“In Your Own Words” is contributed from the lawn care and landscape forum at www.lawnsite.com, which has been named one of 10 Great Media Sites by Media Business magazine and has been chosen as a winner of the Most Engaged Media Brands for 2010 by min, a firm that tracks the media industry. Visit them, and join in the discussions.
Merkava_4: At some point, it would cost you more to drive your truck around than what you’re earning for that day. What price per gallon would that be?
kilgoja: Depends on what you drive and how far I guess. … If you drive 5 miles, which is .25 gallon of gas or less for my truck, and cut a yard for $50, then I don’t see how you are losing money. Make $50 and spend $1.25 on gas at $5 per gallon.
Turf Dawg: If my clients can still afford my services, then I am not closing up shop no matter what the price of fuel is. I may have to adjust my rates and get leaner on driving, but not shut down.
Merkava_4: So far it sounds like you guys could absorb quite a bit of an increase in fuel costs, no problem.
Scagmower48: My profit margins are high enough where fuel could double in cost and I will still make enough money, no problem. Net profits will definitely be down though.
NicholasMWhite: I don’t understand everyone who thinks higher gas prices are going to be the end of the world for grass cutting. The fact of the matter is fuel is a very minute expense. The major expenses in this industry are labor and equipment depreciation. Over all, fuel should be no more than around 3 percent of your gross sales. If you are a large business with 10 trucks and crews who run on very slim margins, a 25 percent increase in fuel will hurt a little bit. But, even a 100 percent increase shouldn’t put you out of business by any means. But, as a small one-crew operation, you should barely feel the 25 percent increase we’ve recently seen.
If fuel doubles in price, add a fuel surcharge, just don’t be ridiculous about it. If the cost of fuel doubled, your expenses shouldn’t change more than $1 to $2 per cut, so don’t charge your customer a $5 fuel surcharge.
I know most people are going to tell me how stupid I am, but it’s just the facts. Also, people need to stop whining about it. There is nothing you can do about it. You can’t get by without it, so don’t bother complaining.
Lawnut101: I agree. You just need to adjust and be fair. If you would go out of business, I would think you aren’t making enough in the first place.
american dream: How about raise your prices to cover the added gas expense, but I forgot this is the only industry that still works for 1985 wages! You know I’m right.
ncknaklawns: You guys who think it matters are either cutting too few lawns or are not really tracking what you spend on expenses. I could pick up one or two more lawn contracts and cover the increase. Now, if you’re overextended with expenses, the problem isn’t the gas.
Richard Martin: If gas gets much higher than it is now, you may start seeing some wholesale changes in the economy. Many, many businesses are already operating on razor thin margins, and these fuel increases may be the straw that breaks the camel’s back. A friend of mine runs a corner grill and he has seen his food prices increase by 40 percent in the last year, and he can’t even come close to passing all of that onto his customers. All of his vendors (delivery companies) are already tacking huge fuel surcharges onto his invoices, and he said he doesn’t know how much more he can take and stay in business.
Yes, it is true that the solo operator can absorb a lot of fuel prices, and the little companies with up to 10 or so can absorb them, but not as well as the solo. It’s an economy of scale thing in reverse. Generally, the larger the company, the thinner the margins.
One of my customers told me she could fill up their Excursion for about $90 last year. Now it costs her $130. Her husband runs a small aluminum gutter business. How much fuel price increase can they absorb before something (me) has to go just so they can afford to continue to live. This isn’t just about us. It’s about everybody.
Baytownlawncare: I am really pushing a referral bonus to clients to get their neighbors to sign up. I figure if you can make one stop and cut two or three, you are milking it. Most of my yards are within 5 miles of my home, and I have established most of them on a big circle that comes back to the house. If someone far off calls (more than 10 miles), I just add $5 to the estimate. I figure that covers it all. Truck gets decent mileage and the mower hardly burns anything. I filled it up last week and it still has half a tank. Might have to gas it up today.
ncnaklawns: It definitely seems like a lot when you’re there filling up all the time, and it’s $100 to $125 or more. And, I hear you when you say that it affects larger companies more. This is primarily because workers don’t have a stake in the company, and the owner wants to make money. For owners who are not out there working the hard labor, compare this: as a solo, I do all the hard labor and make a profit. I come home and don’t get paid a dime to maintain the equipment, sharpen the blades, read all the tax laws and forms, do the taxes, do the banking. It is built into the contract price.
mowerbrad: I think a lot of people make out fuel prices to really be a bigger thing that what they really are. Yes, increasing fuel prices can cut into your profits and might even ‘hurt’ your customers a little bit, but I don’t think it will be the end to your business (at least for lawn care). Your truck and mowers will always burn the same amount of fuel, no matter if gas is $3 a gallon or $5 a gallon. So maybe there is a 25 percent increase in fuel costs. Either pass it along to your customers or ‘eat it.’ It’s very easy for you to tell your customers that if gas gets above $X a gallon, you will have to tack on a $3 or $5 surcharge to their monthly bill to help cover fuel costs. A few bucks a month isn’t going to lose you customers.
MOturkey: The only ones who will have to park their equipment because of high gas prices are the ones who are lowballing their prices. That’s going to bite a lot of them in the a** this summer, just like a couple of years ago.
fireman9: I’m not worried about raising prices, just going to do a few more every day to cut down on my route, save some driving and get a day off.
Baytownlawncare: I guess we can fire all employees and revert to running a $100 push mower, trimmer and blower out of the trunk of 1974 Gremlin, and only get 10 yards a week mowed. My cheap little push mower will seriously mow about three to four yards on a quart of gas, but is slow. Just thought I would be funny. I really don’t think gas prices are really going to affect lawn companies until we hit $5 or $6, and at that point start charging $2 to $3 dollars a client to cover costs.
fireman9: Almost all the work I’ve taken on in the past few years I’ve priced based on fuel being around the $4 mark. With the exception of some of my original customers, who are mostly retired on fixed incomes, everything should be just fine. The oldies have been good to me and I can take care of them by absorbing the fuel price increases for their customer loyalty and referrals over the years.
Pressedun: It’s not just that the gas prices will go up, it’s that everything else will, too. Shipping costs will be higher, manufacturing costs will be higher and that means higher prices for everything you buy. I don’t understand why people just think it’s only the gas prices going up—think about everything else that it affects. Your cost of living increases while taking in the same amount of money.
krackerjack9: Just add a fuel charge. Around here everyone pays it and expects it.
Kelly’s Landscaping: I would say after $7 per gallon, we would consider the option of shutting down. There is definitely a breaking point. Perhaps $8, but pretty sure by $10 it’s death. I spent $12,900 on fuel last year. If that number doubles or triples, I do not know how we absorb that. And, for that matter, pass it on to customers that just lost their jobs and now have to spend $10,000 a year for oil for their houses. Obviously there is a breaking point, but then there is also time. Does this happen this year, or slowly in 25 years? A lot can happen in 25 years. [In]1986 my first job was $3.80 an hour bagging groceries. Today they pay close to three times that here. So as long as the inflation is slow, it’s not that bad, but if were talking one to two seasons, we’re screwed.
MOturkey: There are two types of people: those who always think in terms of gloom and doom, and, well, those who don’t. One of my best friends is that way. He’ll get excited about doing something, then just as soon as any obstacle presents itself, he goes all negative and is ready to throw in the towel.
To the best of my knowledge, I’ve not lost a single customer because of the economy or inflation. Some have asked me to trim their costs to the bone, but they don’t cancel service altogether. Do what you have to do to maintain a reasonable profit margin, worrying about things you can control, rather than dwelling on those you can’t.
krackerjack9: We just got a truckload of fuel the other day; it was $27,851.22 for 8,000 gallons. Right now we’re using about 11,800 gallons per month out of this plant. The trucks on average get about 3.8 to 4.4 mpg. Some jobs we’re adding a $100 fuel charge for 50 miles or less; others that are just a pain to get to due to roads, and speed limit on the ranches is 15 mph, they get a $300 fuel charge.
Recession Proof Mowing: I can make money off a $25 lawn if I had to pay $5 per gallon, it’s just ‘how much margin to make what you want to make’ that’s the question. I’ve got cheap labor, so high gas won’t push me out. My subdivisions are priced well, as are my churches and residentials. But, if you’re asking if high gas prices are a kick in the nuts, that answer is ‘yes!’ Gasoline at the pump would have to be $10 per gallon where I’d radically change up my business plan across the board. But, if gas is that high, there would be riots and so much calamity that mowing yards would be the least of my worries.
GarPA: You are right on the money. Even if it goes to $5 a gallon, it’s not the end of the landscape business world as we know it. As you say, add a dollar or two per service call and drive as efficiently as possible. If $4 a gallon of gas is jeopardizing the survival of your business, you have more serious issues that will likely take you down before gas prices will.