“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.
This video explains why using the right lawn care equipment can maximize your potential and bring in more profit.
This morning as you think about your business, are you putting the right equipment on the right properties? When you bid the job, are you bidding it taking into account the right production costs because you’re using the correct equipment? Are you selling work that’s bigger than you should be doing right now because you don’t have the appropriate equipment?
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.
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.
Learn The Basics of Door To Door Sales…
The question is, should I pay door knockers by the hour, or by commission? There’s only one answer for this, by commission. There’s no scenario, where I would ever pay by the hour for door knocking. Now, if I had some available employees that were already on my payroll, where I’m already paying them and I’m not going to take them off payroll because I’ve committed to keep them on payroll even while we’re slow, then I would continue to pay them. But, I would offer an incentive of a commission.
I would still not send them out and say, “Hey, just spend the day door knocking and see how it goes.” No way. I would give them a very lucrative commission for every single sale. There is no scenario where I would not do this.
If you’re hiring individuals to door knock for you, then you’ve got to do a little work to find the kind of guy that will do this type of work. A great way is to talk to the guys that are already door knocking at your house, selling you other things, and see if you can swipe them.
There’s a couple of models for door knocking. The two models to consider are, one where you have an individual who canvases the neighborhood, knocking on doors, and attempting to make a sale. If they make a sale, you give them a commission. If they don’t make a sale, they don’t get a commission.
They tend not to work full time. They tend to work in the evenings and on weekends, and they’re getting a commission for every sale that they make. You’ve got to figure out what that number is. Be generous with it and don’t be cheap about it. Think about what it would cost you to acquire a new client.
For example, if it costs me a hundred dollars to acquire a client through door hangers, or a hundred dollars to acquire a client through direct mail, then I’m going to pay a guy a hundred dollars every time he makes me a sale, because I want as many sales as he can possibly bring me.
I’m not looking at this as a scenario where I am trying to save money. No way. I want the guy to make a lot of money, because I want the guy to bring me a lot of sales. That’s model number one, you pay a guy for making the sale.
Model number 2 is a two person team. You have a setter and a closer. The concept is, you have setters canvas the neighborhood, they knock on the door, they drum up interest. Their entire purpose is just to garner interest and ask if they can have a follow up with them. Can somebody come by and chat with them, can we give them something? And, at the minimum, they’re collecting names and phone numbers.
That’s what you’d call a setter. They’re setting the appointment. That’s their entire purpose. You’ll see this model a lot with roofers. Roofers will go around with a setter, and then they’ll come back around with a closer. The setter, will make a commission as well.
Then there’s a closer that follows up with that person. The setter gets the name and the phone number. The closer then goes back to the home, or calls them on the phone. Their job is to close the business, to get the deal, to basically win a new client. That individual then makes a commission . Setters can make less than closers, or it could be a 50/50 split. You’ve got to figure that out. There are different models.
Great industries to look at are pest control and roofers. They both do a ton of door knocking, especially the roofers. Watch how they work. Read about how they work on the internet. I’ve actually never done that, which would actually be a pretty good idea. Read about it and see how their model works, how they pay, and what their commission is. I always talk to these guys when they come to my house so I can learn additional ways to do this, and I would recommend the same of you.
Next time somebody tries to sell you something, engage them and find out how they get paid. Find out how long they’ve been doing this. Find out the hours that they work. That’s how I know that most of these guys work late afternoons, into the evening, and then they work weekends. Most of them are students, or they also have another job. Do a little studying and you’ll get all the answers you need on this one, but look at those two models. Good luck.
Stop Underpricing Work… It’s Critical to Your Reputation and the Future of Your Business.
If you are underpricing and undercharging for your lawn care work, you are doing your clients a huge disservice. Let me explain.
I get a lot of pricing questions. Companies aren’t sure how to price and new guys in the lawn care business have a tough time figuring out how to price. Estimating is also challenging. I get that.
This is a different take on it. It’s not the question I usually get asked, but I want to make a really important point. If you are undercharging your landscape clients, you are doing your clients a massive disservice.
The reason I have this opinion is because most of us, and I’ve said this before, started out as the “low-ballers,” which is a word we use in the industry. These guys are the ones underpricing and undercharging. They’re the low-cost provider that’s screwing up their whole business because every time they go out to compete for a bid, they’re giving the ridiculously low price that makes it impossible for them to make any money. That’s a “low-baller.”
If you’ve been in the business for any period of time, you’ve probably complained about this many times. You’re fed up with the guys that are underpricing work. They don’t know what they’re doing – blah, blah, blah. There’s a temptation to adjust your pricing to match their pricing. But, what happens if you do that? Then, you won’t make any money. This is the reason why it’s critical that you price right and do not undercharge your client. It’s a vicious cycle.
For example, if you do not price your services correctly, you cannot afford to hire the very best people. If you don’t hire the best people, then you don’t deliver excellent service to your clients. This is a huge disservice. If you don’t price your business correctly, then you can’t afford to train your people. Therefore, the work you give to your clients is sub par.
Worse, and an even a bigger sin, is the advice that you give your clients is wrong. If you tell your clients that they need something or you incorrectly diagnose a problem, you are wasting their money. If you are wrong, they could lose a plant, or a tree, or their turf could die. You have done them a huge disservice.
The way you give your clients great service is by charging them fairly and not trying to match your competitors that don’t know what they’re doing. It’s your job to price correctly so that you can hire the best people, train your people well, put them into safe trucks that are insured, and hire licensed drivers to insure everyone is safe on the road.
I am not preaching here. The point I am trying to make is that you need to have confidence in setting the right price. It’s absolutely the right thing to do…for your business, your employees, and your clients. Clients want great service. They want great quality.
Yes, you will lose some clients to the low cost provider. Eventually, they will get burned and they will be back willing to pay fair prices.
So many guys complain that they can’t get into their market because everyone is underpricing. Think about one of the biggest companies out there. It’s TruGreen. Their name and their marketing has supported higher prices than many companies actually charge. Oftentimes, TruGreen prices actually tend to be a little higher than the market.
There are plenty of examples of guys that are in the marketplace charging higher prices and succeeding in a massive way. Your client wants a great product. If you want your sales team to be highly effective, and you want your marketing to work, then invest in quality and service.
It’s kind of like a circle, it takes a little time for your sales and marketing to get going. It takes a little time to reap the rewards of investing in great customer service. But, as the business gets a little bit bigger and there’s more word of mouth, and you get a little more marketing out there, it will all start to pay off. If you combine great service and fantastic quality, more people will see it and it will all start to come together.
Sales, marketing, customer service, pricing, quality, employees, your trucks, your reputation, how you dress…it is all connected. The core of it all is pricing. Don’t be concerned with what everybody else is charging. You’re doing your clients a huge disservice if you can’t be the great service provider.
Low pricing in the short-term might give your business a boost, but in the long-term you will absolutely pay for it. Have confidence to price work correctly. Figure out how it needs to be priced. Go out there and do it. Improve your marketing, your sales, and your customer support so that you can get the higher prices.
How To Get Your Proposals, Estimates & Bids Out The Door and In The Hands of Your Prospects Faster
This is a trick to get lawn care estimates done faster. If you find yourself sitting in the truck, or if you are at the office late writing up estimates, remember that you’re really a fairly expensive person in the company to be doing that. You need to be as efficient as possible. You should have somebody else, in some cases, put your estimates together for you. This is a trick on how to do that.
Often times what happens is, you take a look at a property and make some notes. A day or two later, when you have time to put together the lawn care estimate, you have forgotten some of what needs to be done or said inside the estimate.
I highly recommend using one of these three options to voice record your estimate notes. First, get a call-in line. There are a lot of options for this where you can call in to a phone number and record a message. Second, is to create a voice memo in your phone. Third, you can get a little mp3 recorder that costs about 60 bucks. I prefer the first two options because you can share your notes with your office team immediately after your notes are recorded.
Even if there’s something you haven’t quite worked out yet, you still talk about the parts. What did the client ask for? What were their selling points? What were their hot buttons? What did you say you would do? What are the services and products that need to go onto that estimate? What are the prices? Just talk it out as you look at your notes. Then you can email it, or if you do the call-in line concept, someone on your office team can pick that up. They can prepare the whole estimate for you.
This, a lot of times, is faster than using an iPad or laptop. You don’t have to worry about getting the wording perfect and if you are in a hurry to get to the next job, you are able to record your notes so that someone else can take care of the estimate for you.
Another person in the office that makes less money than you, can put all the details into the system and get it all prepped for you. That will free you up to move onto the next job. This really speeds up getting estimates out. I’m not saying you don’t do your own estimates ever. But, sometimes it might make sense to do this. It’s a powerful trick to get more production out in the field.
For example, if you can only knock out five estimates a day because of all the prep work, maybe using this approach, you can now do eight. Then, when you get to the office, or at night from you house, you log in and just review it. If it looks good, you can send it. Or, if there were a few things you were still thinking through, you can make those edits then, and send it out to the client.
This will save you some time. Everything in the business needs to be thought of from the standpoint of how you can maximize your time. How can you spend your time on the highest value activities…the things you are best at? If you’re great at selling, spend your time selling…don’t spend your time on typing. Have somebody that’s great at typing and writing and wording spend their time on that for you. That way you can be more productive and move faster.