Learn why your lawn service prices should fall in the top 20% of your market.
I get the question all the time: How much money should I be charging for my services? How should I price my services? I’m not going to directly answer that in this video but I do want to talk about a concept that I think is really important.
I have been studying marketing since around the end of 2005. When you start studying marketing, you get introduced to a lot of really interesting people and they obviously teach on subjects other than marketing.
I noticed that what a lot of the gurus in the marketing industry tend to teach is that you should price your services at the very very top of the market. You should be the highest priced provider in the market for whatever it is that you want to sell.
I don’t really agree with that for the service industry and for my service business. That’s the point I want to address. As you’re learning how to price your services and you are working your strategic plan to get to the price point that you want to be in the market and be able to sell a lot of work at that price point so that you can make a good amount of profit, what I believe you want to try to accomplish is you want to be in the top 20%.
If you were to look at the pricing in your marketplace, whatever the service is that you’re selling, look at 50 competitors and write down the cheapest price somebody in your market charges to provide that service, and then write down the highest price that someone in that market would charge to provide that service.
Let’s just use fertilization and weed control. If someone for a 5,000 square foot property would charge $25 to do fertilization and weed control at that property, and at top end of that market somebody would charge $75 to do that service. If you picture that on a whiteboard or on a chart, you want to be pricing in the top 20% of the market. If you were to plot all the lawn service prices for everybody in the market and you were to divide that into 20% chunks, you want to see what the pricing is at the top of that 20% chunk.
I don’t know what that would be in your market, but you want to slowly figure that out over time. You’re not going to figure it out when you first get in business. You’re not going to figure it out on day one. You figure it out over time and as you figure it out, you start to price at that price point.
Now obviously, your service quality, the quality of your people, your customer service, everything has to improve and grow and get better so that you can get those prices. But, I believe that the sweet spot is in that top 20%. Why is that? Because if you’re the highest priced provider in your business, you can’t really build a big business.
If you know me, then you know that my whole concept is to build a business big enough to have somebody that runs it for you. Then, you also have to have a couple of layers so that even if that main person leaves, it wouldn’t all end and you’d have to be the guy running it again.
You want to build a business big enough that you can afford to have people to run the company for you, and that takes a while to get to that point. To get there, if you are the highest priced provider in the market, it’s hard to get enough business, enough volume of business, to build a business big enough to do that.
If you’re too cheap in terms of pricing, you can never hire the right people, the best people. You always have equipment problems and truck problems and employee problems, and you can’t afford to market. You can’t afford to do anything, so then again, you can’t build that business.
That top 20% sweet spot to me is the point that gives you enough money to grow a great company that can run itself and that will allow you to take a lot of money out of the business, and it will allow you to build, again, a big enough business to accomplish everything that I just said.