Is @keith-kalfas a Low-Baller? How to Increase Prices and Triple Profits!

Hey, everyone, it's Mike Andes and you're listening to the landscape business course. I am super excited today because I feel like today's episode is probably the most important tip I've ever given landscapers. And I've mentioned it before, but it's probably the thing that can change your business the most. And the people that have made this change have never regretted it. I have yet to see someone that has raised their prices and regretted it. So today we're going to be doing a reaction video to Keith Kalfis because he happened to bring up the topic last night. And I was like, hey, you know what? What? I'm not going to try to reinvent the wheel. We're just going to make a reaction video and integrate what I was already writing some notes down on. And I promise you that this is going to change your business. And I'm going to do an example, kind of a scenario of two different weeks in a business, a landscape business, and show the difference between raising your prices and keeping them the same. It'll completely change your business, your profitability and the relationship you have with your business. And you can afford customer service like, like Keith is gonna talk about in his video. So let's go ahead and start his video. And then at the end, I am going to actually do a demonstration on this little here whiteboard about the difference between raising your prices and not, and show from a dollar standpoint how you can double more than double your profitability. So let's go ahead and start. This is Keith Kalfus talking about his prices. Here we go.

I gotta get this off my chest. I gotta share with you this crazy thing about prices. And if you are so frustrated, you're overwhelmed, you got a million things on your plate in your business to the point where it's squeezing out of the sides. This video is for you. What's up? My name is Keith Kalfitz. It's like dark out and still 100 degrees out here, man. Very hot these days. So listen, I had this epiphany. I'm out in the field working, like a couple years ago, and.

I was providing, started slipping and providing crappy customer service to my clients. But hear me out.

And I was like, I don't understand. You're trying your hardest. You're doing everything you can to get every customer on time, to communicate with them, to do phenomenal, beautiful, top notch, high quality work and have speedy invoicing, speedy communication, do phenomenal work.

So the problem with me was.

The pricing was too low. And if you can't afford to have a secretary on the phones or to have people helping you get the work done in a timely manner. And you're trying to do everything yourself or maybe you and another guy or something, right?

You will start providing lower quality service and lower quality communication because you're only one person, right? But the customers don't care. The customers don't care whether if your price is the highest or the lowest. They don't care if you're not making any money or you're living in a cardboard box and you go out of business next month. Well, they should care. Some of them do. But what I'm saying is it's not much of their concern of whether you go home and live in a cardboard box. And they want their stuff done. They want it done right. They want it done beautiful. They want it done in a timely manner. They expect great communication and they'll be upset and they'll complain about you and they'll fire you and talk bad about you and you will ruin your entire reputation.

Will get ruined if you don't do all these things right? So this epiphany was I couldn't get back to clients on time.

And so much stuff was going on that I was cutting corners in communication and started to piss off clients.

And then do you ever have these arguments in your head with yourself, like you're pleading in a courtroom or something, like you're pleading this fairness thing that doesn't even exist? Here's what it was. I said, I literally feel like next customer that calls me or if a customer is upset, saying, hey, the reason I provide crappy service is because my prices are so low that I can't afford to give you good service because I'm only one person. That's why I give you crappy service, because my prices are low right.

Now. The customer doesn't care to hear that. It would actually sound really weird.

So what Keith here saying, what he's saying here is really important. That is when you have lower prices, this is something a lot of people don't wrap their mind around. It's actually worse for the customer, alright? And so one of the things that when Augusta Lawn Care franchisees come here for training, the very first thing we talk about is our mission and our goals. And then I tell them the things that I promise to do as the franchisor. And one of the things is to always act in the best interest of the customer. And I say that sometimes that's going to mean telling you to raise your prices. And that's in the best interest of the customer. And the reason it's in the best interest of the customer is because when you raise the prices, it gives you the profit margin to do great customer service, to have what we call command center with the franchisees that answers their phone calls and everything. But like, if you're not a franchisee, having like a office staff, like that's very expensive. You know, if you're going to hire one office person on a full time basis, you might as well just in payroll, count out, you know, three, four grand a month. Plus you're gonna have an office space, renting that space, computers, Internet, utilities, like, trust me, you're looking at six grand at least a month. And you're not gonna fire them or lay them off in the winter if they're really good. And it's gonna take them three or four months to get comfortable on your software. Like it's expensive. But what he's talking about is very true. They are expensive. And in order to afford them, you have to, you know, charge what you're worth. And so I'm really looking forward to the rest of this video and then showing you an actual example of what he's talking about here in numbers.

But it's you just voicing out that if I charge a little, if I charged higher prices than I could afford to have somebody answer the phones or calling you, letting you know we'll be there on time or we're running late or this happened or.

And then here's what is the problem? If you raise the price, then you lose the clients. So you mean you're telling me that if I raise the price so I can afford to give you good service, you're gonna fire me? I lose, I lose my clients. You lose your clients, right? But if you keep the price low so you can keep the client, you're gonna give crappy service. And then you're gonna ruin your reputation anyways because they're gonna give you negative reviews, they're gonna talk bad about you and say that you give a crappy service. So either way you're screwed, right? So if either way you're screwed. The way I got it, I was so pressed against the corner because now I was hurting my own integrity. The very fabric of the identity of who you are. If you're a good man, a good woman, a good person.

And you're providing crap service, that's really gonna, it's gonna mess with your mind and your emotions because that's not who you are. You, you are a Person who has integrity. You are a person who's on time. You are. You are a person who does great work and provides great service. And if you can't provide that because you literally can't afford to, you can literally go nuts. There are people in small business that go nuts. They have breakdowns because they're trying their hardest. No matter how hard they try, their clients are upset with them. They can't do it on time. Then now their families upset them because you're, you're. You're sacrificing your family to take care of your clients. But then if you take care of your family, you're not taking care of your clients, then you're not taking your family. And then. And then what do you do? What do you do? Now you're taking care of your clients and your family, but you're not taking care of yourself. And then you get squeezed through the cracks, and then you have a breakdown. And then when you have a breakdown, who do you not take care of? You can only take care of you. Now. You don't take care of your clients, and you don't take care of your family. And now everybody hates you, including you. And you're sitting there twitching, having a fucking breakdown. This shit has happened to me.

So.

That'S when you raise your prices. But you, I believe you have to get to this point where you're like, I don't care if I lose my whole business. I don't care if I die. I don't care if everything falls apart. I'm raising my prices, right? I've raised my prices every single year. My prices are astronomical compared to what they used to be. And they're still not enough. If you really actually reverse engineered. Here's an experiment. So you're gonna do someone's landscaping, mow their lawn, clean their windows. I don't know.

And you go to do. It's like, it's like a $200 job. But you reverse engineer if you have to make a hundred thousand dollars a year, right? And you need this many employees, and they got. They all got to be on work comp and payroll and unemployment and have insurance. You gotta have an office and office manager and marketing and pay all your taxes to make sure and make sure you still make, let's just say, 100 grand a year.

I know this is silly, but listen, you go to charge the client $800 for something that would normally be 200, they go $800.

That's absurd. We go, what are you talking about? That's What I need to charge you to provide excellent service, do all these things, and make sure I have a fully legitimate business. And so I can eventually afford to live in a nice house like you have. And so I can have. So I can have. This doesn't make sense mathematically and logarithmically. I'm just saying it. But, like.

You can go through all these different arguments and scenarios in your head where you think to the client, oh, so you're the only person who's. You're the only person who's allowed to live in a nice house and drive nice cars and afford to put your kids through college.

And so, real quick, I'll say this Florida turf pros had a really good video on this yesterday as well, about when customers cancel simply due to the fact that they are concerned by the fact that you get the job done so fast. Like, you get in 10 minutes, you do a $50 job, and they actually cancel. And someone had said to him that you make more money per hour than I do because they were a nurse. And so this kind of comes back to this fact and this idea of raising your prices and charging what you're.

Worth, have the best health insurance and all these things. So you're saying I'm not allowed to have that stuff? Is that what you're saying right now? That's not what they're saying. What I'm saying, however different, many roadmaps or mazes you have to go into your head to finally come to the conclusion that, oh, this is what I got to charge.

Right?

Chances are you're just gonna lose your whole business because.

So that one got cut off short. And I don't know if he accidentally bumped his phone or something like that, but let's go ahead and go to full screen. And I want to show you now a demonstration of really what raising your price is, why it's so important. Okay, so I'm going to take two different job weeks, and we're going to assume that you have four employees. So job week number one. So I'm going to try to write on here so you can see. So job week, Job week number one. All right, so we have two different weeks. The first week is going to be with the same old, same old prices. And then on the back here, we're going to do job week two. And I promise you, after you see this example, you will raise your prices. I have yet to see someone who raises their prices in our industry and, like, regretted it. Be like, oh, man, all my customers left me and I can't get any jobs if you're reasonable with your price increase. I promise you this is one of the best things you can do. Your price is your biggest lever in your business. And what I mean by lever is that when you change one thing in the business, it can have a big impact. A lever. And. Or there's like a lever here. I'll actually explain from a mechanical standpoint. Try to explain here. You have a fulcrum on a lever. So say, for example, this is like the centerpiece, right? And if I have. Right here, the centerpiece is like an inch away from the board, right? Well, if I push this end of the board down by only about an inch, it changes this side of the board by like, four inches. All right? Now, to reduce the impact of this lever, I would go maybe here, which means if I increase our. Push this one down an inch, it only increases this side, like an inch. Inch and a half. Who's got a very big lever? And this would be the lever in that point. Changing. Changing this by an inch, if it only affects this side a little bit, it's not that much of a lever. But if it's way over here and I move this down an inch and it brings it up five or six inches, that's a big lever. All right? Price is the biggest lever in your business. In other words, changing it a little bit dramatically affects the. Your profitability. All right, back to this, because I don't know if. Hopefully I didn't lose you there. All right, job week number one, we're going to assume a few things, all right? And we have to do assumptions to make sure that we're not here for the next 24 hours. All right? We're going to assume that an employee can do one job in one day. So I'm simplifying this. You could assume that these are all, like, say, property cleanups or leaf cleanups. Just to say, for example, let's say these are all leaf cleanups. And this is actually a really good example if we're. As we head into the fall, if you do leaf cleanups, okay, So I want to make sure you can actually see what I'm doing here. So I'm going to move over just a tad and show you here. So job week number one, we're going to assume that an employee does one job per day, and they work for five days, and they work eight hours each day. All right? So let's just assume five days at eight hours each day. And we are charging.

Charge them $50 per hour. So we're charging the customer $50 per hour. We are working five days at eight hours with four employees. Okay, so over the course of all of that time, we got five days, eight hours each at 50 hours for four employees. What that comes out to in revenue, if you do the numbers, you got eight, eight hours. You multiply that by 50, that's 400 and you multiply 400 by five, that is $2,000. All right? And that, so that'd be for one employee, but we have four employees. So we have a revenue revenue of $8,000. This is getting messy. And I'm not gonna have enough space. All right, revenue is $8,000. Now let's assume that we have a 15% profit margin. Alright, so profit.

And we have a 15% profit margin.$15% equals we're going to have $1,200.

In the bank in profit. Okay, so let's real quickly, so we're all on the same page here, recap. Five days. Each day an employee is doing a job, taking them eight hours. We're charging $50 per man hour to the customer. And we have four employees. Or our revenue at the end of this week, end of this week is going to be $8,000 revenue or sorry, the profit is $1,200 because we're assuming a 15% profit margin there. Okay, now we are going to take this same situation and then next week we are going to do the exact same thing. We're going to have five days, we're going to have eight hours a day, just exactly the same here. The only thing we're going to change is this number right here. So instead of charging the customer $60 or $50 per hour, we're gonna charge them $60 per hour. Okay, so same exact thing. Only thing we're gonna change in this scenario now is charging the customer $60 per hour. Now what happens? The revenue.

So this is at $60.

Per hour. Hopefully all can read this. Get a little bit closer for you. So the revenue at this new target is going to now be $9,600. And some of you are like, oh well, 96, 8000, not a big difference. Well, guess what? That extra $1,600 you made is sheer profit because all you did was change a number on a spreadsheet and go from $50 an hour to $60 per hour. This is not clear. All right, so now Your revenue is 9,600. Now let's look at the profit on this. So now the profit on this week is going to equal $2,800. Say, how did you get that number? All right, we got $1200 here, plus we got an extra 1600 in revenue. That was sheerly because we increased the dollar amount per hour. We didn't have to pay anyone any more or anything like that. We now have a profit of 28.

Okay, now you're like, okay, well, that's kind of cool. Guess what? That is a 233% increase in profit. Going from $1,200 in profit to $2,800 in profit is 233%.

Like, you got to understand how important this is. All right, so now the profit percentage as a percentage, now we're looking at 29.2.

So literally more than double what we made in profit. We more than doubled our profit by simply changing our hourly rate from $50 per hour to $60 per hour. And trust me, the numbers get bigger and bigger. The more employees you get, the more jobs you do, the more hours you work per day. But that's all we're changing is the dollar per hour amount. Okay, now I want to address something that Keith talks about here, and that is charging for customer service. So one of the things that a lot of us struggle with is having that office person or having an estimator. As your business grows and the numbers get even bigger than this, as your numbers begin to grow and the business grows and you need an estimator out in the field. But guess what? The estimator is sheer overhead. They don't, you know, it's like, man, I don't know if I can afford them. I'm going to have to do this the rest of my life or I'm going to have to do the office work the rest of my life. I'm going to have to do calls the rest of my life and emails. Alright, well, what if we did this? What if we added an estimate fee for every single job? In other words, every single estimate that we put out in the back end of the estimate, we charged $40 as an E fee. So we call it Augusta. It stands for estimate fee. If we charge an e fee of $40 per job. Now remember, we're doing five days. We're assuming that each employee is doing one job per day. Hopefully you all can see this. Sorry. We're assuming one job per day per employee. What? That works out to be at four jobs a day, because you got four employees and five days a week. That's 20 jobs per week. Two times 20 jobs per week times 40. So 40 jobs times $40 for an E fee is going to net. Wait, I did something wrong here. I did 20. My bad. I did a mistake here. I did a mistake. Hold the horses. We got four jobs per day. Awesome. We multiply that by five. Got it. Okay, so we messed this up. Michael messed this up. Shame on him. Okay, so we got four jobs per day. We times it by five, that's 20 jobs. And you multiply that by $40 is going to get us.

20 jobs in a week times 40. Got it. All right, $800. We just increased our profitability by, you know, if we go from $2800 in profit, we add another $800 in profit because an E fee is just, it's tacked on. A lot of you ask, well, where do you put the E fee? Do you charge before the customer calls? No. In this scenario, we're assuming that the jobs that are one have all been charged a $40 per estimate fee. Alright, so we got 20 jobs in the week. We're going to charge $40 of an E fee. That's going to add $800, which now our profit goes to $3,600. Which by the way just happens to be three times three times what our profit was here. Literally we tripled, tripled our profit from $1200 per week to $3600 per week simply by doing two things. Charging $60 an hour instead of 50 and charging a $40 per estimate fee. Now that estimate fee, that $800, as you begin to grow, that number begins to grow with the number of jobs that you sell. And that is what ends up paying for an office person or an estimator. And they actually begin to be a revenue source for the business inst. Overhead expense. So do I think you should do this tomorrow? No, maybe not. But definitely this is where you need to realize that this is the lever, the biggest lever in your business is going to be price. If you increase your hourly rate just the 50 to $60 going from 50 to 60, I can almost guarantee you, you will not see a dramatic decrease in your accepted estimates. Just can almost guarantee it. As long as you provide value and all the things that Keith was talking about, a great website, you very quickly get the estimate back to the customer. That's really, really big. And that's made possible by having someone in the office many times or having someone answer the phones. Those are all value adds that allow you to charge the extra monies. Okay, so even if you say okay, well I can't do all of this stuff because I don't have someone in the office to get estimates to my customer fast and answer the phones. Well, could you afford it if you went from $1,200 a week in profit to $3,600 a week in profit, all of a sudden that's over $8,000 a month in profit simply by raising your prices. I promise you, for $8,000 a month, you can afford someone to answer your phone calls. You can afford someone to do the estimates for you as your business grows. So these are the numbers to what Keith was talking about. Also, check out Florida turf pros. Also had a great video on pricing. I promise you, if you raise your prices, you will not regret it. It will dramatically increase your profitability. It'll give you flexibility to spend money on greater customer service, getting a better website on lawn careweb design.com and getting an office person down the road. And trust me, when you have 20 employees, these numbers get really, really juicy. We just recently raised our prices for the first time in a couple years at our local office. Where we went from, we raised our prices $10 per man hour. And we also increased by our lawn mowing customers. We increased the bottom 35% of our customers. We increased their prices. Makes me a very happy man. You've been listening to Mike Andes on the landscape business course. We'll see you next time.