Home Service Pricing EXPLAINED in 1 Hour (Do This Now)

My name is Mike Andes. I'm the founder of Augusta Lawn Care. We do over $50 million in mowing grass. If you're a home service business owner, this video is for you. It's a marathon of questions about how to price your jobs to maximize your profits and when to raise prices. So sit back, relax, and use the chapters down below. If you want to skip forward to the next section that might be more relevant to your business, let's go ahead and roll the tape.

So I've gone over in the last two years, essentially a time every time we're on site, figuring out kind of exactly how long a place took. And then what I've done is like just using kind of Google Earth, measuring out square footage and just essentially trying to see if there's a pattern to be able to standardize this. So essentially somebody else can start giving out estimates.

But the.

The fact of it is, is, like, there's no pattern I found between square foot size and. And the time it takes. So I don't really know how to teach somebody else to quote because right now it's just like, it has to be me. And I have to go out in person. So I gotta, like, leave kind of like the office, drive there. It's, you know, it takes an hour to give out one quote.

Yeah, we all know. No, nothing to do with that. Mercy. Okay. All right, so.

First off, are you trying to grow right now? Are you trying to make the business as profitable as possible?

It's a bit of both. I'm trying to.

It's one or the other. Are we trying to grow revenue this year? Are we trying to raise prices?

I guess raise prices after profit. I want to essentially want to make myself irrelevant. This year is essentially goal.

Okay, what size is your distortion?

We made 300k last year.

All right. All right, go ahead.

Yeah, so three. We had 300, essentially. But nothing can happen without me there. Like, I tried taking one day off last summer, and it was like, it was a nightmare for everybody involved. So it's just. The goal for this summer is obviously to make a little more money, so increase the profits, but like I said, make myself irrelevant, and then next year we can work on growing from there.

Great. So in order to achieve this, we need systems in the business. In order to create systems, there are two things we do and two things we avoid. We avoid complexity and we avoid.

Custom jobs. Anything custom, and then we run towards simplification and standardization. So when it comes to pricing for lawn mowing, if that's the current constraint, we're trying to talk about. We can throw this into this matrix and say, okay, is this simple, is this standardized or is this custom? And is this complex? And so right now, you visiting the property, having to look at every single one, every single job is custom. You're like, well, it's just mowing.

It's simple.

But every single job is going through Jordan's eyeballs in order to come up with a price. And so what I would recommend is how do we simplify this process? Yes, we could measure the property over the phone and do it via Google Maps. I think we should. I would say, can we simplify this more? Because there's going to be times people miss, miss a section of property, et cetera. I would say, can we just have a small, medium and large. Can we just say any property that's under 5,000 square foot, is this between 5,000, 8,000, is this between 8,000? 12,000 is large? Anything about 12,000, I'm going to have to do a drive by, for example. And so that way there's way less room for error. And you're like, well, what if it's inaccurate? It will be inaccurate. But we will also do is prevent you spending an hour going to the customer's property. Because right now that's costing you 80 to $100 to do that estimate is free. No, no. Because right now the alternative to you doing the estimate is doing the work and generating 80 to $100 in revenue. So if you have to go drive out there, you are paying.

The equivalent of 80 to $100 to go do the estimate. And so I'm okay being inaccurate. The very worst case scenario, the worst case scenario, if you do an estimate over the phone, it's slightly off, is the very worst case scenario is you have to raise the price to the customer. We do it on less than 1% of customers inside of Augusta. When we do pricing over the phone, less than 1%, that's the worst case scenario. Now what we like to do is take the price. After three months, we're going to go on copilot, we're going to the budget hours, and we're going to look at the actual hours and the ones that we're not hitting budget hours, we're going to raise prices. But now I've created the system, and that is very simple. I have three prices, small, medium, and large. And then they're going to fall in one of those baskets. And then in three months, I'm going to have real data as to whether or not I Need to raise their price. And then I'll do that based upon that. By the way, there's going to be people that will accept the large price for $79 a week when if you would have gone to the property, it would have 59. And we're not going to lower the price. We're going to roll with it. But they're happy to pay that because you made it simple now for them to get an estimate fast, for them to get an estimate, and your close ratio will go up because people don't want to wait for you to come to drive by their property, send them the quote, et cetera.

Yeah, I mean, that, that makes sense to me, but it's more just like, okay, so how. How do I determine the prices in a sense, for that small, medium, large?

So I would be looking at your. Your current properties. I would take. How many do you have? How many customers you think you have now, Jordan?

I have about 62.

Perfect. So we're going to do an X axis and a Y. I'm sorry, Y axis and the X axis. On the X axis, we're going to do price on the Y axis. We're going to do square footage from zero to whatever square footage you have, and then just literally go in Excel and do a plot graph of all of those. And you're gonna find very quickly they follow a general trajectory. And you're gonna say, okay, these ones are small, these ones are medium, these ones are large. And you're gonna look down on the excess and see where does that fall in the square footage. And have a very good range as to what small, medium, and large looks like.

Okay.

And then.

Obviously, like, I think we all know, like, the biggest time thing is trimming. That's the biggest. So do you, like, factor in. So, like, would you do like a small, medium, large? I'll try the axis idea.

And then.

Just kind of based on, I guess, sort of what I know from doing them, I can sort of make guidelines on, like, consider this, like an easy trim, this normal trim, and this like heavy trim type thing.

I wouldn't even do that. I would do it based on square footage. I would do it based on square footage and, and realize that, yes, your accuracy will go down when you do this. Your close ratio will go up because you now you get the estimate to the person immediately over the phone instead of them waiting a day or two. It saves you a hundred dollars for every single estimate. They're like, what if we lose a customer? What if. What if I'm a Little what if I'm $5 off? That's 20 mo's that you just saved. You could do their property for 10 times and then raise their price and still be ahead of spending an hour doing a drive by estimate for them. Okay, like doing drive by estimates stinks. Doing in person estimates when you meet the customer really stinks. The cost of doing that is we don't even calculate because I just calculated your time little on the fact you have another vehicle running there. You have tires, brakes, etc, you're talking about $150 to do a drive by essence on a mowing job. If you spent that on marketing, we double you double your leads, you know.

Okay, so I'll give the, I'll give the access to try, I guess.

Yeah, I'll save you time. I save you time. Jordan, I tried it out. It works, I promise. Okay, we did. Across 170 locations last year, every single one blew it out of the water. It's not even close. So as long as you're okay with a slightly less accurate estimate, knowing that in three to six months, once you've proven your worth to the customer, you'll raise prices and 95 of them will stay because you do a good job, you're good.

I'm just looking for someone to talk me into raising prices because I'm deathly afraid of it.

Okay, let I can convince you very quickly. Here we go. So right now, how many trucks do you have?

Oh, we have two.

Okay, we got two trucks. How many employees?

We got three.

Okay, we got three employees.

Four. Four, including myself.

Let's go ahead and go with four. Great. And so I'm going to assume that you have two guys in each of the trucks. That's kind of what you're rolling with right now.

Yeah, got it.

All right. And do you use budget hours in your business?

So we're switching to P4P this year. And that's kind of, kind of like where I'm confused because you know, a lot of our loans are underpriced. So it's like, got it. You know, probably, I think probably 40, 30 to 40 of our loans are probably underpriced. So it's hard to, you know, convince like your guys that they're going to be making, you know, extra money whenever.

100.

It's hard to even make the P for P on that job.

Yep.

If your pricing's way off, P4P doesn't do a lot because the guys won't make enough money. Right. And if they're not Making enough money on P for free, there's a good chance you're not making enough money either. Right. And so let's go ahead and break this down. So we got two trucks, four employees. We don't have budget hours right now. Because if we had budget hours, I'd be saying we have a capacity of about 140 budget hours per week and we can work with that. We don't have that luxury. So let's work with this instead. How many mowing customers do you currently serve each week?

We have about 140, 130, 140 a week.

Okay. And right now, without having to get more trucks, more equipment or employees, and assume you guys work like 40 hours a regular week, how many customers do you think you can get to without having to either work overtime or have to get more trucks and equipment?

How many customers can we get to, like, currently?

Yeah. Do you think, like, if you got 160 customers, do you think you'd still be able to get it done in a 40 hour?

No, no, we go into overtime, like, with what we have now is just too much.

Got it. Okay. So let's just assume 140 is basically your limit because, like, right now you're saying you're already pushing that envelope. Yeah, got it. So then this is really easy. All right, great. Fantastic. So what you're going to do, because you don't do budget hours and you haven't been tracking likely your track time on the job for like all of last year. So we don't have data.

No, we haven't.

Right. So fine, that's great. We're still going to raise prices. Here's what you're going to do. First off, you're going to talk to you and your crew and you're going to sit down, go through all your customer base. You could probably do this yourself because you're on the properties a lot. And that is like, which of these customers, like what, what? The one third of them that you said, like, they're way underpriced. Which ones are those? And just raise them by like a solid 30 to 40%. So if they're, if they're. And that sounds like a lot, but if they're, if you're charging them 40 bucks a cut, that's like 12 bucks, 13 bucks. Right. So it's not a ton. And. But that 20 or 30% is going directly into your pocket. And guess what? If you lose them, you don't care because you're going into spring rush and you're going to be going way over, you're already at your limit. Like you. In order to get more customers, you have to lose some customers. And so we're gonna do two things. Number one, all new customers are going to be charged a higher price. So what's your minimum for mowing right now?

49.

Great. So let's go ahead and move that to 60 bucks. Okay. And I'm assuming you're in more a rural area, larger property sizes?

No, we actually aren't. We have a lot of quarter acre lots. It's a pretty populated, wealthier area actually.

Okay, well quarter acre lots in my area is kind of big, so. All right. You're not like post.

Okay.

Okay.

Yeah, much larger. Okay, got it. So let's just say, okay, our minimum, we 50 is not too bad. But what we're going to do is we're gonna do two things. Number one, we're gonna raise all the prices on every job you know is just way under bid. Right? Way under bid. You could probably list off 20 of them to me right now. There's the customers names. We have to raise prices. Oh yeah, what, what I also want to do though is on all 140 of these, raise prices by a flat dollar amount. And the reason I say flat dollar amounts because we don't have the data right now to compare budget hours versus actual hours. Right next year after going through copilot and you have all the budget hours in there, which I would, you know, that's a different conversation to get budget hours figured out. But like once you've done that then you would run a report like which ones have budget hours of X and Y versus how long it actually took. And all the ones that taking way too long. I'm going to raise prices on them. But for now I just want to do a flat price increase. I'm not looking at which jobs need to be raised prices on. I am simply looking at the fact that I can only take 140 customers and I have hit that limit. And I will have to say no to new customers or I will raise prices until I go down from 1:40 to 1:20. And losing 20 customers to you is going to seem like a big deal. But I can promise you in the next four to eight weeks you'll get all of those 20 new customers back because you're going into spring rush and you're going to charge a higher price to them. Okay, so new customers are getting a higher price, but you're going to, you're going to have to raise prices on existing customers in order to be able to make room for new customers, which you're inevitably going to get because you're going into spring rush. And so if on 140 customers, like, I want you to raise prices by at least $10 a cut, at least.

Okay, so instead of a percentage, you're saying do it, do a dollar amount.

Well, here's the thing. The reason I'm saying a dollar amount because I want you to do it. I just see consistently simplicity in this case is going to be the best. So what I would probably do if I was you is anything under $60 per hour per cut is going to get ten dollar price increase. So if they're getting charged 50 bucks a cut right now, they're going to 60. Anything above $60 per cut currently give them a 15 price increase. So if they're currently getting charged $70 a cut now, they're going to be at 85. And then what you're going to do, have you started mowing yet or not?

We will in a week.

Great. So tomorrow you're going to do all of this and you're going to send them all an email. Say next week we start our mowing season. Here's your pricing for the upcoming 2024 mowing season. If you have any questions, let us know. We look forward to seeing you and serving you at your property this upcoming year. That's it. No explanation long of the economy and inflation, all this garbage. All right. Yeah, the prices. I guarantee you if you do this, you will probably lose 10 to 15 customers. Probably less, to be honest with you. But we actually need to because you can't take any more customers. But here's what's really cool. If we average, like if you're over $100 per cut, I want you to be charging $20 more. So if we can average an extra like 12 bucks a cut and we mow someone's lawn like three or four times a week, that means we're making an extra like $40 per customer. $40 times 140. We're making an extra $5,500 in straight profit by doing this price increase. I also have a tense to believe that if you raise these prices, you'll then be able to do pay for performance because now your prices will be at a high enough margin to where you can pay your guys on P4P and they're incentivized because there's enough meat on the bone.

We're in Kansas. What is there any that you've seen.

Around there as high as possible. So really, really the what you're asking is like, you know, how do I price it? This is the thing. You can do it based upon what everyone else is charging. And I could tell you $50 an hour. I could also tell you $300 an hour. It doesn't really do you any good. Value based pricing is what you want to do, which is I'm going to price based upon how much are people willing to pay, because that's how you extracted the most profit from it. And so what I recommend is using your close ratio as a gauge as to whether or not you are too high priced or too low priced. So like, do you know approximately your close ratio, Alfredo?

I think right now it's around 70, but I know that our pricing on the installs, it, we charge I think 70. We used to do 70 per hour, but it, if you included everything in it, it was more around 50 or 60. So now I'm calculating everything by 80. But I don't know if that's gonna shock everybody and lose a whole bunch of people.

So it won't. So there's two things. One, you're really low price for sprinklers. Really low. And the reason is, even if you didn't tell me your pricing per hour, I would be able to know that because 70% of people are accepting the bid. And I believe if you want to go to 80, you'll still close like 68% of jobs. And the reason for that is because everyone thinks that if I lower price by, or if I increase price by 10%, I'm going to lose 10% of my estimates. Not true. It's not a linear relationship. We, we just raised price by 25% of my location and our close ratio went down by 2%. And so like, the reason I say that is because if you have a close ratio above 50%, you are in growth mode, in my opinion, at 70. So are you trying to grow really fast, Alfredo, right now or not?

No, we're actually trying to, I think we're trying to go into profit mode.

As much as we can. We want to be there. This is going to be fun. So you're going to now start charging at $90 an hour, no more, no less. I would actually say 100, but let's just be easy. Let's do 90. Okay, so that's like a 30% price increase. I predict, I predict your close ratio will still be above 50%, but now you're going to double your profit margins. And so now what we're going to do with this little fun little game is you're going to do this for the next month and you're going to tell me in the Facebook group what, what happened. Like an almost guarantee your close ratio between 50 and 60% and you'll, you'll make twice as much profit. Now if you told me, hey, we're trying to grow as fast as possible. We have all these trucks we're not using. We have a bunch of excess capacity employees we're not using, great, keep closing at 70% and grow. But if you're trying to make more money, I can guarantee you if you go from $70 per hour to 90 per hour, you will go from a 70% close ratio, maybe, maybe to 55 to 60%. And so I know it sounds scary, but I've seen it so many times. Like, I just have a lot of confidence around it.

The only thing that's kind of working against this is right now our city is under water restrictions. And for sprinkler companies, a whole lot of that, they've narrowed down our watering day to only one day a week. So we're not trying to go that high yet. And we're also trying to transition because just the brand name right now, I don't think we have that, that $100 worth. But I think by the end of this year, we will have the systems in place. We will have trucks are standardized and whatnot. We could, I, I don't know.

I disagree. I disagree. Here's why. Because every single time you send an estimate, the customer votes on your pricing. And right now, 70% of people are voting that you're lower, you're too low of price. How do I know that? Because the reason that a customer accepts an estimate is because they see value higher than price. And so every single time you're, they are casting the vote that they value your service more than what you're charging. And so if 70% of people are doing that, I know for a fact, I don't care about water restrictions. I don't care about the color of the moon or what the weather is looking like. Your customers are telling you to raise prices. It's like, okay, I'm not guessing. I know 100% with pure certainty that if you raise your prices to 90 an hour, no, no customer will even know, first off, because they only see the price in front of them every single time. You see every single estimate, you see the pricing every single time. That's why you get emotionally involved. Like, I don't know if we can do it this year, maybe about next year, like, okay, yeah, maybe next year we'll make money. Like, just make more money now. And the reason I know that it's because, like, 7 out of 10 people see greater value in your service than the price you're charging. And so there's. There's a delta. There's a difference between right now your price is here and their value is here. What's going to happen is you're going to raise price. You're still below the value, and they're going to still buy. And maybe it's five or six people instead of seven out of ten, but it's still going to make you twice as much profit.

We are located in Montreal, so we have kind of, compared to other cities, I think we have a pretty lower price we can charge compared to other guys. I was wondering, do you think it's worth pursuing while we're already heavily involved in lawn care? Do you think it's worth pursuing that even further? Or do you think it's wiser to maybe use that as kind of like a stepping stone to other projects that are maybe higher revenue, higher profit?

Okay, so right now, are you kind of maxed out? Like, do you have a ton of excess labor? Like, could you grow by 30% without buying more trucks and equipment?

Yeah, we. No, we. We'd have to buy more equipment for sure.

Got it. And so really, like, right now, you're saying what, you're. What we're currently believing is the fact that we can't raise prices just because the market, like, we would lose too many customers.

Yes, absolutely. It's.

It's.

The prices are pretty low here and they're fairly competitive. So, you know, raising prices won't do too much.

When was the last time we did raise prices?

I raised them every year.

Okay, and what percentage do you raise them each year? Usually.

So we've done a couple purchases of client lists. So each client, fat, I guess, kind of increases at a different percentage. Generally, we try and keep up with inflation or a little bit above.

Okay, all right. And then.

Sorry, but I find we are getting priced out. Obviously, there's some that are fine with our price increase, but I'm finding it that I speak to my competitors. It's kind of a friendly market, and I do find that there is a threshold that people just aren't willing to pay more than.

And what's your.

And so I think we're kind of starting to get printed out.

What's Your close ratio?

40%, 50%.

Okay, yeah. Like so in my opinion, in my opinion, the close ratio is the determining factor as to whether or not, you know, your prices are too high. And so if, if you're hitting up against capacity, I. E. You in order to double or grow the business, you'd have to buy more trucks and equipment. I would keep raising prices until, if you're at capacity, you need to make more room in order to be able to grow. Like, I don't want you to go buy more trucks and equipment and just expand capacity. I'd rather you push down on demand by raising the price. And so. Yes, go ahead.

I guess my question was more like, should I, should I maybe shift into. Yes, obviously our lawn mowings. I think it accounts for about 65% of our revenue. But my question is, do you think I should shift more to maybe adjacent services where there is maybe a higher profit margin or I can increase my prices a little more without having to, you know, to the economy to scale thing with the graphs where, you know, it takes so much effort for not incredibly high return.

Yeah, like, honestly, like I hear this from everyone, that the reason I push back so hard on this, because I hear people in every industry say the exact same thing. And that is like, I'm price competitive. I can't raise my prices anymore. I should go do offer a different service. And we always think the next service is going to fix the problem. Now, do I believe having more services and, and selling more to the same customer is a good idea? Yes, because if I can have one customer and sell them three different things instead of one, I can triple their value per year, which means I can also spend more money on marketing and it makes more sense. And so I'm a big fan of having multiple services, but the idea that you're going to switch services and it's going to fix the business is like the most common problem that people have in our, in all industries. Like, there are people that, in the services that you currently are thinking of switching into that think that they should switch to different services because there's pros and cons of every single service. So for the guy that does chemical applications, yes, they might have a higher quote, unquote margin. However, they might own. Like I was talking to a really successful chemical company the other day, but they might get $300 per customer per year on average, sometimes less. And that's really difficult because if I have to spend 150 to acquire a customer, or in your case, if you purchased a client list, it's really difficult to make sense of $300 per year, you got to keep them for like five years to make 1500 bucks. Whereas with like, lawnmower.

Yeah, exactly.

Lower margin, 100. However, I'm able to get like $2,000 per customer by just having like a spring cleanup, a fall cleanup, and some mowing. And so.

Yeah, and that's what we really focus on. You know, like, we don't do any applications. We really try and stick to the bread and butter and the recurring services. For sure. It was just, you know, I. I guess it's more of a thought or. Yeah, you kind of answered it, but just maybe expanding it to fertilizer or aeration. Yeah, like, I'm more add ons.

Yeah, totally. I think, I think the answer is in. Is. Is in the add ons, right? Like if. Because every dollar you make from an existing customer is more profitable than going and getting a new dollar from a new customer. And so if I was you, instead of doing like, we're gonna go into chemical applications and we're gonna like, really expand that side of the business, what I would do is say, okay, we're gonna offer these couple chemical applications and I'm gonna upsell them via one click, estimate email or send text message to my existing customers during the slow season. And I'm going to try to fill my schedule with work that otherwise I wouldn't be getting during the spring rush. And I'm going to upsell my existing customers into this other service. But the idea that we're going to switch services is something that, like, I just really see people jumping into a new, different service because, like, oh, it's more profitable. They need to jump into it. Like, oh my word, I need five times as many customers just to make the same amount of revenue. Now all of a sudden, my overhead structure doesn't work. I've got to let, like, I don't have enough work for all these trucks and employees and all the rest of it. So I'm a bigger fan of trying to upsell your existing customers and having adjacent services that you can upsell them to. Big fan. And I just, I always see people thinking, thinking that switching services and changing area is somehow going to fix their business when the vast majority of us just need to hit capacity and raise prices. Like, it is boggling to me just how often that is the answer. And it's like, well, I want to grow and grow. It's like, well, if you're going to grow, you're increasing supply, you're increasing the supply. And when you increase supply, your price either goes down or you absorb more demand. Like, if you look at a price supply and demand curve, when there's lots of demand and it exceeds supply, I. E. You have way more customers than you can serve, you can increase supply, I. E. Buy more trucks and hire more people, or keep the same supply but raise prices, therefore bringing demand back down. But you'll still stay busy. That's why I'm such a big fan of, like, determine how many customers you can serve, determine how many budget hours you can complete each week. And once you hit that, then raise prices if you want to be more profitable. But until you do that, you can't really judge your industry or your service. Mix like that is when you can really determine whether or not it's profitable is once you hit capacity and raise prices. And in my opinion, until you have taken a year instead of, we're not buying trucks, we're not buying equipment, we're not hiring any more people. We're simply going to hit the capacity to number of budget hours, number of trucks, number of employees that we have. We're going to hit that, and then we're going to raise prices. And if we hit it again, we're going to raise prices again. And once you've done that for a solid year, then you can really distinguish whether or not that service is profitable. I just see this a lot of the time, so I just. That'd be my word of caution.

When a new lead comes in, we're obviously just going to get the quote to them as fast as possible for what they're asking for. But then when you're trying to increase their annual value, is it better just to present them with like a list? This is what we offer. What do you want to do? And then build out the package from there. I see billing obviously as being like one of the best options for that, since my area is really used to subscriptions. Or do you just try to let it upsell, you know, step by step as you visit over the course of the property?

Right? Yeah. So there's two ways, two ways of thought on this. One is they are in a buying window. They're buying from you already. We should be trying to sell them as much as possible and solving more of their problems. And then the second ideology is we need to solve their problem to gain their trust. And once we've done that, then they will buy more from us in the future. I think both are right. So, for example, I would probably put in your estimates. If they ask for one service I'm going to give them the package price as an optional thing. Yeah. So I would just have a second line item says optional and it says like 12 month program or name it something fancy and then it's super simple and it'd be just below the item that you know, they've requested. And then on a recurring basis, maybe quarterly, if they don't accept the package or like the more recurring 12 month plan, I'm going to be trying to upsell them that using text or email. And then you just want to be strategic in terms of when you send that. For example, you're not going to want to upsell them a 12 month recurring package when there's nothing to do on their property. Because at that time a 12 month package doesn't make sense to them. What you want to do is when they just had a massive bill for, let's just call it, I'm going to make up a number, 400 bucks for that month. You want to say, hey, by the way, for 299amonth across the whole year, we'll take care of all these other things. Yeah. And so you just want to be strategic in terms of when you pitch that.

Yeah. So spring definitely, like in spring when everybody's getting the, the, all the extras done, you just try to pitch those packages. And then do you think it's a good idea to like set up a separate page on your website? Is like almost like a checklist form. So it's like here's from on your website they can say we want full maintenance and they go in and they just check off. And then it comes to me as like a, a service request or whatever. Right. And then I have to go to the property and fill out the package and send it to them. Is, is that, or is that just too complicated on your website and people won't do that?

Yeah, you want to be careful with complicating any sort of 12 month plan on your website because most people come to your site like they have a pain point and they're like looking for one thing. So that's what they're going for. If you're going to package and bundle a whole bunch of other stuff into it, you got to keep it like deathly simple. And so what I would do is if they select, for example, what service are you on in Keaton? Sorry?

Well, we're full service maintenance year round, like, but we get really heavy six months of snow where it's just like a lawn and everything basically shuts down. Like it's Hard to even offer winter services. But yeah, it's all about increasing that annual value and just trying to set it up so that we're allowed to go in and take advantage of those opportune moments throughout the winter. Right?

Yeah. So I would have, I would have like mo only. And then I have another package like mo snow and all things. Property maintenance. Exactly. And then, and then just be like listing off the service that are included in that. But just don't get super technical. I see people way too often because we do winter services. I see people start like explaining all this stuff to the customer and like, okay, so if it snows, we're going to pull the one visit forward and then if it doesn't snow, we're going to put two weeks like, like, hey, chill out. At the end of the day, we're gonna make your property look good year round and we're gonna come during the off season and spend the same amount of time as wood. If you're mowing, that's it. And so simple as possible. If you can't say in two sentences, you gotta consolidate it. Okay, gotcha. Same thing with your upsells. Same thing with your upsells too. Like when you, when you're trying to get them from mowing to the other package, like trying to explain too much and like listing off tons of services can get you in a bit of a pickle. And if you have savings in terms of prices with the package, that's what we want to pitch as much as possible. Because that makes sense to everyone. If I can just say, hey, based upon last year you spent $1500 with us, this package is going to cost you $1200 per year and you're getting all this other stuff that, that makes sense to everybody.

Yeah, exactly. And like I was thinking more so because it's like our, our full package essentially includes like 14 points, 14 services. So it's like if you're booking at least eight, then we'll throw on the nine for free. Right. But we're also going to maintain like a minimum where if you're not going with, you know, either six months of snow or six months of lawn mowing, you have to be fulfilling four out of the 14 points or, you know, we're just essentially not a good fit for you.

Yeah, yeah. So as long as you can say that and as simplified as possible because 14 points, 4, 8, 9. Like, just like, hey, these are the two options. And if I can't say in two sentences. Yeah, so you got it.

We're trying to switch a lot of our clients over to the subscription based services. You know, one price, spring cleanup, thatching, mowing, all, you know, the full services.

Being in Idaho, north Idaho, we have a lot of snow. I mean we get a lot of snow, especially come the new year. Sometimes we get a lot, sometimes we get very little. I want to include that service in there somehow, but it's an unpredictable. It's not unpredictable service. We didn't do a whole lot last year. We did a ton the year before for. And we haven't really hardly done any so far this year. Do I include that as a separate. Do I just have the subscription price for six months, maybe April through October and then pause that and then just do as, as the snow comes, charge that whatever that price ends up being. Or should I find an average and then include that into the price.

So from, from your perspective in terms of pricing, you're going to find an average. From what you tell the customer, what you want to protect is that 10% extraneous, very, very like 1 out of 10 years you get this crazy amount of snowfall. You need to protect yourself against that. So I would do is just say it includes snow, snow removal up to X amount of services and put that on the higher end. Like it's not going to be like a. Like you're just trying to protect yourself against the insanity of one year where it triples snow volume. You're not trying to protect against like a heavy season. You're pretty against like edge case horribleness that could wipe you out and you're going to make unhappy customers. And then usually they're going to read it like, oh, well, last year they only plowed me, you know, plowed the place like four or five times. They're doing up to 10. Great. Totally fine. So I would do that. Just have an upper edge limit. Some people do it based upon number of inches fallen, but then it's kind of difficult for them to keep track of and then you've got to convince them that there was that many inches fallen. I would just do based on number of services. It's like so up includes up to X amount of services. Okay, cool.

Thank you.

Yeah, it'll also protect you if you get a dumped on in snow. You can kind of make the excuse to them like, hey, we haven't got your property yet because we don't want to come five times the next week. We're trying to get down to two or three to preserve and you don't. So you don't Go over your budgeted number of services. It kind of protects you a little bit and you can use it to, from a scheduling perspective.

Okay, cool.

Yeah.

I mean last year at this time we've made, we made three times as much as we made we've made so far this year from snow and ice.

So thank you. The dependable kind of annuity of revenue, what you're giving up is the killer years. But then you're trying to get rid of the slim years. And I agree with that. If you can, if you can sell that.

Right.

If you can't sell that. You know, one thing I'll say is you want to sell this package when there's a ton of snow on the ground. Because what you're going to have is people that are paying three times as much for emergency snow service. And what you're trying to get is sell them on a lower price on a flat rate. Do not pitch this service. I would not be running ads if there's not a lot of snow around because they're going to be like, why would I pay you? I don't need you. They don't need you until they want you. And so I would just be careful around that. Like you want to sign up as many people as possible when they have really high bills. Okay, cool.

Yeah, I haven't pitched it yet. I've been trying to figure out what that even looks like. But I'll. Yeah, definitely wait till we get a little more smelling agreement.

Cool. And you can even create like three packages if you're like really like for example, both like you could have three packages. Hey, we have a six month subscription for mowing. We have a six month subscription for, for snow. Or a third package is a snow and lawn 12 month package and these are the monthly prices for all three. So you could kind of package it that way. The challenging part was packaging in general is budgeted hours. If you're doing like pay for performance, it starts to get a little more tricky. But from a pricing perspective, it's very, very straightforward.

Yeah, we have a couple places, a couple commercial sites that are just one price, 12 months or really six months actually just for the landscape season. But I find it difficult and I'm sure there's probably a way, but inside co pilot figuring out then how to make my budgeted hours, how to actually translate that into my efficiency on there. So I just have it priced at zero just so it can be on the schedule. But then I have to kind of track that on the back end of myself.

Yeah. So when you're coming with your pricing, every single service inside that contract, we want to have budgeted hours. So you're gonna have a level billing agreement inside of of copilot. And then inside of that, you should have visits for every single service, whether it be some of our weekly or bi weekly, some of our six months, etc. And each of those should have budgeted hours. And that's how you can still run pay for performance even inside of a level billing contract, because every visit needs to have budgeted hours. Otherwise, like, you're kind of running blind on the contracts and you don't know if you're ahead of schedule or behind in terms of the pricing. So if you need help with that one, Riley, feel free to book a call with atc. But like, switching from just like blanket pricing for contracts to actually like where you use the budget hours for every visit, your crew get way more efficient because when they show up to a job, they just see one visit with just the budget hours for that specific service instead of more of a blanket, like, hey, these are all the things we got to get done. And then they're figuring out when they got to get them all done. So we're in Florida. We have more of a level billing model. Yep. Our Q4 collapse is right in the middle when the demand is the highest in the summertime.

And you know, we go cash negative sometimes and.

And wait, your demand is the highest during that period?

Yeah.

What do you mean by that? So it costs the most to do it in. Okay. Your level billing. Yes. Got you. Yes, I hear you.

So we were thinking about going to.

A permo model, and I wanted your feedback on what's your close ratio right now? 50%. Are you trying to grow the business top line? So we're kind of splitting. We're going to. One's going to go in profit mode.

And we're going to go into another.

Location and grow that other location. I would test the new model with per pricing, per cut pricing, and I would. I would test that cash flow, because typically people are trying to go the opposite direction. From a cash flow perspective, I would say if you already have that set and established, I wouldn't fix it or change it. Especially if you're closing at 50%, it doesn't seem like a huge bottleneck. I will say if you then switch over to per cut price and it's 75% and you can raise your prices by 20% and get a 50% close ratio, all of a sudden becomes very profitable. Yeah. So I Would test the new model at the new location. Especially because you're focused on sales at the new location, the current one, you're on profit mode. I would just raise prices assuming you get enough lead flow and you're at capacity.

So you know lawn mowing, we have our reoccurring customers, the yearly customers, so they sign up for that contract for the year. So we normally do like lawn applications, shrub pruning, mowing, we do everything across.

The board for them.

So do you bid out at the end of the year, like to get them on track for the following year or. Because we've always waited till like January 1st and then we send out all of our new contracts for the year and this waiting game of until March hits when we start our first round lawn apps for our pream. Like, who's signing up, who's not? Like, where are we going to be? Like, this limbo guessing game drives me nuts.

And Change it to April 1st. Change it to April 1st. The reason is because if you have your April 1st is renewal date, you've already show up at their property a couple times. They're like, well, yeah, you're already here. You've already started the season. Also harder for them to switch because everyone else is super busy. So getting like a bid alone could be taking them a couple of weeks. So like they're almost forced to go in with you again. It just makes sense for them too because they need you to show up next week versus in January. The reason you're in limbo, because they don't really need you around.

Right.

So do your annual contract renewals during peak demand, April 1, May 1, whenever it is, I would just shift it to that because then if you show up at their property a few times the growing season, they're not switching.

Right.

Okay, well, maybe I'd start it. Well because we always started our first round lawn apps in March for the pream for crabgrass. So I could always bump it up then that way I get them on board.

And yeah, if you're like, if you're already half like you've already started the cycle of applications 100%, like, they're not going to switch. They're just not. First off, all your competitors are busy. They're not getting back to people, they're not answering their phone, they can't find enough employees. Like, so do it then. And also there you won't be in limbo because they need you to show up next week. Right. They'll, they'll definitely feel free. Like I would say this in a small market. The thing is, the reason is a small market also means you have less competition.

What do you think about storefront locations? Like how much, you know, is that traffic gonna really bring in if I get a storefront office? Because there's a few spots here in my small town where I'm like, man, if I was there with a sign, how much more is that gonna bring me in? On top of, I've actually adopted your instant door hanger quote thing too. So I'm gonna just. The first year I try those. But just wondering, you know, what does storefront really bring in as far as like extra traffic?

Yeah, like storefront for a home service business usually doesn't bring a lot of traffic. And what will bring the traffic in is the sign. And so what you can usually do is just negotiate with a business owner that has the property or the location you want to get a sign on their property. For example, if you went to a strip mall or a multifamily, like an apartment complex and say, hey, I want to put a sign up next to you, the highway, I will do all of your pest control for free indefinitely. As long as that sign is there, you'll get just as much exposure from that sign as if you would go pay 1500, 2000, $3000 a month for a retail space. And trust me, your walk in traffic from that, you would be lucky to get one or two a week. Like, there's just hardly any traffic for home services when you have a physical space for services. If you're selling other products. Like if you were like, hey, we're going to open up a lineup where we sell traps and bait and other pest control products. That becomes a conversation of probably getting several people in their day. And then you try to upsell them from the product into the service. That could make some sense. I could, I could see, I could get on track with that one. But in terms of actually having a storefront just for the sake of marketing, I think if you spend that 2, 3 grand on rent, then you have triple net, then you have utilities, then you have Internet, then you have the fact that you're going to have to have it manned, like you're going to have someone there. If you don't, then it's useless. So by the time you add all this up, you're literally probably talking about five to $7,000 a month in fixed expenses. And that doesn't probably include labor. Like, if you have someone there all the time, you're looking at 10, $15,000 and so now all of a sudden it's like, well, if you spent three $400 a day on Facebook and Google leads or Google Ads, would you get more traffic and lead flow to your website? And the answer usually is yes.

So I ended up removing some of our services like like French drains and like fire pits and like weeds to sub out sprinklers. But we do get a lot of, one of the things that we're not doing is fertilization weed control. We get a lot of phone calls. Even in December we had about a couple handfuls of just fertilization weed control. But we always pass those on.

Do you think it'd be a good.

Idea to offer that now that we.

Got rid of some of the other.

Things that were kind of taking up a lot of my time and it would be easier upsell to my current customers and future customers?

Yeah. The big question is like the issue I have with adding more services is if the demand for that service is the same as your core service. So if you're doing landscaping and lawn care and that's your core thing, by adding fertilization weed control, which I'm a fan of, the problem with it is that the demand for the that service is the exact same as when everyone else is calling for mowing and other landscaping services. The only time I personally want to add any service to my business is if I am filling in the off season. So if I am making sure that it's a demand curve that is outside of my core service because otherwise this is what's going to happen. You're just simply going to create more excess capacity throughout nine months out of the year because you're going to have to staff up for this extra boom of with spring rush that happens already. And so you're already overstaffed, you're already over equipped in terms of trucks and equipment for the spring rush peak. By adding another service that has that exact same demand curve, you just make it, you just make it even that much more demand. And so I see most of the time when people do this, yes, it will increase revenue again. Adding more services will always increase more revenue. And it's easy to be like, well, people are asking for it, I should offer it. It's just like sitting there, free revenue. But by adding complete complexity of the business, you are going to have more trucks, more equipment, more insurance, higher levels of training required for your office staff, for your team out in the field, certifications, licensing, insurance, all this stuff starts to mount. And what you're doing is all you're doing is compounding your spring rush to where you're going to have to buy one more truck, you're going to have to get one more employee. And that's just going to add to the excess capacity for 8, 9 months of the year when you're not in spring rush. And so I would personally ask, like, do you think you can grow to your goal of 800,000 next year without fertilization weed control? If the answer to that is yes, I would not add it. Now what I would probably say is if down the road you're in profit mode and I know your situation more acutely, Walter, because of the onboarding copilot. So like I would say, if you hit 800,000 without it now, it becomes a matter of, hey, I'm going to go into profit mode. I'm going to raise prices on all my mowing, all my recurring services, and then I'll add the fertilization weed control and make it super profitable from day one. Cause I don't need it to grow. I'm just gonna add it as a supplementary service. Cause I enjoy it. Cause customers are asking for it. And more importantly, the reason I sometimes give a green flag to this one is customers require you to do that in order to get their mowing. But I genuinely believe like you've grown the business so quickly, I would not. I don't think you're going to need this service to get to 800,000. And so adding it's just gonna add more complexity and is ultimately a distraction from the core services.

Okay, perfect.

Then I'm probably just going to try.

To hit my goal first and then see where I'm at and then see if that's a good option to add it in the future.

Awesome. You're the man. Take care, Walter. I currently only need 20 to 30 mowing accounts to max my asset capacity. If you had the choice to fill the remaining capacity with 20 to 30 mowing accounts versus one school district account with three different easier to mow properties making up that account, paying the same man hour rate, what would you choose? The rub is, I actually may actually be able to do both using a mower that isn't normally part of the fleet that I'm considering selling. If I don't bid this and get awarded this job. If I can fill the labor requirement. Yeah, like you know, in the perfect world, I'd rather have the 20, 30 mowing customers. Less customer concentration. Again, depending on how many mowing customers you currently have, if you have 200 plus recurring customers already. I'd probably just go for the school district. That's awesome because like there's only 10% of your customers. So even if they did leave, it's like you're like at 50% of capacity. But if you only have 50 customers, I would be careful with this one because you can immediately get an employee staff up with this extra equipment and mower and all of a sudden they leave and 50% of your revenue is gone. So I'd be careful with that.

But I'm also worried by the fact that you're thinking about adding different types of mowers just to satisfy this account. It sounds like you already have it though and you're like willing to like let go of the equipment if you don't get the contract. That's what it sounds like based on my quick reading here.

So, you know, get both right, Go for it. You could push up above capacity for a little bit knowing that you could raise prices. So that's probably what I'd actually do. Depending how many million customers you currently have, I'm going to assume you have like 200 million customers. If you had 200 million customers, I would take the jobs, I would raise your prices and hope that you lose at least 10 to 15 of them and then take on both the contract and the 20 to 30 counts. That's probably what I would do. That way, even if you lost the school district, you would have raised prices and probably bridged the gap of profitability even if we lost that customer and we're 10% under capacity.

When setting up my pricing for mowing services, I wanted to know if I should be basing that pricing off of like a two man crew or like a one man crew.

We always personally do it based upon one man crew. Just because we use that the most. Right. I just simply use whatever you use the most. And then also from like a budget hour perspective, we calculate budgeted hours based upon how long it'll take one person. There's going to be a little bit more waste in there if I have two or three or four. But we always do it based upon one.

Okay. Yeah. Because usually like from spring to summer we do two man cruise. And then whenever it kind of slows down, it usually goes down to like a one man cruise. Got it during that kind of.

I would. Whichever. Whichever. On average you use the most, that's probably the one I would use as kind of the benchmark in terms of, you know, how long things take.

So when switching to winter services, obviously in the winter should I drop my pricing like those bi weeklies down to the weekly pricing.

Whenever that that the winter services actually started.

Our goal is to keep the same prices as their mowing services. Right? So we just keep it simple. Right. Like, but the challenging part with doing this is there are going to be properties have a massive lawn and hardly any landscaping. They're the ones that usually are the ones that are kind of paying a premium because their lawn takes a long time to mow. But maintaining everything else during the winter doesn't take long. We rarely are able to keep those ones during winter services, but just so much easier to tell customers your price is going to be the exact same on the exact same schedules we've always done for mowing. Like that's just an easy way to sell it so you don't have to have another barrier. And then in your estimates for mowing you can just say there's a year round service. And during the winter we do other winter services. Right. So I would just recommend sticking to the same pricing, the same schedule. And the big debate is, well, if they're on weekly mowing and I'm switching them to bi weekly winter services, do I charge the same price as their weekly mowing? I would say yes, simply so that their invoice stays the same and that per visit price doesn't change. I love the idea of putting prices on our website for mowing and plowing, but the size ranges on lawns and driveways is huge. In my area, for instance, our smallest lawn is 2000 square feet and our largest is 200,000. Driveways range from 42ft long to 1500ft long. We have a complicated formula for pricing snowplowing and we compare similar lawns to get the timing correct for mowing prices. Mowing pricing is exasperated further by the terrain in our area. For example, 20,000 square feet for from one customer takes 0.45 hours. Another takes 0.97 hours. So we couldn't price by size accurately. Is there a solution I'm missing other than drive by estimates? We can do satellite most of the time as we know the area very well, but it's not instant pricing like you were suggesting. All right, so a couple things. They first say that doing over the phone estimates is a huge step up from doing drive by estimates. The drive by estimates are a huge step up from doing in person estimates where you talk to every customer for an hour. So you're already significantly down the path in terms of systemization and optimization. So don't beat yourself up too much if you're not going to take it all the way to instant pricing, I will say this. Yes, your smallest is 2,000 and your largest is 200,000. But where 80% of your customers, I would happen to believe that 80% of your customers are between 5,000 and let's call it 40,000 or 50,000. And so my question is, could I do pricing at them but then have an option for anyone else that's outside of those ranges to be able to get a pricing in person, to be able to save myself 80% of my time? And so that's when we do like our small, medium and large. I'm not going after the edge cases that are like super large because it's a small percentage of my customers and I just have it where like I will do an in person estimate for them. And so I'm trying to capture 80% of my customers and not have to go to them at all, not have to pay for an admin to answer the phone. Like if you can just reduce the drive time of drive by estimates and your time going out and doing the estimate, but also not need an admin person to be reactive on the phone call and sitting around waiting for a phone to ring all day and it doesn't cost you a single penny more to have the instant pricing. We have a win. We have a win on our hand, boys and girls. So I understand this pricing variability, but if I can, if I can get on the property, the very worst thing that happens is that you change the price, right? So play it out. Like what's the worst thing that happens? The first mow or the first plow. You get it wrong your first visit, we are going to charge by the minute anyways. So we're going to take our time to get it up to standards. For example, if it's mowing, we're going to edge, we're going to double cut if we have to. We're going to do everything possible to get it dialed in. If the pricing that we have given is way off, like there's hills and mountains and cars parked in the middle of the lawn or some crazy area that we they were completely wrong on in terms of selecting their price, then we will change the price that happens to 1% less than 1% of the lawns that we do at Augusta Lawn Care. But again we attack the 80% and the other 20%. Like when it says, hey, if your lawn doesn't look like any of these street pictures, click here. And people that have massive properties or commercial projects or Something crazy, they'll click on that one. So just realize, be okay with the fact that the very worst, you change the price, the very best is that they select $79. You're like, man, I would charge 59 for this. And you rock and roll. And then also if you're in growth mode and you're willing to not have as much profit for a little bit, do it for three or four or five months, grow to capacity, raise prices on that customer and bring them up to where they should be at, and then we all make more money.

Average recurring service, gross profit margin. What do you typically like to aim for there?

It really depends because some, some recurring businesses, if they have supplementary services, the recurring side of their business is actually just the gateway. Right. So are you exclusively recurring or are you using recurring as a way to get people in and then you're upselling them them.

So we're pool service. So my primary bread and butter, weekly pool maintenance. And we should be doing more repairs. I am honestly, I'm more of a business person than a pool person. So repairs have not been as natural to me. I find myself grab taking to the chemistry side. I used to be in a partnership, it ended this year. And so I actually, I'm in a bit of a transition period with my business. I launched this, this new one with the existing customer, half of the existing customers that we had with the old business. And I'm actually right now, I haven't put together any website branding anything for the new business because I've been exploring the possibility of linking up with a pool builder who we can, you know, work on with leads and also have a better foothold in the repair, slash renovation side of the business, which kind of more like you talk about. But I primarily as an entrepreneur, I like cash flow. So that's, that's what I like to optimize for. I right now, just for reference, I run it anywhere between 23 and 85, but a blended average gross profit margin of about 50 to 55%.

Is that gross profit?

It looks like that's gross profit. That's after chemicals and just direct labor, which right now the software I use to measure my labor cost, it has to estimate a flat, a flat rate. So I overestimate the amount of labor to account for just like a few other variable costs. Fuel, equipment, depreciation, such.

Yeah, like in general, if you can get your gross profit in home services almost across the board to 50%, you're good. And the reason I like that is like a really basic metric. Is because if you're in, if you're in something that does more material base. So in this sort of construction, your labor percentage is going to be significantly lower. Direct labor but cogs includes your materials and supplies. And so generally for something like pool cleaning or lawn care more recurring a far greater portion of our revenue goes to cost cogs in the form of direct labor. Whereas in construction it's usually more like a, you know, 2030 split on a 50% margin. 50% margin. And so anything under 50, you start getting extremely profitable. Like if you look at the valuations and enterprise value of home service businesses, as you get below 50% gross of of your revenue going to COGS, I just see the enterprise value and the sale ability of that business increasing. So just recently like my location on pay for performance, we this is the first time we've ever done this and as we reduced our percentage from 33% going to the team down to 25 after we raised prices significantly and I know the impact will almost more than double our profits over the next 12 to 24 months. And it's simply a function of when I go from 33% of my gross revenue on mowing, I put down to 25%. That's a 25% decrease in labor cost. And so that goes straight to the bottom line. And so I would, I think where you're at right now is probably good. And I just say like if you get down like 45%, you're going to see incrementally better opportunities down the road at your next stage. Because if you're not passionate about the business like the industry, it's going to be probably some sort of an exit multiple locations, general manager, some sort of passive down the road. And if you can get that down to 45 or 40, you just almost can't lose honestly. So that would be my recommendation.

One follow up.

Yep.

Can I one follow up on that? So a lot of these customers we had since we picked them up like 2018, 20, you know, 2020, they've been, they've been around for several years and haven't seen a price increase. So several of these people could probably to make it to the current market rate could probably be seeing anywhere between 25 to 30%.

Increases on, on their service side. So what is your, what's your, what's your methodology for evaluating when to raise prices on existing customers? And yeah, I mean there's plenty of things about it, but I just, I'm.

Curious to hear your thoughts.

Yeah. So have you read the book yet.

The turnaround book? No, actually, I got the audiobook. Going through it now.

Okay, so chapter, let me see. Chapter, Chapter four is your chapter. Basically what it is. A way to make sure you actually have a way of knowing exactly when to raise prices. There's one way to raise prices and it's based upon capacity, right? So basically when you have got enough jobs in your pool route where you either a need to hire someone or get another truck in order to increase capacity, you have the opportunity to raise prices. And the reason you have this opportunity because if you raise prices and some people leave, you don't care because you need to actually make room for them. And so that chapter will kind of walk you through how to determine what your capacity is. And then when you hit that is your. The more so I would love to track this one day, the more time someone hits capacity, I can guarantee you their profits and their growth percentages are way higher because it gives you the opportunity to actually move those levers by either raising price, increasing profits or B growing the business. And so it's a more calculated way of actually raising the prices. But if you know you're 20, 30% under market rate, if you just were able to accomplish over the next six months that price increase, you'd get your average recurring profit blended profit margin on gross profit probably down to 38 to 40%, which you would crush on. So best of luck to you. I know you know what to do there. Great work.