How to Compete in a Low Price Market

I’m going to read you a question I received. “I’m from Oklahoma and just moved to Keller, Texas. For six months now, and is currently serving,” he’s saying I’m currently serving Keller, Colleyville, and Southlake. “My question is how would you adapt to the new location,” because he’s coming from Oklahoma, “because everything here is really competitive and pricing for mowing is really low, plus everything here is huge,” meaning the property size. “And that is one of the biggest shocks I have to deal with, or I’ve had to deal with when I got here.”

So, the three markets that he’s talking about are fairly close to where I’m at. I don’t service any of those markets, but I know those markets well. In fact, I am highly optimistic of that area. If I was starting another branch location, that’s an area I would absolutely think about, probably the first area that comes to mind for me other than Austin in Texas.

It is true that, I think the Texas market’s fairly brutal when it comes to price and competition. There’s so much competition it’s pretty amazing. As a result of all the competition, and a lot of the competition doesn’t know how to price, doesn’t understand what it takes to grow a company, meaning that a lot of the competition is, and this happens all over the country, it’s not unique to this area. This would speak to all of us. A lot of the competition is pricing work based on them doing the work, based on not building a team around them, based on not having insurance, workers comp, all those other things that a legit company needs. As a result, it creates a lot of price pressure on you as the owner. This would’ve been true in Oklahoma as well, but it’s very, very true in Texas, without question.

The only way you’re gonna overcome this and grow a sizable business is through marketing. Most of the companies in the Texas market, and again, true for most of the country, are not very big. They’ll never get past a few hundred thousand a year in revenue. That is the vast, vast majority of the market. Just to take it a little further, only a small percentage will ever get over half a million a year in gross revenue. The companies that get passed the half a million in gross revenue are the companies that really learn marketing, and they start to do marketing. They’re painting their trucks. They’re doing door hangers. They’re doing SEO. They’re doing pay per click. They’re doing all forms of different types of marketing that they’ve learned and studied. That’s really at the end of the day what you’re gonna have to do, and that’s an investment. It takes time.

For now, you’re just gonna have to sort of fight it out and get your initial group of clients to build the company and not delay on the marketing side. I’ve mentioned it before, fast approach is to go knock on doors. That’ll get you there quicker, but you’re still going to eventually have to really start to figure out your marketing and be seen in your marketplace over and over and over again.

The couple last little points here I made. In this market, like all markets, but especially in this market, the one you’re talking about serving, where in South lake they’ve got some bigger properties, you have to be really aware of matching the right equipment with the property. As an example, if you feel like you’re constantly getting beat out on price, it could be that yes, this market’s a little more competitive than where you came from, but it also might be that you’re not putting the very best piece of equipment on the property based on its size. Your labor expense is your number one expense in your company. It’s going to be the biggest percentage item expense on your profit and loss statement, and the way to drive down labor cost in your case is to make sure you’re using the very best equipment.

Very simple example. If you’re mowing an acre, you wouldn’t put an individual out there with a 21 inch mower. That’s a huge amount of labor cost. But if you put him on a 62 inch rider or whatever, 36 inch rider, or whatever, or walk behind, or ride on, whatever the appropriate size is depending on the obstacles and makeup of the property, if you use the right piece of equipment, you could cut their labor, your labor cost, because you’re cutting their production time in half, or by 70%. Be very aware of are you using the right equipment on the right properties, are you using the right equipment in the right areas. That’s something I would absolutely look at.

Then, are you using the right people. This is a lesson I learned. When I had maybe 10 people in my company, this is the very, very beginning, I didn’t like the company, it wasn’t performing very well, but I didn’t really understand how much we should be making per hour. I didn’t understand any of that. I was just like possibly you, I was figuring it out. Then one day this guy named Elder walked up to our shop and said, “Do you have any work? I’ve been in the painting business, but I used to mow lawns.” I happened to need somebody, and I said, “Yeah, we could use you tomorrow.” And he started with us, and from him I learned what real production was, what real work was, what speed looked like. Not so much what quality looked like, because he came from the commercial world, and I was doing residential, actually I was doing a lot of commercial as well, but I put him on a residential crew. He was not, he showed me what real speed looks like.

I would question yourself, are you really using individuals that are fast, that are good, that have experience? There’s a huge difference between the good guys and everybody else. You want to build your company around the good guys because they’re fast, and that leads to lower production time, lower labor cost, more profit, lets you be more price competitive. In an insanely competitive market like the one we’re in, you have to have the right people. They have to be trained. You have to be putting the right equipment on the job. And then you gotta market. That’s the only way to build. You gotta do marketing in this market. If you want to build based on referrals or word of mouth, it’s too slow. You’ll be grinding it out for years and years and years. You’ve gotta figure out how to stand out from everyone else. It’s a good market, you’ll just have to learn how it works. Don’t give up.

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