“I’m new to the industry. How do I learn to price lawn mowing jobs so that I can win bids and be profitable?”
Pricing is really difficult. When I got started in the business I didn’t have the faintest idea how to price commercial or residential. I was clueless. I remember the challenge and the difficulty. I remember struggling to figure it out.
Jonathan gives his top three ways to raise lawn care prices easily.
I recorded a video some time ago about raising prices. In that video, I talked about how numbers prove that for most companies, depending on your net profit margin, you could raise prices by 10% across all of your clients, lose 25% percent of all your business, and still make the same amount of money. The idea of losing 25% of your revenue because you raised prices 10% is laughable. The odds of that happening are pretty slim, unless your business is just terrible at quality and customer service. The reality of it is that you might lose some number of clients or some amount of revenue, but by raising prices 10%, you’ll make so much more money. I want to cover just a couple quick ways that you could go about raising prices.
One: Rather than raising prices at contract renewal, which is when everybody else is doing it, and all of your competitors are marketing to all your clients trying to steal them away from you, what about raising your prices mid-season? This is one of my arguments against contracts, because contracts are the logical time to raise prices. So, if you don’t have your clients under a contract, it’s so much easier to wait until late summer and do a price increase at that time. What this does is, you don’t have your competitors marketing to your clients anymore. So your client, yes, they could go to Google and do a search and find a new company, but it’s just not as easy and convenient as it is in springtime, or at contract renewal time, when everybody’s pursuing them and trying to get their business.
Two: Raise your prices first on just your under-performers. If you use a system like Service Autopilot, or another system that can do job costing, go through your job-costing report and find your under-performing clients, based on how much money you’re making on that client to service their property, and raise those prices. Oftentimes in business, a lot of what we don’t do, that we never get done, that we never implement, it’s because we don’t know how to do it or we don’t have the confidence to do it. And raising prices is generally a confidence issue. Most of us are scared to raise prices. We’re afraid it’s going to cost us a lot of clients and everybody’s going to get mad and leave. In reality, that’s generally not the case. So, to build that confidence, you could first raise your prices on just your under-performers that you identify using some of your different costing reports in whatever software system you’re using.
Three: Simply raise prices on new clients. You’re unsure about raising prices on past clients, but you’ve at least identified where you’re doing unprofitable work, or where you’ve been under-pricing in the past, and you can adjust your prices that you use to sell to new clients. Then you could raise those prices by 10%.
So you haven’t had the same effect on your business because you haven’t taken a 10% price increase across the board. But, in my example here, taking for example the last two points, one, you’ve gone through and you’ve raised your under-performing clients to make them profitable. Some of them might fall out, but if you lose those, those are the ones that really aren’t so bad to lose, because they might have been costing you money or returning very little profit to your business. Then, the second option that I just mentioned was that you’re now raising prices on new clients, so all work that you sell moving forward is priced correctly at this new 10% price increase.
So, if you don’t have the confidence to raise prices across the board, at least consider those two ideas: under-performing clients and new clients. It’ll make all the difference in your business.
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.
Watch Jonathan’s video to learn why you should raise lawn care prices 10% and how to get your clients to agree to pay it.
If I’ve been guilty of anything in business, it’s been under-pricing, not asking for enough money, and questioning the prices that I’m asking for even after I think through how much I need to charge.
I’d recommend that you take a look at, or do a few Google searches, around the topics of if you can raise prices by X and lose X number of customers. For example, you might Google something like, raise prices 10% and lose customers. Just look around and do some reading.
Several years ago, I read some books on pricing and so I raised prices in my business. I had done some price increases before but generally I had been scared to do that. I’ll tell you right now, I’m still under-priced in everything we do.
A lot of times the reason we’re under-priced is because we don’t have the confidence to raise prices. Or, we are not communicating correctly to explain to our client exactly why the price that we’re charging is the price that we should be charging and why it delivers to them tremendous value. I think most of us make that mistake so you might check yourself and see if you have that same mindset as well.
Here’s the concept, and this number that I’m about to state will change so your profit margin will affect what I’m about to say.
If you raise lawn care prices 10%, you could theoretically lose 25% of all your customers and make the same amount of money at the end of the year in terms of take-home profits. Remember, take-home profits is all that matters. There’s been some studies in the service industry that say if you raise prices 10%, you can lose up to about 37% of your customers. That’s huge.
I am positive that if I raise my prices 10%, I would not lose 25% of my clients. If I lost 5%, think about how much additional profit that would make me in my business and think about how it would affect your business. If you could raise prices 10%, only lose 5% of your clients, how much more money would you make?
The point here isn’t to give you the exact answer. It’s to give you a concept that proves to be true every single time you dig into it. Do some Google searches to research this and it will give you additional confidence to price your services correctly.
Charging Higher Prices Benefits Your Clients… The Video Above Explains Why.
The question is, “How much do I charge a lawn care client? I don’t want to overcharge or undercharge for landscape services.”
The main point I want to make about this topic is that you absolutely don’t want to be the low-priced company.
When you are the low-price solution provider, you can’t hire the best employees, have the best trucks and equipment, or spend the most money on marketing to out-market everybody else. You can’t afford to do all those things that ultimately make you a much better company at customer service. If you can’t afford the best employees because you don’t charge enough, then you don’t really have a good business. Great employees make your life easy.
Your strategy should be to be one of the higher-priced providers in your market. Not because you’re gouging your clients, but so that you can deliver incredible service to your clients. Most clients expect very little out of a lawn care business. If you can deliver anything better than the norm, you have the chance to wow them. You have the chance to get a lot of referrals and really grow your business.
Strategically, go in with the goal to be an average- to high-priced service provider. Start out average to learn the business. Get in the marketplace and study your competition. Use your competition as your guideline for quoting and for pricing. Use those same prices with your clients. Then study your own business. Learn your own business so you know how to price effectively.
If you have no knowledge whatsoever about pricing, there’s really no magic formula that says charge $55 per man-hour and this is what you do to figure out exactly how many hours there are going to be on the job. It’s all a learning experience. It’s about getting burned a couple of times and then never making those mistakes again. It’s about asking clients what they paid previously. It’s about price shopping your competition. It’s about having your friends ask the competition to come out and do an estimate at their home so that you can learn what they would charge. It’s about doing whatever you’ve got to do to figure out how to price.
Again, no magic solution, you just have to get out there and see what others are charging. Go on their websites and look around. You’ll start to build a feel. If you’re starting out first in residential, it’s really easy to figure out pricing.
Commercial, that’s a whole different deal and is a lot more difficult. That’s why I generally don’t recommend somebody that is just starting out in the lawn care industry to begin on the commercial side until you’ve got your feet wet. You have to understand the relationship of time to square footage, time to man production, time to equipment size, and then task the right equipment and the right size to the right property and the right area on the property. You also have to make sure you have the right guys working on the right task at each property. It’s a whole different game.
I recommend starting out in residential where it’s easy to figure out what your competition’s charging. Then go into the market and charge the average to get your feet wet. Learn the business for yourself. Then before you know it your pricing questions all go away.
If that doesn’t help, please ask another question and I’ll be happy to clarify again.
Watch this video to learn how to set lawn care pricing to earn the most profit for your business.
If you’re watching this video, I’d highly encourage you to watch video number one and video number two if you have not already, because this video is based on the last two videos. And in it, I’m talking about how to figure out lawn care pricing for yourself as your business evolves.
In the last video, what we did was figure out the time for eleven properties within the seven thousand and seven thousand nine hundred and ninety nine square feet range. Remember, we’re using mowing as an example and we determined that our price based on hitting our target of forty dollars per man hour, the price needs to be twenty nine dollars and seventeen cents to mow properties within this range.
So basically what we’ve done, is we went through our business and we just simply tracked our time and measured our properties and we figured out, for all the different square footage ranges, what we need to be charging to hit our goals and we could do this for every service…fertilization, weed control, lawn mowing, aeration and all the different service types. Then, what we do is we basically build out our lawn care pricing. We call it a price matrix in Service Autopilot. It could be just a layout like this for you inside a spreadsheet. We figured out in our business, hypothetically I’m saying your business, that for five thousand to six thousand square feet, you might need to charge twenty eight. And for six to seven thousand, you might need to charge twenty eight dollars. Again, keep in mind, we’re using fictitious numbers to lay out a simple example.
So, just simply lay out something like this for the different services at different square footage ranges. Then, when you go out, you measure the property with a measuring wheel or you go online and you measure it with satellite imagery or pictorial imagery. You can literally look at the square footage, look at your spreadsheet, or if you use Service Autopilot, it will figure out for you based on the price matrix and it will give you a price. Service Autopilot really simplifies pricing and it also helps ensure that you’re always pricing your properties to achieve your target man hour rate.
So, that’s the basic premise of figuring out your lawn care pricing from the beginning so that you can set it and then price off of it from that point forward.
Now, something you might find as your business evolves, you might have originally set prices like this, at twenty eight dollars and twenty eight for this square footage. But, then what happens as it evolves and as your property makes changes and maybe as a little bit of the market you serve changes or the demographic you serve changes, you’re going to notice that maybe you’re starting to achieve a little bit different man hour rates. So, maybe your goal is to achieve a man hour rate clocked around forty eight dollars. So, let’s just go with that.
If you’re trying to achieve forty eight dollars per man hour when you’re mowing, and you’re nailing that on this property right here, five thousand to six thousand square feet. But, now on six thousand to seven thousand square feet, you’re not. You’re more on this forty six dollar per man hour range. So then, you’d probably need to raise that price to about twenty nine dollars to continue to achieve a forty eight dollar per man hour range.
In video number two, we went through and we tracked all of our time and that helped us figure out how much we’re making per man hour. Then, once we figure out how much we’re making per man hour, and we figure out averages across the square footage ranges, we can then really analyze our business and we can really adjust the business. Something we found years ago at our business is, we were really doing okay in this five thousand to ten thousand square foot range. But, as soon as we got into the bigger stuff, fourteen, fifteen, sixteen thousand square feet for residential, we weren’t making money, or, we were not making good money. It wasn’t holding up.
In my example right here, notice what happens, we’re pricing six thousand to seven thousand square feet at twenty eight dollars. Remember that these are made up numbers, these are not my exact pricing and it would be totally different for you and your market. But in my example, notice that, six thousand to seven thousand square feet is priced at twenty eight dollars. We’re pricing fifteen to sixteen thousand square feet at thirty two dollars. But what’s happening on those properties based on how long they’re taking us, we’re only making thirty seven dollars per man hour. Our target in my example, was forty eight, so notice how far we’re under performing.
So what that would tell me as the owner of the business is that, we either need to stop doing properties like these or we need to figure out how to be more efficient. Maybe we need to construct a route that has bigger equipment on it, so that we can go through this type of property faster and we basically group all of those properties into one crew and get through them faster. You’ve got to watch out on the back side though. You could drive up your non-billable time. You might get your per man hour time, you might optimize it and make the per man hour time you want, but then your non-billable goes way up. You may end up with tons of drive time and so you still don’t end up profitable for the day.
There are lots of considerations here and those are things to think about. And, I know that I’m not going to win as much business, but at least when I do win the business, we’re making money and that’s the goal.
And so, the point of this screen here is to show you two things. Once you figure out your average pricing by square footage, you then take that and you set that for each of the square footage ranges. Then over time, you re-analyze your business and you figure out by square footage range, what man hour rate you are earning right now, on average. If it’s too low, you back into it. If you want to go up to earning forty five here, if you want it to go up to forty eight, how much do you need to raise this twenty eight dollar price? And if you watch my video number one, or excuse me number two, and you paused the video on some of my formulas, then you can kind of figure out how, this one here is about raising the price. So you can look at my formulas and figure out how to do this for yourself.
I hope that makes sense. If you have questions about this, post them in the comment section and I will, based on the comments, potentially record additional videos on this topic.
Learn how to set lawn care pricing to earn the most profit for your business.
In a prior video, we were talking about how to price. This is part two. Part one sets this video up and I recommend watching it. We’re talking about the subject of how to learn to price your work versus copying the pricing of someone else. Let’s now look at some actual numbers. There’s a couple of things to know as I go through this video.
One, we’re going to talk in terms of per man hour pricing. How much are you making per man hour? When I’m talking in terms of per man hour here, for example, I could tell you that you need to be making forty dollars or more per man hour. When I say forty dollars or more, that includes their salary and their labor burden meaning the taxes you’re paying them. It would include worker’s comp. It would have overhead things in there such as insurance and truck and fuel and administrative costs in the office.
All of that is rolled into this one number that you need to be making per man hour to pay for that employee, all the overhead that goes into selling the work, and having the office administration support that individual. As we’re talking about these per man hour numbers, that’s what all is included within that number.
Let’s talk details here. In this example, I have eleven properties. First, what we did was, we went out and measured all of our client’s properties and figured out for those eleven properties their gross lot. Let’s just use gross lot square footage. We’re using a mowing example so in video number one we were using a mowing example and I’m going to continue to use a mowing example. For these eleven properties, they all fall within the seven thousand to seven thousand nine hundred and ninety square foot gross lot. I know that’s a small property. I’m just trying to keep this example really simple.
Then, what we did was we went out and we tracked time for all of the mowing jobs that we performed. When the truck arrives, we start the clock. When the crew gets back in the truck, we stop the clock. For these eleven properties, here’s how much time we were on the property. We were physically there for twenty minutes, physically at this property for twenty-three, physically at this one for twenty-one. We ran three man crews, so when you take the time we were physically there, multiply that by the number of individuals in the truck, we had total time at the property of sixty minutes. That means three men were there for twenty so, twenty times three is sixty.
Now, what we did because we weren’t sure how to price, we heard one of our competitors say, “Hey I charge thirty dollars per man hour for a property that’s seven thousand to seven thousand nine hundred and ninety-nine square feet.” Now if you watch video number one on pricing, you’ll know why this is such a disastrous thing to do. Don’t copy someone else’s pricing.
Let’s say you did that. You heard that I said thirty dollars is a good price for seven thousand to seven thousand nine hundred and ninety-nine square feet so you went and you charged all of your clients that have that square footage that price. But, now you’ve started tracking your time and you’ve figured out what you’re actually making per man hour.
Now, something else I’ve said is I believe that at a minimum you need to be charging about forty dollars per man hour, minimum. Now look what happens because possibly you copied my pricing. Once you start tracking time on this job, you made thirty a man hour. On this job, you made twenty-six dollars a man hour and let’s look down here, you made thirteen dollars a man hour on this job. It took you one hundred and thirty-two minutes, over two hours to perform this job. You made thirteen a man hour.
You pay your guys fourteen dollars an hour so you’re not even recovering what you paid them per hour. Not to mention the overhead which includes fuel, the truck, the taxes you’re paying them, and the insurance. So, you’re really losing money. You’re basically paying this client to let you mow their lawn. That’s what happened because you may have copied my pricing and because maybe you weren’t ever tracking your time to know how you were doing.
I say “you” in general, not “you” specifically.
All right, so what’s happened now after tracking these eleven jobs, you’re making an average of twenty-four dollars a man hour. That is not a profitable number that you can build a good business on. I’m positive of that. I don’t care what market you’re in. You’ll see some really low numbers in the commercial business but they just have totally different margins. It’s a different business. But, all of what I’m talking about holds up in residential and in commercial. All of my numbers in red here are the result of copying somebody else’s price and you’ve ended up with basically very low profit margins and probably a business that you don’t love.
Now that you’re tracking your time and you’ve measured all of your properties, you can actually figure out what to charge. For example, if I want to make forty dollars per man hour and I know that that property took me sixty minutes, then I can do a little bit of math and you can see my formula is right up here. If you want to copy this stuff and just pause the video, you can reconstruct this spreadsheet. But, you can see that I need to charge this client forty dollars, not thirty dollars if I want to make forty a man hour. On this client, I need to charge them forty-six dollars, not thirty dollars if I want to make forty a man hour.
If I go through here and work on all of my pricing, it will show dramatic results. Here look at this one. I need to charge sixty-six dollars, not thirty dollars for this property to get myself to an average price of forty dollars per man hour. Once you’re aware of pricing and where you stand as a business, you can start to make some decisions on how to set pricing. If this were my business and I was looking at this, here are some things I would do.
First off, I’m not quite sure what this fifty-three is here so I’m going to delete that. Something is not quite right about that number. The calculation must have been wrong. Oh that’s what it was. I know what I did there. That was actually correct. Here’s what this tells me. If I look at my eleven jobs, then I need to be charging on average fifty-three dollars to mow a seven thousand to seven thousand nine hundred and ninety-nine square foot property. That’s what these numbers are telling me.
If I want to make forty dollars per man hour, that needs to be my price. By the way, for me in my market, that’s way high. I would never get that so my numbers are fictitious. I made up these numbers in terms of how long this took. As a result, these numbers are all false. I could never get fifty-three dollars. In fact, thirty dollars in my market is a high-end price. It’s towards the top of the market for just mowing a small lawn like this. Don’t get caught up in these numbers please, but this is what the data is telling me. I need to be charging fifty-three dollars.
Now, here’s what I would first do. I’ve taken a bunch of properties. I’ve figured out how long they take so that I can figure out what the average amount of time it takes me to do a property of this size. That allows me to find my average pricing. Immediately, I would look at some of the anomalies. This one here, this one here, this one here, and the ninety-nine minutes down here. I would look at these and figure out why these properties take so much longer than all the others. Is it us as a company we’re doing something wrong? Is it that there’s something about these properties that isn’t right? Or is it that these properties are in an area, maybe that they have tons of trees on these properties?
Then I could make some decisions. You can look and see that you just aren’t making money on certain types of properties so you decide not to do those any more. If that were the case and you took your worst performers off the table, now look at what it does. It gets your price down to twenty-nine dollars.
Now we’re starting to get into a more realistic price. I’ve just gotten my poor performers off the table. I either fired or I left the market which probably meant firing them, but I made some decisions in my business and now I’ve got more accurate pricing. Maybe it’s a part of town where you just don’t make any money on properties that size so you leave that part of town and you go where there are more properties like this one and this one. These are properties that I can get through a lot faster, maybe I go find a lot more of those types of properties.
Since I got rid of some properties, I’ve got a new price. I’ve figured out that I should be charging about twenty-nine dollars on average for a property between seven thousand and seven thousand nine hundred and ninety-nine square feet. I set that price and now that’s what we start to quote. Then periodically I come back through here, and if you use ServiceAutopilot, this is on the job costing report. Out to the right you can figure this stuff out. We have a training that teaches you how to do this or you can copy all of my formulas and my spreadsheets and you can figure this out for yourself.
As your business evolves and you optimize the business meaning as you raise prices, you become more efficient, you change your setup, and you change different procedures and training within your company, these numbers are going to change from year to year and you can go back and reset pricing. Another option is, if within seven thousand and seven thousand nine hundred and ninety-nine square feet you just find a ton of variance, meaning that at the top end versus the low end of those seven thousand square foot properties there’s three or four dollars in pricing variance, then maybe you break all of this down into ranges.
You look at all of your properties from seven thousand to seven thousand and five hundred square feet. You plot the time. You put in how much you want to make per man hour and notice again in my formula I have forty dollars in there if you want to copy this, it’s forty dollars. You put in how much you want to make and it tells you what you need to be charging and you figure out your pricing based on that.
Everything I just told you, you can do it for yourself very easily and you can do it for every single service you have within your business.
It’s true. It does take work. It’s absolutely true that it would be easier for me to just to tell you how much you should charge, but look at how dangerous that is. I think it’s impossible tell someone how much they can charge, but it’s possible to give hints and say, “I feel you need to be at least forty a man hour or fifty a man hour or sixty-five a man hour depending on what that service is.” For each service, pest control versus lawn care versus mowing, you do need to be achieving a different man hour rate. You have a different cost for the people. You have a different cost for the trucks that they’re running.
You do need to be achieving a different man hour rate depending on the service and in some cases it doesn’t cost you any more to provide one service over the other, but the market will support a higher price. You should be charging a higher price. That’s the way to think about it.
In video number three, we’re going to move on to looking at setting rates.
Learn how to set lawn care pricing to earn the most profit for your business.
I receive a ton of questions, and I would say in the top two or three is, how do I price? How do I know exactly what I should charge? I think this is the right question to be asking. The dilemma is that I struggle with giving the exact price and here is why.
I can give you exact pricing, but it’s a cop out for me to do that. That’s the easy solution for me. The problem is, I’m very concerned with giving you accurate advice. I don’t want to be wrong. I don’t want to screw up your business, and I want to give you wise advice. Giving you the exact price to charge is not wise advice.
In this video, I’m going to show you exactly why. I’m going to show you the factors that go into pricing and why I can’t give you the exact price. I’m going to tell you exactly how to figure out the best pricing for you. I’m going to show you numbers and how to do it. You’re going to learn how to price. Once you’ve priced your work, I’m going to show you exactly how to figure out of it’s profitable. I’m also going to show you how to figure out your pricing by square foot. Basically I’m going to show you how to do it, and I’m going to show you how you continue to look at your pricing as your business grows.
Now, to do this I’ve got to go through a few points so this is going to be a three-part video. I’m going to go through and talk about pricing, and then I’m going to show you how to do it. I’m going to show you actual numbers.
There are two things to know. One, there are all kinds of services. Mowing, fertilization, weed control, aeration, pest control, you name it. At the end of the day the pricing is all based on time. For the sake of my example, I’m going to use a residential mowing example. This concept also applies to commercial and it applies to every different service type including digging a whole and sticking a bush in the ground. This is the universal truth behind pricing, and that is pricing is based on time.
You and I are in the business of selling time. Let’s say your competitor has figured out in their business that they should charge three extra dollars for every 1,000 square feet for fertilization and weed control. If they’re smart, they didn’t just copy their competitor. Rather, they figured it out based on time and they know that to do an extra 1,000 square feet it takes this amount of extra time to walk it. They spray it at a certain rate and they figured out what that charge needs to be.
I’m going to go through the example based on mowing, but know that square footage pricing is based on time. It’s not based on square feet. You figured out your square footage pricing based on time. That’s important, so hopefully I’ve made my point.
We’re using a mowing example. If you want to arrive at square footage pricing, which is sort of the premise of this conversation, then you want to figure out if you want to price by gross lot square feet, or do you want to price by net or by turf. You might price from one service to the next differently. For example, you might price mowing based on gross lot square footage. Whereas, you price aeration based on turf, and pest control based on the home square footage.
What net is, and this is how some companies price, you take the gross lot square footage and you pull out of that the footprint of the home and maybe the pool. It depends on how your company works. That’s net. That leaves concrete in. That leaves turf in. That leaves flower beds in. That’s something to know and think about as you’re setting your pricing and as you’re figuring out your pricing by square footage.
The other critical thing is the only way you can price is if you track time. Otherwise, your only other options are to guess and copy your competitors, and neither one of them gets you to the place you want to be…a highly profitable business. I mentioned this already. It’s just about the most important thing I’m going to say. We’re in the business of selling time. Pricing is going to be based on time.
Now, one last thing before I get into the details. Let’s say, now you’re wondering how to price fertilization and weed control because there’s product costs involved. The number one item on your P&L sheet, meaning the biggest expense on your profit and loss statement is labor. Labor is the thing that you want to manage above all other things inside the business because it’s your biggest expense. You’re, again, in the business of selling time. When you’re determining pricing, you first start with how long it’s going to take to perform. Then you figure what you have to charge just purely based on selling time and labor.
Now, you can layer on top of that additional things if you’d like. This could be a whole three-hour conversation in and of itself. But, for the sake of our simple example, we figure out that for fertilization and weed control it takes a technician one hour to do a property of a certain size, and we want to make $40 a man hour. That means, I need to charge $40 any time we do a lot of that size. Let’s just put a number to it of 8,000 to 9,000 square feet. That’s not accurate. That’s just my example.
We figure out that when you were doing 8,000 to 9,000 square feet for fertilization and weed control I need to be charging $40. That covers my time, makes a profit, recovers overhead and does all of that. Now, on top of that, I’ve got chemical costs. For that size property I know on average across the applications for the year that I’m going to have an average of $7.50 in chemical cost. My price for that service might be 47.50. I’m making the $40 on the labor, and then I’m recovering my cost on the chemical. You could mark it up. All of that’s up to you. You are setting the pricing. But, that’s the idea. Figure out labor first and then you can layer on top of that your mathematical cost, your product cost, and your chemical cost.
Again, this is going to be a couple-part video because there’s a lot to cover here if I’m going to give you the full details.
Now, why is it that when you ask me what I should charge to provide this service that I struggle with answering that question, and why I feel as though if I tell you the exact pricing I’m doing you a tremendous disservice? There’s nothing that would make me feel worse then knowing that I gave you a price that led to unprofitable work or led to potentially harming your company. Here’s why.
If I charge, let’s just make up a number, $30 to mow a little bitty lawn. I tell you for this size lawn you should charge $30. What does your business look like as compared to my business? I’ve worked on my business. We just turned 10 years old. We’ve been working on our business. We’ve become more efficient. We’ve optimized things in our business. We’ve changed. We are nothing like what we were 8-9 years ago, not even similar.
Think about how many men are on your truck versus my truck? At $30, if I have two men on the truck and you run three men, and maybe the three-man may not be as efficient as two. That means you’re going to be on the property for longer and that means you’re not going to be making money at $30 per visit like I do.
How’s your truck set up? Do you pull trailers? What’s the basic setup? If my truck setup shaves four minutes off of my visit time and your truck setup doesn’t, then I’ve immediately got efficiencies you don’t have. My pricing doesn’t work for you.
What’s your equipment setup? Are you out there with 48″ walk-behinds, whereas I’m there with 21″ mowers? Or, am I out there with a 61″ rider and you’re out there with all walk-behinds? Again, who’s more efficient? If I’m more efficient than you, I just killed you by telling you to charge what I charge because I’ve got a totally different setup.
What’s the frequency? Is it biweekly? Is it weekly? Because in mowing that has a huge impact on how long it takes to do the work. Are my properties all flat, whereas you are in a market where there’s a lot of terraced properties? Are your properties wooded where all of mine are builders that came in and cut down all the trees and planted two new trees in the front yard, so I have virtually nothing to mow around? Is mine flat and you have hills? I’m in Texas after all. It’s pretty flat.
Do you mulch or bag? For example, if I mulch most of my properties and you bag, you’ve just added time that I don’t have.
Are your properties constructed in such a way where you have tons of concrete? That means you have a lot more edging. That means you have a lot more blowing, whereas I hardly have any concrete on my properties for the same square footage because now, yes square footage is the same but we’re performing different services. That means different time. In services, I mean we’re spending more time mowing maybe, whereas you’re spending more time blowing. If it’s super-windy in your market and it’s not windy in my market, what’s that do to blowing?
My point is, I’m belaboring it here, but you get the idea of how many variables there are. What about stick edging? In my market I have to stick edge weekly. What if in your market you only have to stick edge every other week or once a month. What about fences? We have fences. What if you don’t have fences? What if you have metal fences versus wood fences? What’s that mean to weed eating time.
Then finally, what’s the spring effect in your market? How much longer does it take you to mow a property in spring than it takes me to mow a property in spring, based on leaves and all kinds of other factors like the type of grass.
This is why the pricing is literally different all over the board, and copying price is a disaster. This is why I could say I charge 30 for this, and if you’re in Toronto and you charge 30, and everything about the way we operate is different. I really, really did you a disservice.
Now, how do you figure this out for yourself? Because it’s really not that hard. If you want to make a lot of money, than you want to learn how to do this. You’ve got to track your time, period. When you’re tracking the time, you need to know how many people are doing the job. That’s easy. Then you want to have measured the property, measured the gross lot square footage. I’d recommend the turf lot square footage. You don’t have to get out there with a measuring wheel. There are measuring tools built into Service Autopilot and there are measuring tools for free all over the web.
What’s the calculation? I’m going to give you numbers on these other spreadsheets here in a minute, but what’s the basic calculation? Basically, you take the start and end time of the job and you figure out the number of men. Then you get the total time. I’m going to show you what I mean by this. Here’s how you do it.
Let’s just use the example of you’re running a crew of three. You pull up in the truck, you turn off your engine, you write down the start time, or if you’re using software, you clock in. You perform the work. Then when everyone gets back in the truck, you stop the timer. You start the engine, you drive away. Now you have your start time and your end time.
Let’s look at how that would play out. Your property is 10,000 square feet, 4,414 square feet of turf. You are on the property from start to end, meaning they got out of the truck, got back in the truck. Start to end is 20 minutes. I’m keeping the math simple. There were three individuals. The total time on the job was one man hour. You had three men there for 20 minutes. That equates to one man hour or 60 minutes. If you charged the client $30 to mow that lawn, than you made $30 per man hour. If you had been there for 40 minutes, so 40 minutes times three, so you were there for two total hours and you charged $30, then you would have made a man hour rate of $15 per man hour. You kind of get the idea of how the math works. This is the core of pricing every single service.
Now, let’s say that you look at this and you say you’re only making $30 a man hour and you heard me say that you should really be $40 and above per man hour, which is my argument. When I started in the business, I was in the $25 range because I copied a bunch of competitors. Then I was in the 30s for mowing and some other things. I quickly realized those were not good numbers, but I was copying what my market was doing. If you look at your business and say, wait a second, we’re only making 30 a man hour on this property. That’s too low, so what’s your option? Your option is one, to raise the price on that client so that you can make enough money based on the amount of time you’re there. Or, you need to become more efficient and do that property faster.
Where do you find efficiencies? A few of the clues are up here. How many men are doing the job? What’s the setup of the truck? What kind of equipment are you using? Are you picking the right properties, meaning are you predominantly serving a market where the properties are too big or there’s too many trees, whereas if you were to go focus on a different market you could make more money? Those are some of your decisions. All of that goes into pricing.
Now in video part two, I’m going to start showing you numbers and I’m going to show you how to figure this out.