Cost of living is going up. Is your cost of doing business rising, too? Chances are it is. Are you raising your rates or paying employees more? Are you doing anything to change with the market? These LawnSite members say location and customer demographics play a big part in their decisions to raise rates — or keep them the same.
MARCUSMAC99: From Bloomberg today: U.S. Consumer Prices Show Biggest Annual Increase Since 2012. The U.S. cost of living rose in February, while prices increased from a year ago by the most since March 2012, reinforcing the view that inflation is in line with the Federal Reserve’s goal. Compared with February 2016, the CPI was up 2.7 percent.
If you have not raised your rates for 2017, or [are just] strongly considering it, you are missing the opportunity. The bottom line, the numbers point out that your costs are going up. Your billing rates need to go up, too. Time to start making up for lost rate increases since the crash in 2008/2009.
FLC2000: I’m raising mine. There are some houses I do that have not gotten a bump in five-plus years. It won’t be a big one, 10 to 12 percent, but it will be a raise nonetheless.
Charles: Consumer price index doesn’t apply to lawn care. Everybody knows the faster you can get the job done, the less you should charge. The rest is newbies filling mailboxes with “1 acre for $25.”
JMK: I’m raising mine, but keep in mind a cost-of-living increase doesn’t always equal a wage increase, or the wage increase doesn’t match the cost-of-living increase.
Mowing clients may see their cost of living increase without having the corresponding wage increase. If the client’s cost of living goes up and their wage remains the same, they may adjust the budget by getting rid of the perks, which can include lawn maintenance. Cost of living is calculated by needs, not perks.
Because of the cost-of-living increase, lawn care employees should be getting a raise. From reading the “I can’t find good workers” threads, I’m willing to bet guys on here will raise their rates without considering giving their employees cost-ofliving raises. This puts them in the same boat as your clients: having to make a choice between the needs and the perks or quitting and getting a better job, as well as determining which perks are more important.
So, the question should be: How much should someone raise their rates and adjust numbers and efficiency to compensate their employees properly while maintaining their client base and affect profit as little as possible?
Ijustwantausername: My prices are already well above average so I am staying put for now. Everyone will be paying a 3.5 percent credit card fee going forward if they use that method. Credit card fees are getting awful. I generally will go up every two to three years or so; other than that it’s not necessary for us.
Heritage Lawns: Good advice. We try to target higher income clients so that this is never an issue for them. Have a great and profitable spring everyone!
Mdirrigation: I have taken prices up year after year. It’s business. Have I lost jobs? Sure have. Have I priced myself out of some markets? Of course. But ask yourself, ‘Why race to the bottom?’ If you don’t raise prices, 10 years from now you will be making the same money for the same work. Everything else goes up — trucks, equipment, insurance. So you either do more jobs to make more money or you raise prices. With a $25 lawn, every year raise it 5 percent. Year one is $25, year two is $ 26.25, year three is $27.56, year four is $28.94. Doesn’t sound like much, but add it up times 50 lawns a week — it makes a difference.
weeze: My prices are usually on the high side already. I’m going to charge $30 or $35, not $31.75 or $33.25. Just seems dumb to me to fool around with that. I guess once you have a full schedule of customers, you can try to raise the price on a couple to see how it goes. I don’t have a full schedule, so I haven’t gotten to that point yet. I just price everything to where I’m making at least $50 to $60 per hour.
marcusmac99: The expense of credit card fees is a good point. Over time it does add up. We are starting to see labor rates go up on the west coast of Florida. Luckily, gas and diesel costs are about the same as last year. But, with all the building continuing to happen here, labor for landscaping that shows up and does a decent job is costing more. It costs even more money if they have a valid driver’s license and good driving record.
larryinalabama: I don’t know how many survived the drought last year. I’m not sure if I can hang in there at any price. Nonetheless, I’m still positive about this year.
oqueoque: This time of year, there are a lot of guys handing out fliers and advertising. In a couple of months, I usually start getting calls from potential customers that say they have work and most of the landscapers they called were too busy to reply.
If you raise prices in a couple of months on your existing customers, rather than now when the customer is receiving fliers, you will have a better chance of seeing your price increase being accepted. If you lose a few old customers in a couple of months, replace them with higher paying customers who are having problems getting your competition to quote them or even return their phone call.
RussellB: My customers are happy, my employees are happy, and I am happy. Why should I change anything?
Charles: I used to raise prices every few years. I just found out you risk breaking the friendship bond with the customer when you do that. Now you are no better than cable TV people. They wonder each year if you will jack up the price again.
GRANTSKI: I definitely can’t justify raising rates across the board. Half my lawns pay $70 to $100 an hour. I threw this idea out there before: What about raising rates but add a “complimentary” service? Maybe a free slow-release fertilizer since that benefits both parties? Or a free hedge trimming? Maybe add two free edgings per season?
ZachBreeden: I’ve found that you can usually raise prices pretty easily on clients you’ve had for three years or longer, as long as it’s not an overly significant increase. Humans are creatures of habit. People like things to stay the same way. And if you do really good work, and you’ve got your groove in with certain clients, you know them, they know you, you know what they like and don’t like, and you can kind of read their mind. Usually they don’t bark much if you go up $5.
hackitdown: We are raising our rates. I have been getting no resistance for two or three seasons on the higher pricing. It is a little harder to bump existing customers, but I do it when I can find an excuse. In my area, unemployment is at 3.5 percent, and wages have been climbing for a while. Minimum wage is $11 an hour here. I have been interviewing guys to work this spring, and they are already making $16 an hour. Those are the facts. Like all pricing decisions, it is all about location. If the economy is dragging in your area, it will be more difficult. I live 30 miles outside of Boston. I’m sure I would be shocked to know what guys closer to the city are charging — and paying employees.
Read more on LawnSite: Why Aren’t You Raising Your Rates?