How To Determine Lawn Care Pricing (Part 2)

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.

How To Determine Lawn Care Pricing (Part 1)

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.

Variable Costs vs Direct Costs vs Fixed Costs

Learn the difference between variable costs (direct costs) and fixed costs in your lawn care & landscape business.

A lot of times if you do a Google search, or if you went to college and you studied accounting, a lot of the examples are based on manufacturing. They’re manufacturing examples or they’re the production of some product. It can become confusing.

There’s a lot of interchangeable terms.

Variable cost is a term that’s used frequently. More common, in the landscape industry, is the use of direct cost. I like to talk in terms of direct cost instead of variable cost. You will also hear, and you can watch my video on this, the term “fixed overhead”.

I’m going to go into a little bit of an explanation here. Let me first talk in terms of direct cost because we’re going to use that term instead of variable cost. Direct cost is a cost that varies based on production. As an example, if you win a design build job, you will incur some extra costs to complete that job. You may need to hire some contractors, rent a dumpster or a Ditch Witch, pay out a sales commission, or incur material costs such as plants. Those are direct costs.

Had you not won that design build job, you would never have incurred the material cost, the permits or the rentals. Therefore, it’s a cost that, again, is only incurred when you win the work and when you perform the work. If you’re looking at your profit and loss statement, these direct costs, are going to appear under your revenue at the top of your report in the cost of goods sold section.

What you do is, look at your revenue generated for whatever time period your P&L is looking at. You subtract out of that revenue, your sales revenue, your cost of goods sold. This is your direct cost. That leaves you with your gross profit margin. Your direct costs are going to be one of your biggest expenses inside your lawn care business because your business is so labor intensive. Or, if you’re in the design builder construction side of the industry, materials are going to be a huge cost to your business which falls under direct costs which is part of cost of goods sold.

Again, direct costs and variable costs are often used interchangeably when you’re reading accounting books or performing Google searches. Within the lawn care industry, the more common term is “direct cost”. Generally, what most people do is they take all of the other costs and they put them under “fixed overhead” or “indirect costs”.

There really are some other variable costs in the business that, oftentimes, will get lumped into fixed overhead or indirect costs, but are truly variable. You have to figure out what the standard is for your business, what the standard is for this industry. I would recommend following the standard for this industry.

Let me give you an example of what I’m referring to. You could have what might be considered a variable cost by some, for example, website hosting or maybe marketing. Some consider marketing a variable cost because if things aren’t going well, you could shut off all of your marketing. You could stop running pay-per-click ads or sending out direct mail pieces. Those costs are somewhat variable.

It’s far easier to stop those types of marketing costs than it is to exit out of a three-year lease or to stop paying for truck insurance. Those are fixed costs. Marketing is an example of a variable cost. However, what you’ll see oftentimes, is that a lot of companies will look at their marketing expenditure for a period of time. They will put it into the indirect cost section on their P&L.

What they do is, they take gross profit margin. Remember that’s your direct cost subtracted from your revenue. That gives you your gross profit margin. From that, they subtract their fixed overhead and indirect costs. Oftentimes, you’ll see marketing or advertising as one of those costs that get subtracted out. I wanted to make the point that as you’re reading and as you’re thinking through what is a fixed cost versus a direct cost versus a variable cost, marketing is a great example of a cost that will fluctuate. Therefore, it is somewhat of a variable cost.

For example, you might have website hosting, as I am showing here. That’s a marketing cost. You can’t really turn off your website and shut it all down. A lot of times, that’s obviously a fixed overhead or an indirect cost, whereas pay-per-click, where you’re paying for clicks in Google, you could shut that down by pausing your campaign in an instant. That is more of a variable cost.

The takeaway is that you need to sit down with your accountant and pay attention to what’s done in the industry to figure out if, even though there’s some variability in that cost, as in my example of pay-per-click, it might make sense to follow industry norms or the recommendation of your accountant. You might also hear the terms sometimes called “general and administrative costs.”

Those are some things to think about. Universally in our industry, you will hear “direct cost”. Direct costs are directly tied to the job. If you do not perform the job, the costs are not incurred. If you perform the job, the costs are incurred. That’s why they go into your cost of goods sold section on your profit and loss statement.

What is Fixed Overhead?

 

In your lawn care business you’ll have two types of overhead.  You’ll have fixed overhead and variable overhead.  I have a separate video that explains variable overhead.

Fixed costs make up fixed overhead.  An example of fixed cost would be rent, insurance, admin salaries, office expense, depreciation, utilities, and the cost of your estimators.

The characteristic of a fixed cost is, it’s one that doesn’t change very much and it’s not affected by activity. Whether you perform a lot of work this week or you perform very little work this week, your fixed costs, or fixed overhead does not fluctuate.  It remains fairly constant and it is fairly easy to predict.

You want to be very slow to add these fixed overhead costs because, if there’s a decline in your business, it’s hard to get rid of these costs.  If you go out and you sign a three year lease on an office space, it’s a fixed cost.  You know every month your office is going to cost you $1,000 a month.  If your business takes a significant decline, it’s very difficult to get out of that three year lease and eliminate that $1,000 a month expense.

Insurance on your office building is an example of a fixed cost because the insurance cannot be eliminated without eliminating the lease.  Therefore, that insurance cost doesn’t go away until the lease itself goes away.

Admin salaries are fixed.  Yes, you could let those individuals go but, generally to keep your business operating and running, you have to keep your admin team.  Therefore your admin salaries are considered to be typically allocated in your fixed overhead numbers.

Watch the video about variable overhead and also watch the video about an elementary way to calculate fixed overhead within your business.

Why Underpricing Work Hurts Your Clients & As a Result Your Reputation

 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. 

Trick To Finish Lawn Care Estimates Faster

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.

Can I Charge More For Organic Lawn Care?

 

6 Important Points about Implementing an Organic Lawn Care Program:

1. Organic Lawn Care offers an opportunity to grow and improve your profit margins.

2. Organics can be both a defensive play for your business and a profit center because people expect to pay more for organic lawn treatments.

3. According to Tom Kelly of BeeSafe, you can charge more to cover increased product costs.  Your net margin should increase a bit.  Labor cost should stay the same if not grow as compared to standard chemical applications.

4. You can use the same equipment for organic treatments.

5. Training a technician to apply the rounds of your organic program is not very difficult.  It is a little bit more difficult, but it is not a scenario where you have to send a tech to get a 2 year degree to be knowledgeable.

6. Moving towards an organic offering is a smart strategic move to give your business the selling advantage and keeps you competitive in your local service market.

How To Raise Prices Without Making Your Lawn Care Customers Mad

Has it been years since you increased the price of your lawn care and landscape services?

In This Video Learn The 4 Keys to “How To Raise Prices”

The question is, how do I tell a client that I need to raise the price? How do I tell them that I need to charge more for the spring clean-up or for the initial mowing? How do I explain it to them without them getting mad?

I’m going to give you the four things to consider.

Remember how much or how little you knew when you got started. You think about this business every single day. When you wake up, you’re thinking about it. When you go to sleep, you’re thinking about it. You live it seven days a week. You think about it constantly. But, when you first got started, remember how little you knew about the business, how little you knew about the industry. Now think about how little your clients know. It’s so easy to assume that they understand. They don’t think about any of this stuff that you deal with.

Now, why did I say all of that? That’s the key to everything when it comes to explaining to a client why you need to charge more. They don’t know your business. They don’t understand it. They don’t know the challenges and the cost involved. As far as they’re concerned, if you’re in the lawn-mowing business, anybody can get a mower out and mow a lawn. If it’s tree-trimming, all he’s got to do is get up there and cut that limb off.

Basically, that’s how a lot of people think. They have no comprehension of what goes into this. They don’t understand all the costs behind the scenes. They don’t realize how much it costs just to get the truck to their house. So, when you say, “I need to charge this,” that means nothing to them. They don’t know why you arrived at that number.

Here’s how you’ve have to think about raising prices and explaining it to a client.

First, you have to educate your clients. You have to tell them some of this stuff. If you want to sell something, it’s about education. If you want to raise a price, you’ve got to educate them on why. Why is to their advantage? Why does it matter? Why are you doing this? You need to tell them that. Education is key. They know very little. You know a lot.

You need to teach them a little bit about what you know so that when you ask for something, it’s meaningful. They understand why you have to raise the prices or why it takes extra time to complete a job. A lot of times when you explain to them, you’ll find out people aren’t upset. They get it. They work, they have jobs, they do things, they understand when things take a lot of time. So, education is key.

Second, you’ve just got to be honest. I think that’s the absolute best approach in business in general. Lay out your case. Be honest. If you screw it up, come clean and just tell them. If you’re running behind, tell them why. Be honest. If you try to cover it, or if you try to make stuff up, your team sees you doing that. Then they do it. If you are dishonest with your clients, your people will be dishonest, and then you will be a dishonest company. Your company and your people mimic you. You need to be honest. Your need to be forthright. Tell people the truth.

When I say to be honest, it’s not always being honest about a screw-up or mistake. Sometimes it’s just being honest and saying, “Look, the reason we’ve got to raise the price is we thought it was going to take three hours but it takes five. For the last four times we’ve been eating the extra cost, but I’ve got to tell you we’re losing money every time we’re out here. We really love working with you. I really want to keep you as a client, but is there any way you can help me work this out? We need to make a price adjustment for this to make sense.” I’m not saying to say it that way, but it’s that kind of an attitude of just tell them the truth. Tell them exactly what’s going on. Explain your case. Educate them. Be honest about the situation and then propose a solution. You’ll be surprised how often that it will work out for you.

Third, explain it. That’s part of being honest. Just lay out your case. Tell them what’s up. Tell them why. Explain exactly why you’re asking for more money. It’s not because, “My wife and I decided we want to buy a Ferrari, and we figured out that if we charge every customer two extra dollars, we could do it.” You tell them the truth. “Look, we’re not making a ton of profit here. The reason we’re doing this is gas prices have gone up. The reason we’re doing this is because now that you’re having us mow the backyard, it costs us more time and money. The reason is because we originally came out and looked at your irrigation system and there was only one zone, but that was broken. Now when we come back, you have a second zone that’s no longer working. We didn’t anticipate this. We need to charge extra.” It’s all about explanation, education, and honestly explaining what’s up.

Finally, when you’re doing a massive price increase across a lot of clients, test it. Let’s say you have three hundred clients you want to raise the price on. You don’t just go out and raise the price on three hundred clients. You call up a couple of clients and you explain your case. Education, honesty, and explanation. If all three clients decide to cancel, you’ve got a problem. You don’t want to go to four hundred clients. If all three clients say, “Cool, I get it. No problem.” Go to all four hundred clients. If a couple of clients say, “Wait a second. Why now are you raising my price, because you just raised prices last year, and I can go down the street and get somebody else?” You listen to their concerns. You take those concerns, and then you go approach three more clients and tell them that you need to raise prices. But, now you know how to answer the concerns when you’re talking about why you’re raising the price. If you’re writing a letter, you can address the concerns you heard in the letter telling your clients why you’re raising the price.

These are your four tips when you consider adjusting prices or making changes. When you do this, especially when you test it and try it, it’s not so intimidating. Your clients will be far more understanding than you think they’ll be. Just remember, it all starts with explaining to them and educating them on your reasoning.

Good luck.

 

Why Are My Lawn Care Business Profits Shrinking As My Company Grows?

Learn why your lawn care business profits will shrink as your company grows…

The culprit of declining profits is almost always one of two things:

1) increased overhead you didn’t expect and therefore budget for or

2) incorrect pricing of the work you sold (often because you are unaware how much overhead cost you will incur to perform the work, especially as the business grows)

The good news is your lawn care profits (profit margin of your business) do not have to decline.  You can protect your margins by understanding overhead and how overhead will change as you grow your company.  With this understanding in mind you will be able to price work correctly to maintain your desired profit margins.

Watch this video to learn how to avoid the trap of declining profit margins.

Video Transcript

Hey, it’s Jonathan.  I get this question, but it’s never specifically asked the way I’m about to say it.  It’s just asked in all kinds of different variations.  Basically the question is, “Why is it that as my company keeps growing I’m becoming less profitable”, or “Why is it as my company keeps growing I have less and less money”.  Let me give you some numbers first and set this up and then let’s talk about it.

There’s a lot of reasons why this might be.  The one I’m going to point out, in this video I’m going to talk about is specific to overhead.  Let me give you an example first just to build up a scenario and then let me talk through this.  Don’t get caught up in my numbers.  Don’t get caught up in the numbers being perfect.  Don’t get caught in the math, it’s just for the sake of an example.

Let’s say that you make $10.  We could even say $10 a year.  However you want to think about this, you make $10 a week.  Let’s use you bring in $10 in revenue.  You start out in your company, you’re out there doing the work, you’re spraying the lawns, you’re mowing, you’re doing whatever, you make $10 today.  Let’s use a daily rate.  I made $10 today.

If I’m spraying lawns I had $2 in material cost, I had some gas in my truck, I had a few costs and I had $2.  At the end of the day I have $8 left over.  I made $8 today.  That’s 80% on my $10.  In gross revenue I made 80%.  Good day, I made $8.  Obviously it’s not a good day, but just for the sake of math.

You start growing the company a little bit more and you start selling a lot more accounts and now you need some help.  You still make $10 a day, but now you need somebody else to go do the work for you.  You’re not on the truck, you’re sending somebody else out to do this work for you.  You have $10 in revenue for the day, you have that same $2 in cost as when you were doing the work, but now you have $5 in cost to send somebody out to do that job for you.  Now you have $3 left over.  That’s 30%, 30% is awesome, that’s a great margin, again oversimplification here.

Then you start going a little bit more.  You get more accounts, you get a few more employees, you keep adding to it, and then you have to go get an office.  Then maybe you have to hire a salesperson and then you’ve got to hire an office manager to work the phones.  You’ve got to get an accountant, you’ve got to buy some computers, you’ve got to do a million different things called overhead.

Now that same analogy.  You make $10 bucks for the day, you have $2 in cost, you have $5 in employee costs, but now this overhead.  The people answering the phone, the cost of the office, all this other stuff, a truck for you the manager.  Once you divide that out you figure out that it costs me, with all this overhead that doesn’t produce revenue.  Overhead is what it takes to run and make the business function and operate.  It’s not producing revenue in my example here.

Once you figure it out it costs me about $1.50 a day in overhead.  Now take that $1.50 out.  So $10 you made today, minus $2 for costs, minus $5 for employees, minus $1.50 in overhead, we’ve got 50 cents leftover, that’s 5%.  You can quickly see how in a business if you price…  For example when you first get in business and you go out and you price a lawn and say I can make a lot of money.  I’m mowing the lawn, if I do 10 of these lawns a day or if I spray 10 of these properties a day based on what I’m charging, I’m going to make a nice living.  It’s definitely better than the living I used to make when I worked for somebody.

Then the business, because you’re pricing your work really well, very competitively and you’re doing a great job because you’re the guy, you’re the owner, you’re all invested, you’ll do whatever it takes, business starts growing.  Then you have to start having other people do the work for you and they don’t work quite as fast as you work and there’s all these other factors.

Now you need to build some infrastructure in your business to support them, again called overhead, then you start adding all of these costs, but yet you’re still pricing exactly the same way when it was just you and you had virtually no costs.  You can’t, with that old pricing model, absorb all of the costs in your business that has now been created to run this bigger business.

I think of True Green as being a highly inefficient business.  I don’t know, I’ve never worked at True Green.  I could be crazy, maybe they’re not.  I view them as being a highly inefficient company.  Why does True Green have to charge more money than most other companies and even companies that are a good size?  It’s all because of the layers of overhead.  It’s the offices, it’s the management, it’s the layers of management, it’s all the overhead.

They’ve also become a real organization.  They have laws to comply with.  They have legal concerns.  They have all kinds of business risk that they’re trying to mitigate and eliminate and they have to put more people in place.  They have to cover their butt.  They’ve got to do more paperwork.  Now they have to hire more people to do that paperwork.  They have to make sure that they’re doing their safety meetings because they don’t want to get sued.  They’ve got to make sure that they’re taking every precaution with their chemicals.

This stuff just keeps adding up and adding up and adding up.  Also as you get further down the food chain from the owner, who was all in on this company, this is his baby, you bring in other people that are a little less passionate, work a little less hard, aren’t going to do 70 hours a week because this ain’t their thing.  They’ll work hard and they want your company to do well, but at the end of the day they’re not going to do what you were willing to do.  Why should they?  They don’t make or have the potential to make the kind of money you have.  You get a little less efficiency from all of those people and that costs your company money.

You can see how all of these little things add up.  The point I want to go back to, and all of that’s overhead, the reason that a lot of businesses get themselves in trouble is when they started they priced their business one way.  Yeah, they took a little bit of a price increase here or there, or maybe they only took a price increase on new clients.  You cannot generally follow your pricing levels from when you started your business or even a couple of years into the business.  Those levels have to evolve, they have to change and they have to go up.

There’s a reason that bigger companies price higher, they have to because they have all kinds of overhead to run a company of that size.  If you want to build a real company some day with a management team, maybe even a president that runs the company for you, you better price in a lot of overhead because it takes a lot of people to do that, to build that kind of a company.  You can’t operate off of yesterday’s pricing models.

This is one of the dangers of a lot of guys that get into business is they don’t understand up front all of the costs that are coming down the road.  There’s no way you could.  If you read and think about it, yeah you can project a few, but you’ll never fully be able to project all future expenses.  Given that, you want to, when you start your business, don’t underprice the market.  Do not.  Price, if at all possible, from day one just like you have all the overhead.  That will leave you more margin in profit to grow the company faster and reinvest.

Price like the market, at least at average market price, from day one in my opinion.  That way you have the money there and your contracts and work that you’ve already sold is priced correctly to allow you to grow.  What happens is a lot of guys start and they have all of these customers and they made a bunch money and as the company grows they become disenfranchised with their original clients because they don’t make enough money on them.  Then they start to neglect them, that hurts your reputation.  You don’t want to do that.  You don’t want to play that game so price it right.

Later you only have two choices, you fire that client or you raise their prices.  At some point you’ve got to get your prices right or you’ll never have profits in your business and you’ll wonder, “Why is my business not doing very good.  Oh, it’s all the low ballers, oh it’s this, it’s that.”  No, it’s just that oftentimes you didn’t know better.  I didn’t know better.  We didn’t know better.  When we started our companies we didn’t know exactly how to price and we didn’t price in all the overhead that was coming down the road to grow a real, sustainable, great business.

As your business grows you’ve got to consistently re-price work, sell it at the right prices.  You’ve got to pay attention to that.  Then you might have to go back to old clients and raise the price.  That’s the only way around it.  If you don’t you’ll slowly put yourself out of business.  It’s an invisible thing that’s happening.  As the business gets big it’s really hard to figure out where the leaks and the problems and the holes are where the underpricing is at.

This thing creeps up on you and it’s something to be very aware of.  This is how you end up with a low margin, low performing business, that you’d like to sell or get out of at some point because it’s not producing what you thought you could produce or what you experienced when you first started the business and then chose to grow it bigger because you thought, “Oh this is going to be great.  I’m going to make a ton of money.”

That’s how you look at it.  If you’re aware of that you can solve this problem or you can prevent this problem altogether as you grow.  Good luck.

Lawn Care Businesses Should Not Discount: Here’s Why

Transcript of Video:

The question is… I’ve heard you say that you do not like discounting but a lot of customers and leads ask for discounts. What should I do?

So that’s true, I am not fond of discounting and I actually think it sets a bad precedent. I also find at both my lawn care company and Service Autopilot my software company that clients or perspective clients that ask for discounts tend to not be our better clients. For example, at Service Autopilot, we get a lot … we get some, not a lot, we get some people that will ask us to waive what is a very small getting started fee, because we put a lot of work into helping them get up and running or they’ll ask us to waive the first month so they can try it for free even though we have a 30 day guarantee where they can get all their money back.

What we find is that when we … for those that say, “Well I’m not really willing to pay even 70 bucks upfront, I want to try it for free for a month and then I’ll decide after that.” By measuring it and watching it, we found those clients or perspective clients do not turn up to be very good. Some do, but most don’t. They’re not that serious about it and so we find … in our experience, and we pay attention to this, that the best clients are not asking for discounts, the best clients are not trying to negotiate over $70. The best clients are committed and so that act a little bit different.

In the lawn care company, we’ve seen exactly the same thing. The person that asks for a discount or will only do business with you if you give them a discount or basically it comes at you in an aggressive faction and says “The only way I’m going to do business with you is you must do this.” That is not the way to start a relationship with us and it’s probably not the best way to start a relationship with you. When you … and there probably are some great clients that if you did negotiate with them, they may turn out to be great clients, but the problem is you’re playing the odds, you’re playing the percentages and most are not. We find that a client that comes towards to us in an aggressive fashion, wanting to do business with us, but in a sense that’s kind of threatening us and that they’re saying ”We won’t do business with you unless you do this for me,” that does not make for a good relationship.

As far as I’m concerned, the way I look and the way I would recommend you to look at it is I am not in business to take everyone as a client. There are good clients and there are bad clients and you want good clients, you want to build a company where the people you’re working with, both of course the employees, but also the clients are clients that you like, that you … that they also look at the business transaction as a back and forth … in a sense of negotiation where you’re bringing value to the table and they’re bringing value to the table as well in the form of paying you and money and if it’s lopsided on either side, that’s not a good business transaction, that’s a not a good relationship.

If somebody comes to me aggressive or they have an attitude or they are demanding in the sense that “We don’t like the way you do things and we’re only going to pay you this amount of money and take it or leave it or we won’t be your client, we’ll go somewhere else,” that’s not a good 2 way relationship for us and building a business with a lot of clients that do that to you and take that attitude will not allow you to build a company that you like and would like to keep for 10 or 15 years or 20 years or however long you intend to do this.

There’s more to it than even money. It’s also about making sure you don’t load your company with a bunch of clients that are going to drive you crazy. I’m very particular about that. If we get calls or messages from client that take a very aggressive approach with us or tell us that they will only do business if we give them a discount or they don’t like the way we do something, we … we do not try to them as a client and I am very, very strong on that. Not everyone is a good client and there’s so much business you don’t need everyone as a client.

Discounting could be your first sign. If somebody is saying “You must discount this for me to do business with you,” that could be a sign. If you’re doing discounting, start to pay really close attention to how the clients that you give discounts to work out.

A couple more examples. 1, at our lawn care company, when we switched over and only worked with clients that would pay with their credit card, [‘with other’ 00:04:41] charge their credit card for work performed. Every once in a while, we would make some exceptions and it seems like every single time we make an exception, again, every single time is an over generalization. Let’s say 80% of the time, when we make an exception, we look back and we say we knew better, we shouldn’t have done it, there’s a reason why we have this deal, even with people that are maybe seniors, that they’ll have credit cards, even with those maybe that were the military and you had a spouse that was home by herself and her husband was off in the military and so we made an exception trying to help them or help an older couple, it’s over and over again. Some percentage of the time we still pay the price for breaking the rule that we had about only working with people that pay with credit card.

I see these little trends and once discounting, one is how they pay you, one is making exceptions in the business for a few clients here or there, that don’t like the way you do things. I’d be very, very aware of that.

The other thing that discounting does is if you start the relationship and you … and they say “I need this for free or in need a discount,” then you have undervalued what you are selling. For example, when I set prices, both at service auto pilot and at my lawn care company, those prices are set very intentionally. We have a strategy around pricing and if the pricing is high, then there’s a strategy around that. If pricing is a little low right now, for whatever reason, there’s a strategy around that. I didn’t just pick the pricing out of the air and you don’t want to just pick your pricing out of the air, there should be a strategy. If you have a strategy and you’re pricing for a certain reason because you want to make a certain amount of money, well then, when you discount it, you’re going against your plan and you will not be hitting your goals. How does that make sense? If you start that relationship and give a discount, you are communicating to that individual, non-verbally that “You know what? I overpriced this because I have plenty of room to give you a discount and do it the way you want me to do it” and they met not think about it quite that way, but you’ve just communicated that and so in future transactions, in future deals with that clients, why shouldn’t they expect they can ask for and get a discount at any time.

There might be reasons to make an exception here or there, but it’s a precedent that you’re setting when you discount and also when you come … when you work with someone that comes at you in an aggressive tone and say “You must do it this way if I’m going to do business with you,” well, you should expect that if they win that, if you take them on as a client, you should expect that they’re going to continue to do that. It works, you’ve encouraged that behavior.

Those are a few thoughts about and again, I want to … I want to say that because somebody wants to negotiate or ask for discount, does not mean they’re a bad client. In anyway, I mean, as a … we negotiate with other and we ask for discount sometimes, but I think the tone and the way they handle it is extremely important and anyone that threatens you and just is really harsh about it, I think that’s a bad sign. I do think discounting is a problem.

The final thing I’ll end with this, incentives work. If you look at marketing, one of the things you want to do in marketing is give a reason, a call to action and a compelling offer that gets your prospector leave to move and take action right now. Just telling the prospective client that “Hey, if you’ll do business with me at my pricing by 5:00 today, that would be great.” What’s that? Who cares? I mean I could do business with you tomorrow at 5:00 or next Wednesday if I … 5:00 was actually irrelevant, that was only for today, but I can do business with you today, tomorrow, next week. There’s no reason for me to do it today, so incentives work.

Discounts are a form of incentives, I just don’t like discounts for the reason I said. If you’re trying to get someone to take action, what is that you can do instead of discounting a bonus or something, some kind of little extra and be careful with throwing in a lot of free stuff because your free service work, because your … again, your devaluing your time and you’re devaluing your pricing, but these are a bonus that you can have. It’s a little removed from the service you offer. For example, if I was running a marketing campaign, instead of saying I’ll give you a free mowing or I’ll do a free fertilization week control or I’ll give you 10% off your bill. Maybe, instead, I would give the equivalent value in the form of a free iPod. I’ll give you an iPod if you sign up by Wednesday the 15th at 5 P.M. That is a reason to take action. It’s an incentive, but instead of devaluing your service, instead of throwing in free service which sets the precedent later, you’ve given a different type of value.

Actually, a lot of types things like iPod and stuff like that actually works better than giving some free … some discounting anyway because the discounting doesn’t even feel … after … when they get the bill in the mail, they don’t even really notice the discount, it doesn’t really feel like they got something. Whereas when they have an iPod or some other thing that they can use unrelated to your service, that feels like they got something that they might not have went out and bought on their own.

I went a little off topic, but it does apply into discounting that there are reasons to discount, there are reasons to give incentives, but maybe there’s a better way, there’s a better approach.

The take aways are just what I said there and then the other take away that’s really critically important is be very aware of how the prospect is approaching you in this negotiation, asking you to do business and if it’s … if you feel that that prospect is not going to be a good client because of the way they are handling the situation, I would recommend against incentives or discounts in that case and not even try that hard to win the business.

In the alternatives where you really want the client, don’t be a great client, but they’re just looking for something trying to feel like they’re getting a little something out of the deal, some kind of an incentive or discount, what can you do other than discounting price to make that transaction happen and make that deal happen?