A Lawn Care Pricing Strategy

Not long ago, I got to look at the Lawn Care business from the other side of the table. My neighbors next door hired a new mowing crew this spring, and they came door-knocking one evening to try and pick up a new account.

Although I wasn’t interested in his service, my initial reaction to the guy who came to the door was positive. This wasn’t a uniformed crew with a brand-wrapped vehicle and business cards, but they were riding in a new truck and running quality mowing equipment. And the guy was out hustling… promoting his business… taking advantage of being on-site to prospect new work… All of which is worthy of respect.

Then he gave me his price.

Under or Over?

I have a good idea what the job is worth. I understand the effort and I understand the market. And this guy quoted me double the fair market price from an average provider.

I hear lots of gripes about the ‘unprofessional hacks’ who underbid lawn care pros with $20 residential cuts, but I seldom hear industry people complain about competitors overcharging. Yet I actually think this guy’s approach is just as bad as the ‘lowballers’ for a couple of reasons.

1. He misses an opportunity to make easy money.

To service my lawn, an average provider would have to fit me into their route, drive to the site, do the work, and drive off to their next job. This guy and his crew would have just needed to cross a driveway and keep mowing… ALL his indirect costs are already covered, since he and his whole rig are already on-site.

A “normal” bid for my yard would have left him with extra efficiency and profitability because he’d already be there. But instead of bidding an average price or leveraging his cost advantage to bid aggressively, he went for the big score and walked away with nothing.

2. He might ‘turn off’ clients from hiring anyone.

A customer who knows nothing about the industry might just think “Well, that’s what it costs.”… So when they consider the economics of yard maintenance, their options might change. Buying a ZTR to do it themselves, hiring through some online service (you know the ones), or even buying one of those robotic mowers …might suddenly seem attractive.

The Other Stuff.

And of course the guy might’ve had legitimate reasons for bidding the way he did. Maybe he read me as a ‘no’ from the start and wasn’t really bidding to win. Maybe he’s gouging the neighbor and didn’t want to blow a good thing. Or maybe he’s just maxed out and will only accept more work at premium prices.

But for anyone trying to build a lawn care business, I think there’s a lesson hidden in there.

More than one path

As you strive to build your business, certain jobs will be more profitable than others, and logically, those jobs will become your focus. You might put your focus on winning high dollar jobs, or another successful strategy is to focus on winning more “regular” jobs you can do efficiently. As companies focus on their most-profitable work, we often see one of two approaches.

  1. Charge a premium and keep your prices high. (Make your money on Margin)
  2. Keep your costs low, do more work, and keep more of what you make. (Make your money on Volume)

One of these approaches might be your ‘go-to, but don’t ignore the other. A blend of high margin and high volume work will help you build both revenue and profitability, and having different kinds of clients lowers your risk if the market changes.

And just like you’ll never make a million dollars mowing yards for $20 apiece, your huge profit margin only matters if you can also build scale.

Just something to think about ~ The Go iLawn / Go iPave team

10 replies
  1. Philip Germann
    Philip Germann says:

    Interesting-
    I think this article would have more credence with some actual numbers. Now I understand-the concept is good-but I question how high the cost really was…In our area, corner lots with sidewalk get bid at the same rate as regular lots by a lot of folks. The fact is, they take more time. More edging, more blowing. I bid them higher and lose the bid, probably by someone who thinks I am $10 higher than my competitors. What they do not realize is my competitors are subsidizing the price of their corner lot cut from other lawns. I know this is a bidding concept, but most of the time, if priced higher, there is a reason. Lawn care guys don’t do a good enough job of projecting nuances.
    Another thing to consider-prices are rising in our industry at a rate we have never seen. The general thought is that due to efficiency (software, gps tracking, cell phones, better zero turns, better herbicides), general prices fell about 20% between 1990 and 2005.
    Now, a labor shortage is driving up labor costs 10% or more per year, and this has been ongoing. Some of this is good-labor stayed stagnant for too long. My dad can remember getting $10/hour as a masonry laborer in the late 70’s. The fact that laborers were not getting a lot more than this 20 years later was unsustainable.
    As these labor costs jump, and even at the higher costs, positions go unfilled, companies are both raising rates and doing less work. I have seen several competitors simply quit mowing this spring, mid season. Landscape work is more profitable, and if they can’t hire, they turn the customer loose.
    Steve Caesre, a well known industry consultant, says lots of his customers are raising prices between 10 and 25% in the last year to help them size properly for what they can hire and pay their guys. So while your point stands, this is a rapidly, rapidly changing game right now.
    The price you were quoted might actually be accurate, or you might find it was accurate-the “status quo” was just changing their game a bit slow, or you did not realize the game was changed.

    Reply
  2. Dave Welsh
    Dave Welsh says:

    We use a Dilution Worksheet to determine how adding a new job to a certain area (increasing density) affects the performance of the whole group of jobs. I don’t agree that ALL of the indirect costs are covered by adding the next door neighbor of an existing customer (fuel being the big one), but the overwhelming majority definitely are. We job cost groups of jobs or neighborhoods all together as one job to determine the profitability of the whole group. This can help you keep your pricing consistent and profitable. It also allows some flexibility when you’re in a competitive situation. And BTW, Go iLawn can be very helpful with this. Building density has been a huge profitability booster for us!

    Another thing to consider would be the scope of work that you’re proposing as opposed to what the prospective customer is currently getting. If you’re going to be edging sidewalks and curbs every other week and the new customer isn’t getting that service, then a higher price is justified. Just make sure to point that out.

    If anyone would like a copy of the Dilution Worksheet that we use, shoot me an email and I’ll send you a copy, or you can find it on the NALP website in the Business in a Box located in the Member Center.

    [email protected]

    Reply
  3. Joe Williams
    Joe Williams says:

    Thanks to everyone who had something to say about this week’s post. I wondered if posting this bit from the customer’s viewpoint might strike a nerve. Clearly this is an important issue, and our thanks to you all for your input. There were some great points made about how you quote and estimate. I’m putting together a better explanation of how I came up with my numbers, and I hope to post that here soon. They are, of course, estimates and opinions, and I’ll let you guys tell me if I’m way off-base.

    Reply
  4. Joe Williams
    Joe Williams says:

    Since we all like to see the “real numbers” I’ll explain how I came up with mine.

    1. The parcel is an irregular residential plot of about 0.7 acre. Between house, driveway and beds, you’re left with 17,500 square feet (0.4 acres) of lawn with minimal obstacles. (8 large trees)
    a. The crew was 2 guys with commercial mowers and gear, running a 48” stander and a 60”(ish) ZTR sitter.
    b. Running fast (5+ mph?), they do the neighbors’ 2.2 acre plot ( with 54,500 ft2 / 1.25 acres of lawn) in well-under an hour elapsed time (x2 guys), all-in (mowing, string trimming, blowing.)
    c. I estimated they should be able to handle mowing, trimming and blowing in 20 minutes (x2 guys) if they are efficient, 30 minutes if not.

    The quote was $150/occurrence. No idea what they’re getting for the plot next door.

    In the Cincinnati market, we know big commercial landscape companies that make $ millions selling their service at something like $40/man-hour. They know their costs and turn a sustainable profit at this rate.

    We also know small residential landscape and mowing companies that quote a $100/hr rate for anything they do. Normally this is one guy, working solo or 2 guys in one truck, who mow and do related landscaping labor and base their estimates on this hourly rate, which also covers all their indirect costs and overhead.

    Based on these assumptions, here’s the numbers I used

    • A per-hour labor rate of $75 – $100/hr. (median is $87.50)
    • Between 0.7 and 1.0 man-hours to do the job. (median is 0.85)
    • ($87.50/hr x 0.85 hours = $74.35)

    Frankly, a quote of $100 wouldn’t have shocked me, but $150 did.

    Reply
  5. Tim Henry
    Tim Henry says:

    A number of years ago I tried the very approach that you referred to. The basis was that if you are doing two or more lawns next to each other the price can be adjusted downward for each participating client. Concept is good but I soon found out it can come back and bite you.
    In our case, or should I say my “learning curve” we had 4 clients on the same block. All yards were similar in size so we cut a deal for all 4 clients. Problems soon developed. Client #1 did not pay so service was cancelled. Client #2 sold the house and buyer did not want the service. Client #3 installed a pool and wanted an additional discount due to reduction is size of yard. That left us with Client # 4 which was being serviced at the much lower then normal rate due to the discount based on the other 3 clients. Client #4 would not accept a change in rate and cancelled service. For all intent and purpose that ended the idea of “neighbor discounts”
    I have since obtained the services of “Go I Lawn”. Every lawn is measured off of the computer and price is based on that measurement. I have a set rate for services based on the size of property. I do have a minimum for mowing of $45.00 which covers up to 5000 sq. ft. The price then increases on a per 1000 sq. ft basis. We are mowing 150 residential properties per week and the pricing program works very well. When someone tells me that they can have the property mowed for $25.00 to $30.00 I politely ask them to tell me who is quoting those prices, as I would like to know when their bankruptcy sale is taking place.

    Reply

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