There can never be enough discussion on pricing lawn care jobs. At first when you get started, you may eyeball a property and come up with a figure based on a guess, but there are much better ways to do this. As your business is around longer, you will get an idea of what your operating costs are. Knowing these costs is crucial to making a profit. If you know them, you will be able to tell which of your jobs you are making money on, which you are breaking even on and which you are losing money on.
Just because you are out there working all doesn’t mean you are making money! You could actually be paying your customers to work on their property and not even know it. Have you ever thought about that? When you lose money on a job, that is exactly what you are doing. Paying to do the work. Doesn’t that sound crazy? But it happens everyday.
A member of the Gopher Lawn Care Business Forum shared with us his insight he has learned over the years of being in the business. He wrote “from the experience I have with many new lawn care business owners, I have found that knowing how to estimate your lawn mowing jobs is a huge issue.
I think the very first issue you have to confront is cost of doing business.
Can you imagine a successful manufacturing plant manager shrugging his shoulders when asked what his actual marginal cost is for each additional unit?
Before I got into the lawn care business, I was an accountant with a manufacturing company. We knew exactly how much each part cost that was required for each and every product we made. We even practically knew how much electricity was needed to make each product! Nothing was overlooked.
To be successful over the long haul, you need to adopt a very structured approach to bidding jobs. Let me pose a question for you to think about. How many guys do you think bid a $40 grass cutting job simply because their friends said that’s how much to charge?
I think most everyone of us did that when we first started. We had little idea of costs and little idea of what the market would actually bear.
Here’s an example of what happens though. The going rate of residential lawns is $40 per cut in a certain area of the country. But, someone gets a late start or is in need of new customers. So, that guy drops his price and starts bidding at $30. Then someone else hears how this guy is doing 10 yards per day and bring home $300 per day. This third guy decides he can do a couple yards each day after work or school. So, he loads up a barely functioning push lawn mower into his truck and starts doing lawns for $20 or $25 for extra money.
Over the course of a year or two, lowballing drops the price out of the market and no one makes money. The guy charging $20 gives up and just continues with his day job. The guy charging $30 has an equipment breakdown that he can’t afford to fix and has to drop out. The only one left to pick up the pieces is the professional who has a steady structure of well paying customers. Prices begin to rise and the whole cycle starts over again. I wonder about the length of the cycle. 5 years?
Here is an example. Say you charge $1/sq.ft. for pressure washing. If the going rate is $1, that is only one half of the equation. A company still has to know it’s costs. If a company has a brand new high pressure, say a high flow warm water pressure washer in addition to a 250 gallon tank carrying filtered water in an enclosed dual axle trailer and a brand new $45 grand F-350 to haul it all, doing deck work might not be the best use of his resources. His costs alone might approach $1 to $2 per sqft. Somewhere there is an equilibrium point. Instead of doing deck work, his equipment might be better suited for industrial cleaning and paint stripping.
That’s why nobody can really ever tell anyone else exactly how much they should bid on a job. One guy might be able to make a great living at $1/sq.ft. while another guy might go broke.
All this illustrates the need for a business plan long before you get heavy into the business. You have to know what the going rate per hour is and what your costs per hour are. You have to know what types of customers to target and what equipment you will need to service those customers once you get them.
I don’t think a business plan solves all questions by any means. But, it gives a good basis to begin with and it can always be adjusted later.”