Mike Andes (founder of Augusta Lawn Care) argues that recent fuel-price increases are being overemphasized by lawn-care and home-service businesses. Using a numeric example (20 miles/day, 10 mpg, $2/gal increase → ~$4/day extra fuel per vehicle → ~$0.50 per labor hour on an 8-hour day), he shows that fuel inflation typically represents a very small fraction of revenue. He recommends raising base labor rates (e.g., $50→$55/hr) or focusing on sales and hiring rather than implementing temporary fuel surcharges, and points viewers to landscapebusinesscourse.com for price-increase templates and employee handbook materials.
Questions this video answers
March 17, 2022
Over 85 locations around North America.
15 vehicles.
20 miles per day.
10 miles per gallon.
Chapters
These are your new prices. Here we go.
Hey, everyone. My name is Mike Andes. I'm the founder of Augusta Lawn Care. We have over 85 locations around North America. And today I'm talking about this massive inflation and fuel prices going through the roof. And I'm not getting on the bandwagon of this is a horrible thing. We need to charge extra fees. I'm going to be showing the rationale why, unfortunately, a lot of people have not ran the numbers and they're overreacting to something that's extremely minuscule to. To what actually is moving the needle in their business. And so every single Facebook group, every single channel that is in the lawn care landscape community, home service improvement, where we have vehicles and trucks going out, every single one of these right now is blowing up with like, what's your fuel surcharge? And what are you charging extra right now? Are you raising prices because of the fuel costs? I'm gonna prove to you today that fuel costs going up even dramatically, is not moving the needle very much in your business. And you'd be much better off spending that time, energy, and money that you're going into, like figuring out all these systems for improving your fuel consumption and just focusing on improving your sales and your hiring. That would be much better use of your time. And people are just spending way too much thought and time and energy into something that's short term. This is gonna go away. And honestly, it just does not move the needle much in their business. All right, the one local Augusta Lawn Care that we have has 15 vehicles. And yeah, we'll probably spend an extra $500, $600 a month in fuel, but that should not be a make or break in your business. If you a half a percent or 1% of your revenue going out the door to fuel is breaking the business, you have bigger problems, you have bigger fish to fry and bigger problems that should be dealt with than just fuel. Like, if your margins are so slim, you can't go from 20% profit to 19 and a half percent profit without breaking the business. We got bigger problems that we got to deal with. So I'm going to actually break down the numbers because unfortunately, I know most people have not done this, and I know this because they keep freaking out about fuel, and I need to have fuel surcharge, and they're saying long emails about fuel surcharges to their customers, and it doesn't even matter. So let's do the math. Let's assume per vehicle we're gonna have 20 miles per day on this vehicle. Now, I'm just going to assume one person's in this truck. If you wanted to do two people in this truck, the impact that fuel has even less. But let's just follow me for a second here. All right, we're gonna do 20 miles per day on this vehicle. Now, what this assumes is that you have a relatively tight route, and I'm assuming either go 10 miles to a landscape job and then 10 miles back, that would mean 20 miles. Or it could also potentially mean that if you have a mowing route and you do like five or six miles away from your shop, you, mowing route, you're driving a few miles around and you come back. I feel like this is actually really liberal. 20 miles in a day on a truck. If you're doing more than that per truck, your route is not dense enough. You really start honing in your marketing on several neighborhoods, a smaller radius. I want to focus on like 1, maybe 2 mile radius for my marketing. And it's not just because of drive time and windshield time and all the rest of it. It's also a matter of fuel if we're going to dive into it. So let's just assume 20 miles per day that we're going to drive on this truck. We're going to assume that we make 10 miles per gallon on this truck. So therefore, it's gonna cost us an extra 2 gallons of fuel, or it's gonna take 2 gallons of fuel for us to drive these 20 miles in that day. So if we assume that there's an increase of $2 per gallon of fuel. So increase of $2 per gallon in fuel. So fuel prices went up by $2 per gallon, maybe from $3 to now $5 per gallon. Insane. Crazy. It is. But that's really just a $4 increase of extra expense on the day. 2 gallons of fuel. 3, $2 per gallon, extra $4 in expense. If we actually break this down to one employee, again, we're just talking about one employee in this truck. That means that half a dollar or 50 cents per labor hours. So if he works eight budgeted hours or eight labor hours out in the field, this individual, we literally just need 50 cents per hour of labor to make up this cost. So it's insane. So like let's say here, for example, that this person is charging $50 per hour to the customer, relatively low. But if you're charging the customer $50 per hour in terms of the labor rate, that literally means that 1% of your labor rate, 1% of your labor is Going to the extra cost of fuel 1%. So we're all like focused on like we're going to get fees. And I would just raise your prices because guess what, look what happens here. If I just raise this $50, all right, this $50 per hour, if I just raise this to $55 per hour, a 10% increase 10 times 10x impact compared to just charging someone for the extra cost of the fuel. So I think people just like freaking out about fuel right now. They're doing surcharges and $2 surcharges here and all the rest of it. Just tell your customers that due to the inflation, due to things going up in price and due to fuel and wages and all the rest of it, you don't even have to tell them that. Just tell them, hey, these are new prices. People are becoming numb to the fact that everything is going up in price. You do not need to give them a long explanation. Tell them, hey, these are your new prices. Here we go. And if you're starting, if you're doing landscape and one time projects, just raise your labor rate and roll. Doing that takes a lot faster than figuring out what surcharge is going to be. $2 or $4. Am I going to charge a temporary increase in price because of fuel? It doesn't matter. And at the end of the day, even if you didn't move your prices, if 1% of your labor rate going out the door to extra cost of fuel is going to sink your business, we got bigger problems. And if you put two people in this truck, it goes down half. So I think people are misconstrued. And if you really need help raising your prices, landscapebusinesscourse.com has a bunch of templates in there that will help you. One of them is the price increase letter that we have used hundreds of times and had a massive success rate. Literally only a couple percent of our customers that we raise prices on end up leaving. And we raise prices significantly at times and we almost do it every single year. So there's a price increase letter inside the course. There's also a whole bunch of other templates. Like there's one in there. It's an employee handbook as well. 30 pages of what we use for our employee handbook and covers every policy you could possibly think of. If you're trying to hire someone, you want to make sure it's done legally. And you have everything in writing in terms of breaks and start times and how uniforms work and you know, everything from lactation breaks to smoke breaks to how being late is handled. All of that's inside of those manuals and that's just two templates that I mentioned there. There's a whole bunch of other ones in there. I think they'll be really helpful for you. I don't talk a lot about a lot about it, but landscapebusinesscourse.com is a great resource. Check that out today. Also, if you want to talk more about raising your prices, check this video out here. It's a great guide for how to do that, why you should be doing that right now and I am a proponent of raising prices. Just don't freak out because of a 1% tiny increase of fuel. It's not a big impact to your business. I do believe you should be raising your prices because another 10 other things like fuel that are going up in price like labor, cost of the trucks etc but just freaking out about fuel right now and adding fuel surcharges and spending time and energy on that is an absolute waste of time. We'll see you tomorrow.
