OT.

    Westchester PD (2006) $80,000 without OT.

    All police salaries are for patrolman sarge and officers are higher.

    NYC Sanitation Dept $69,000 without OT. Officers are higher.

    No one can compete with them on price when their full time job is making them $100,000 and they subsidize their business with that salary.

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