The Fastest Way to Price Jobs AND Win More Bids

Hey, everyone, it's Mike Andes. And today we're going to go take a deep dive on how to do mowing pricing. Now, you might have seen things like just by square footage. Today we're going deep. We're going to talk about four different models that you can use when it comes to pricing. And it's not what you think, because a lot of us are using the eyeball version of. I think that is $40. I think that's $50. Oh, and that's $50, because the last person was $50. And they kind of about the same amount of time. And so that's how most people do pricing. This is going to go the exact opposite extreme. We're going to look actually at graphs in terms of how pricing works when it comes to price matrices. This could apply to any service where you're adding labor to an estimate. To the anatomy of a home service estimate, the goal is to come to a cost for an instant quote, an estimate, a visit, or an invoice. The end result is going to be something like this and usually, just often budget hours, like number of hours and what our rate is. So if we have two budget hours at $75 per hour, that's $150 would be our rate. We're trying to have a baseline for the cost of service. There are many things that go into this, such as the slope of the yard, the distance of the property, et cetera, that we're not trying to model. These are ultimately the responsibility, estimator to adjust for. So this is ultimately why, regardless of how accurate you get with cost matrixes and getting super detailed square footage and the size of the trees and all this other stuff, I ultimately know that that's going to be inaccurate to some extent because there's all these other variables besides the shape of the tree, besides the square footage of the lawn. Square footage of the lawn is fine until it's on a 30% slope, and it takes 10 times longer just to weed whack everything instead of using a mower. And so there are other variables involved. But square footage, for example, with mowing is a big component of it. Square footage in a lot of home services is a big component. Linear feet, for example. But there are other variables. And the reason I say that is because we get so locked in on one linear foot, square foot model that we forget. Like, we could be as precise as possible on this, but as soon as you change one other variable that's not in that model, it all falls apart. So the most basic case is the default, most basic case for defining a service. Everything else that we discuss here is a more advanced or complex use case. And that is ultimately we're selling units of time an hour, one and a half hours, half an hour. These are units of labor. Okay. And you can sell that for money. That's the simplest form that will take one hour to do the job. Okay, great. Times that by $80 per hour. Your cost is $80 per hour. That's the simplest and most basic form. And ultimately I don't think it's necessarily a horrible thing because if you're just starting out and you use that model, what you the only thing you need to do then after that is compare budget hours so that one hour compared to the actual hours it takes you on that property over the course of time. If I copa this would be under your visit reports. It compares and shows green and red above or below what your budget hours are for that job. So you know, if you need to raise prices or decrease prices, in other words, increase budget hours or, or decrease them. Key components, base or minimum cost, variable cost and efficiency at scale. These are three key components that go into a much more complex version of what we talked about. So there's always a base or minimum price. This is the minimum that you would want to charge for a site visit due to the build in overhead of customer acquisition, travel schedule, billing, loading and unloading a truck, et cetera. There are two ways to handle this. Either a at an add on cost, so 0.5 hours plus how long it actually takes you or a minimum floor. So max 0.5 budget hours for example. Then add on the number of work hours on site. So this kind of accounts for the fact that you're going to have minimum size jobs. If a lawn takes six minutes to mow, I'm going to still charge at least half an hour because it takes me time to travel there. Schedule the overhead, the billing, also taking the truck, like unloading the truck, loading it back up all of that extra time. All right, now let's add a little more complex in here. Variable cost plus visit cost. So the separate the the cost of a visit. All right, so now let's go ahead and take into account that there is a minimum price on a visit. The graph is going to look something like this. When I compare yard size on the x axis to y axis of hours of labor, I'm going to have a minimum 0.5 budget hours right off the rip. Then add on in extra time after that because that's my minimum Cost. Now if I use a minimum as a floor, see this, this changes because like look, I'm not going to charge it immediately. And then on top of that, my hours, I'm just going to say, hey, look, I'm not going to go down here. In terms of budget hours, there's always a minimum of 0.5. So again, these are the little tiny details of pricing. How you want to think about this. Are you having a minimum like fee just to show up, then adding budget hours, or do you have a minimum number of budgeted hours that you're not going to go below? As shown here, in this model, you charge less and your scheduled travel costs are just overhead. Okay, the variable cost. This is the cost of the actual services that you're providing. The key inputs for estimating budget hours for a lawn, for example lawn mowing, are size of the yard and the mower used. This is based on equipment on hand and the size of the yard. The single biggest factor in scaling mowing costs is that when you hit a yard size, it allows you to upgrade to a bigger and more efficient mower. The points at which you level up to new equipment varies by service. There are other inputs that are more nuanced and are generally only determined through a visit to the yard, conversation with the owner, et cetera. So what this means is if I'm, it's like, well, am I able to mow 1,000 square feet per hour? I'm just making up numbers when I use a push mower. Great. Does that mean that if you have a 5,000 square foot lawn, it's going to take you five hours? Well, yeah, but now I have a 40 inch stand on mower that I can do 3,000 square feet in one hour, for example. Or well, all of a sudden I'm not using that same, I'm not taking the same amount of time. The budget hours are totally different when I upgrade my equipment. This is another variable. You can't just say, oh yeah, we mow x amount per per hour. Okay, great. But like what piece of equipment are you using? Well, if it's a small yard, we can only use a smaller piece of equipment, so our production rate's lower. So these are things you got to think about. So let's model this variable cost. Each service generally estimates cost based on hours. So we'll limit this discussion how to model the hours for a service using the following approaches. These are the four approaches I talked about for single cost for everyone. This is what we call flat rate, stepped cost, flat rate matrix Linear cost per square foot, our production rate. And then linear cost with efficiency bumps. Production rate matrix. All right, so seems very complicated. I'll break it down. Be really simple. All right. Flat cost is like, hey, we are having a promotion. Everyone gets their lawn mowed for $59. Everyone. That's what this would be. Flat cost. Doesn't matter how many square feet you're getting this. I don't recommend this for mowing because it just. You could lose your shirt on it. So don't recommend flat costing. Okay? But there are times you might do this as a promotion, for example, with like, pressure washing someone's driveway or trimming of bush trimming. Or property cleanup. Like, hey, look, we will do all property cleanups. It's the first 10 people that sign up are 499. And then there are people that you might usually charge 899, but you're. They're getting it for 499. There are people that get it for 299 usually, but they're paying 499. But everyone's flat rate. That's what this is here. Now, this is more common. Stepped cost or flat rate matrix, similar to the last one, but the rates are locked into fixed steps. This is kind of what we use when it comes to instant quotes for small, medium, and large. It's not as accurate, right? So for example, there could be someone way up here or way down here. Like, there's way more room for error. However, it's very, very simple if you're just getting started. I recommend starting with this one because it's very easy to be like, okay, I have four or five different sizes of properties, and it falls in these ranges. Here's my pricing. Very simple. Is it perfectly accurate? No. But remember, even if you got laser like accuracy on square footage, there's still so many other variables. They're going to come into play. How far they are from your prop, from your shop. You know, is there a massive driveway before the lawn that you got to go up and down? Can you even get the truck back there? Do they have a backyard? Do they have a gate? Do they have irrigation? Do they have a dog, like, in the back? Like, there's so many different variables that getting so precise. Oh, it's got to be like, way more accurate than the three or four options. That's why I start to laugh because, like, there are so many other variables you're not even taking into account. Now here's the more accurate version. Stepped up cost with more steps. In practice, this approach Requires the manual creation of many steps to simulate a linear scale, Even if you only have three kinds of equipment. All right, now then we have linear cost per square foot. This is the kind of when people say, hey, I can mow 3,000 square feet per hour, great. That means if I have 18,000 out 18,000 square feet, I should have six budget hours is linear. It does not take into the fact that if you have a massive property, you're going to get bigger equipment. It doesn't take into effect into account that a 2,000 square foot lawn does not take 20% as long as a 10,000 square foot lawn. Why? Because there's a whole bunch more perimeter and edging and blowing off of the sidewalks. So this is never actually the reality. But when people start talking about production rates, this is where I get a little afraid is they use something linear, which usually means they get priced. They go way too expensive on the big jobs and they're too cheap on the small jobs. So something to think about, linear cost with efficiency bumps. So the cost scales proportionally with the yard size. But at certain thresholds you can switch to more efficient equipment. This is what is closest to reality. All right, this is the model that most aligns with reality. And that is, yes, it takes longer to mow someone's lawn the larger the square footage. However, there are inherent efficiency of staying on the same larger property. You use larger pieces of equipment and usually you're out in the bigger the property, you're going back and forth more often instead of around the perimeter, around bushes, around flower beds, around the house, etc. So linear cost with efficiency bumps. To avoid those awkward fractional hours, we round to the nearest square footage or hours. Again, this is the most common because here, if I use this, that would mean that if I have 12,000 square feet, I'm charging the customer like $69.41. Most of us are going to round now to the same token. If I'm charging based upon this most accurate form of pricing, I'm going to be at $74.91. I would probably just tell you to go $79 per cut and you will probably not reduce your close ratio very much at all. And so that would be a form of kind of rounding to the nearest number in order to be able to get a more rounded number. Using nines work great if you're getting. If you're charging someone $66.41, I would just charge them $69 and your close ratio will hardly drop at all. So that's what that one is now linear cost with efficiency bumps. This is actually the most accurate. This is the actual cost. But this one's impossible, like very difficult to do pricing with. And this is what, what the actual costs look like as you switch to better equipment in terms of budgeted hours. Because if I'm able to go from a 21 inch mower to a 40 inch stand on because the property gets a little larger, I might actually do the lawn in a shorter amount of time because I was able to bump up the amount of size of equipment. So this is what in reality it looks like. But when it comes to actually figuring out pricing the customer, I'm not going to charge the customer less because I upgraded my piece of equipment. Right. I am going to keep going up. I am not going to give them a discount. Oh great, we can use the 40 inch mower on this property. Oh, it's going to take us half as long. We can go half the cost. I, I might go down a little bit. That is, that's why I have this efficiency curve. But I'm not going to jump down. I'm not going to charge someone less because their property is larger, which unlocks bigger pieces of equipment for me. And this is why I'm a big fan of using the smallest piece of equipment you can get away with to serve 80% of your customers. Because as soon as I have a massive mower that services a few of my customers, if that's sitting on my trailer, I am essentially paying all the extra overhead for 80% of my customers that do not actually utilize that piece of equipment and don't unlock this extra efficiency. So it's just dead wait, it's overhead. And that is, this graph kind of portrays that. And I was like, hey, I'm not going to give someone a discount just because I use bigger pieces of equipment. All right, so what would the inputs look like? This kind of comes back to like the engineering side. This is what flat rate might look like. I have labor, I have number of hours, flat rate across the board. I'm charging the same same amount of hours, same amount of size of lawn. Then I have flat rate matrix. You're going to have ranges from zero to a thousand square feet half an hour labor from 1,000 to 5,000 square feet one hour. This is the most common. People use this one a lot because it allows you to have the customization of being able to move this in increments that you want along that slope. So this is probably the most common way to do inside of copies rate matrices inside. It's usually using this one. Now production rate is going to scale linearly over the course of time. I like it because it's really, really simple. It's like how long does it take you to do this? I get X amount of square feet per hour. Great. How many square feet? There's my hours. Boom. Simple. It just doesn't take into account other variables like the fact that as the property gets larger, as you have less stops, as you're at a property like you get more efficient. So it can sometimes lead to inaccurate bids on larger properties. Then you have your production rate matrix, which again means that as we get into larger size properties, there are inherent efficiencies gained because of equipment because we don't have to do as much perimeter, et cetera. So if that hurt your brain, I want you to focus on one thing and one thing only. Getting the customer. If this is helpful, go to mikeandys.com where there's over 50 hours worth of online training completely free to help you grow your home service business. The reason that I'm okay with step ups and less of them is to be able to get the price to the customer as fast as possible. Is why we do it over the phone or, or we do it right from our website using instant quotes because I want the customer to accept my bid as quickly as possible. I know there are so many variables that go into an accurate mowing price. I want to get as close as I can, but most importantly get them on the schedule. If I get them on the schedule, then I'll be able to see over the course of time how long the job actually takes and then we'll adjust my prices accordingly. The only reason you would not do this is if you had so little cash in the bank that you could not get by for a month or two of being a little bit underpriced on some of your jobs by the way on instant quotes on over the price over the phone pricing, sometimes you will overbid the job they'll accept and you continue forward. So there's also inaccuracy on the other aspect of it. When you have those big jumps in those tiers and you know like small, medium and large is three tiers. We have a fourth one which is other. So anything really, really big or crazy looking like we have four tiers, get them on the schedule and then over the course of time using your visit reports you gotta track is above budget hours or below and then make an accurate description of like oh, I know now that it doesn't take 0.82 budget hours, it takes 0.96 budget hours. Oh, if I change the price to account for 0.96 budget hours, here's the new price. That's how you do pricing. And in my opinion, the companies that grow the fastest are the ones that get the customer in the door, prove their value and make sure that the pricing is not so precise. Everything's gotta be so perfect. And now it's taking you two, three, four days to get an estimate to a customer. If it's taking you more than 24 hours to get your pricing to a customer, in my opinion, you want to simplify your services, you want to standardize your product offerings in order to get those estimates out faster. And I'm willing to give a little bit of accuracy away in order to get the job and then get the actual job hours over the course of time. Again, if you are so dialed in, you want everything system and automated. This is not as accurate as you might like. But if you're trying to grow your business, focus on speed to close and speed to getting the lead instead of trying to get everything so precise and so accurate. But you're getting the estimate a week later and you're close ratio is going from 60% down to 30% because all your competition already beat you to getting the job. And by the time you show up the customer saying, I already got someone else. So if you like this sort of breakdown that's very analytical about pricing, comment below. There's a whole bunch of other pricing videos about mowing that's much more tactical and show you the mowers and you're outside and looking at lawns. This is much more mathematical and theory based. But when you're talking about the real world, this has direct implications and I look forward to next year sharing a lot of this when it comes to Copilot CRM. Thank you all.