WITHOUT Raising Your Prices... DOUBLE Your Profits! [Lawn Care Numbers]

Hey, everyone, Mike Andes here, landscapebusinesscourse.com and today I'm going to be talking about how you can double the profits in your lawn care business without raising the price to the customer. Some of you are like, that's not possible. I'm going to explain how. I'm going to run the numbers. I'm going to do an estimate between two different companies. One that does it right, one that does it wrong. I'm going to give you the complete breakdown using the numbers. And right now I'm live, but I guarantee there'll be less than 20 people because I am recording this on almost at midnight. Yeah, we're 1152 right now, so don't worry. I'm mostly recording this just for the public. Usually I wouldn't go live, but this makes it really easy for me to post. But I'm going live also because for two reasons. Number one, I was doing this example and I ran it for one of our franchisees. They had a question about something I want to explain how profitability is not necessarily tied directly to your prices to the customer. We're going to get into it. But the second reason is because I was looking at what we're spending right now with all. We're bringing on a couple new media people and we're buying cameras and all this rest of us. And then we're planning this trip next month to go traveling to like seven different states and do a bunch of shots for all of you. So I was looking at the prices like, you know what, we need to sell some courses, we need to sell, you know, we need to make some money here. Lawn care, web design, landscapebusinesscourse.com. so I figured, you know what, I'm gonna go live and hopefully this will bring you value. Whether or not you buy my course, I really could care less. But let's go ahead and jump into it. I know there's only like four or five people live right now on YouTube. That's totally fine. I know it's in the middle of the night, but for those of you watching afterwards, I hope this is good for you. So I did take some notes. So it's gonna be a little more structured and if you fall behind on the number side, if you're on the east coast because it's like 3am your time. So let's go ahead and jump through these. I'm going to show how you can double your profits without raising your price. Okay? So just stick with me. There's going to be. I'm going to show the complete breakdown. I don't want to just show one part of my numbers here. So there's quite a bit of numbers I do need to write in small font. So I'm going to do company one and company two. So we're going to show two different companies that are going to do the estimate on a project have double the profit margin. Okay, so let's go ahead and do the estimate. So estimate for company number one is here. And they are going to do. They're going to budget for 10 hours. 10 hours at. They're going to charge $60 per man hour. Okay, let me just draw this down here. And their total. So their total estimate cost or what they're going to. The price to the customer is going to be $600. Okay? Very important. That's the total for the bid. Maybe it's a cleanup, maybe it's a mulch install. Whatever you want to call it, let's just call it a cleanup for the sake of keeping it simple, like a bush trimming. Okay, then over here we got company number two. Their estimate estimate.

The total price is still going to be $600. But watch what happens here. Their estimate is going to be seven hours.

And they are going to charge $70 per hour. Now, the first thing that you're thinking is, well, you raised the price from 60 to 70. Okay, well, just bear with me because the price to the customer is the same. A lot of people will not raise their rates because they think they're going to raise. That raises the price. It does not necessarily mean that you're raising the price to the customer because watch what we do here. Seven hours, they're more efficient. They get done in seven hours instead of 10. They charge $70 per hour. They're also going to add an estimate fee. So they're actually going to charge money just to come to an estimate. And that's going to be $60. Then they're going to charge a dump fee.

And that's going to be $50.

So at the end of the day, their total.

Is still 600. Okay? So to the customer, the price never changed to customer number one and customer number two, the total price of the job was still $600. And what I could write in here, just total price. Okay, but now I want to break down how this affects the company. Because at the end of the day, the customer was charged the same. Over here, we charged estimate fees, dump fees, and a higher rate. But because we were much more efficient at our labor over here, we just had straight labor we didn't charge investment fee, we didn't charge dump fee. Maybe we're confident in charging extra fees on top of our labor. So here we are, 10 hours, taking us longer, less efficient, but the price to the customer stays the same. So for those of you who are concerned about raising your rates and going from 60 to 70, I'm telling you, just because you raise your rates does not necessarily mean you have to increase your price if you can become more efficient. We're going to talk about that in just a second. We're not done yet with our numbers. So. So now I want to run through the costs. Okay, so now we're going to look at the costs on this job for both of these companies. So the cost over here, let's just assume for both of these, for both company one and two, the variables are mostly going to stay the same. So in terms of fuel, so we got fuel, we got debris.

Maybe even if they have it at their shop, maybe take it to a dump, whatever, managing that debris, we got truck. So like maybe payments or maintenance, we have equipment. I'm just going to round all of these numbers up just to keep it simple and keep the numbers straight for you. This is going to equal $100, okay, $100 for the fuel, for the day, driving the truck, the trailer, having the debris, either taking it to dump or managing yourself. Truck cost, equipment costs, all the rest of it. Let's just say it's 100 bucks to cover all of that. And that's going to be the same thing here. So for fuel, debris, all the rest of it over here, same thing is going to be $100. Okay, so all of those things, still $100 in costs. I should probably write this is now cost, but you kind of get what I'm doing here. All right, the next thing we're going to do, we're going to assume that both of them have an office and an estimate estimator has to go and do the estimate itself. Now, it might be you as the owner, but. But again, you are the most expensive person in your company and it costs you money to go meet the client, put together the estimate, all the rest of it. So let's just keep that in mind. But for the, let's just for the sake of numbers, say office. If you have an office person or like a franchisee, I was using his example. I was saying this is command center, for example, let's do the office doing the estimate. So I'm going to do estimator, because again, even if you're out running the estimate, you know, doing the estimate yourself and being the client, there's still a cost associated with that. And trust me, you're worth more than, you know, 60 or 70 bucks an hour if you're an owner and running a million dollar business. Okay, so office estimator, we're just going to assume the overhead of this is gonna be 40 bucks. Again, I can make a whole nother, you know, line item here and say they're more efficient and make it only, you know, less than 40. But we're not going to. We're just gonna say that the costs on both of these companies for everything and is the same. All right, so still here, and the $40 for the cost of doing the estimate, sending it out, estimated, going to the property, all the rest of it. So if we run the numbers now for this side of company number one, our labor, oops, our labor is going to equal, you know, we're going to assume we're going to pay all of our employees the same at company one. And number two, we're going to pay them $20 per hour. We're going to keep it all exactly the same. So if we had 10 hours, we're going to have to pay them $200 in labor. Okay, over here, if we're charging them $20 for labor, $20 per hour, if that's what we're giving the employee labor equals 7 times 20 is going to equal 140. All right, so cost of labor different. Everything else exactly the same, only because they're more efficiently, got the job done for faster. Now some of you are like, well, if I'm going to get, if I expect somebody to work more efficiently, I'm going to have to pay them more. So that doesn't make sense. Not true. I have seen companies that pay less per hour and are way more efficient than companies that pay a lot more. Comes down to culture, comes down to you being organized. Comes to how you do your project management. Do you do project management videos? Do you keep your materials organized? Do you have all your office notes? Correct. So that when they go to the job site, there's no waste of time trying to figure things out. There's no wasted time in terms of, on their phone. So stopping at gas stations, all that waste is cut out in this scenario. All right, labor different, obviously. Okay, now let's actually run some of the numbers. What's the difference make in these companies? Same price to the customer. The only thing that was changed is that we're more efficient in our Labor, Okay, Same exact price. The customer, everyone. People have called me like a guy, rip people off that I'm lying to customers by charging an estimate fee on the back end or dump fees and things. It doesn't change the price to the customer. It reallocates where these dollars are being spent. Cause in this case they're being spent on overhead recovery instead of direct labor. Okay, so but to the customer doesn't matter. All they see on the estimate is $600. Company one, number two doesn't matter. The customer doesn't care if it takes you 10 or 7 hours as long as the work is done. Alright, so labor, that's the difference. Now let's actually run some of the analytics on this. Okay, so the total cost, the total, let's do this. Total cost of company number one is going to be $340. That's their total cost. That's 140. Oops. Yeah. No. $200 plus 40 plus 100 equals $340 in cost. Over here when we run the numbers, our, our total costs are going to come out to $280. 280. That's 140 in labor, 40 in office and estimator, $100 for all this other cost. Fuel, equipment, trucks, et cetera. Right. So there's our total cost of company one, 340. Company number two, total cost is $280. Now we are going to now run some numbers because if we take $600 and we minus, that's what we charge the customer and we minus out our cost, our gross profit. Okay, so this is gross profit, not net profit, not bottom line. Because there's a whole bunch of other things we've been taking like insurance, office space, all the rest of it. But gross profit on this job is going to be $260. Okay? For company number two, our gross profit, gross profit is going to equal.

$320. All right, so if you actually run the math now and you look at what these companies have done, they have done the same price to the customer, but they're slightly more efficient. That's all. Now we are going to look at what is the gross profit percentage. Over here we have a 43% profit margin. Okay? Again, gross profit margin. Over here we have a 53% profit margin.

Okay? This is a 10% difference, 43% to 53%. What that means is if we are running a 20% margin business, which means net profit after everything is paid for, take home pay is 20%. That means that if this is 20%. This person would literally be making half as much profit if they were running this type of business. Literally going from here to here on, let's say a million dollar business that did 20% margin or a $500,000 business that did 20% margin. Over here at bottom line, if they just changed these slight inefficiencies and became slightly less efficient and charged a lower rate to the customer, change put price is exactly the same, they would literally make half as much profit. So what's the key? What is the difference between company number one and company number two? One thing. Efficiency. Okay, Your price is saying to the client in both regards, your rates went up, but your prices did not. How did that happen? How do you increase your rate to the customer going from $60 to $70. How do you do that without increasing your price? You become more efficient. And so when people say, well, your rates are so high, it's like, no, no, no, I'm probably price competitive or lower than a lot of my competition. The fact of the matter is that we are so efficient and that makes us price us so price competitive. So I really believe so many of us have our eyes on the wrong measure here. We're constantly measuring this. We're constantly measuring $70 an hour versus $60 an hour. When at the bottom line, that does not change the price to the customer. It doesn't. The only thing that really is going to move the needle is your efficiency. Can you get the jobs done faster? Can your guys move quicker? Can they cut out the waste of being on their cell phone? Lolly dag, what is the word? Lollygagging around with each other, getting the job site waiting for you for 25 minutes to come show them the project. Going to the gas station for two hours for their lunch break, you know, chilling out with, you know, people that they know as they walk by. All of those things is three hours of waste right there. That is what's killing your business. That is what is literally halving your net profit. Again, if this is a 20% margin business and they simply became less efficient and lower their rate and they charge the same prices, same prices, they would go down 10% in profit. That would go from a 20% margin business to a 10% margin business. Half of their profit gone, wiped out simply because of inefficiency. So this video is not necessarily about all the things that you can change in your business, you know, P4P all the rest of it, to try to make your business more efficient in that, in that regard, we should of course, show that slide.

But it's not about I'm not going to go into like all the fine details of how to not make sure to make sure your guys are not at gas station, how to track them using a tracker on the truck, have audio or video on the vehicle, make sure they're working all the time, make sure that your trucks are parked in a certain way when. No, I'm not going to get into the details. The bottom line is what your North Star. What are you constantly thinking about in your business? I've made plenty of videos about what doing one thing, raising the prices. And then I realized today after talking to one of our franchisees that look, raising your price is great, but if you just lower your budgeted hours, you're going to be charging the same amount to the customer. So how can I raise my rates while also becoming more efficient, therefore not actually raising my prices to my customer? That is a company that will win because not only is this company more efficient, they're gonna have better employees that don't lally dag get work done. They don't have any other efficiencies. Like I could have said, okay, they're more efficient in trucks and equipment and gasoline. Their office, their estimate process is much more streamlined. Maybe they have a call center that takes, they don't have to pay as much as 40 per estimate. Like there's definitely other efficiencies that could be gained here. But at the end of the day, I don't care if you're charging estimate fees, dump fees or what your rate is. The only thing that really matters is the price on the estimate to the customer and you do not need to raise the price in order to raise your rate. What you need to do is increase your rate and increase your efficiency and it doesn't affect your price. You can be price competitive in the middle of your market even lower and beating your competition if you can get maniacal in your company about cutting out waste and becoming really, really efficient. I'm going to go ahead and answer some questions here in the live chat because whoever asked a question right now at literally what time is it? 12:08am Pacific Standard Time. User of your question deserves to be answered.

Okay, there's just one question here and we'll hop in. Nine. Well, we got some people over in Australia so they definitely do not have a problem. I have a lawn and landscape company. Since 2013, I cut 150 lawns a week. You got to understand that different places have different prices. Where I'm from my lawns range from 15 to $20. 100%. That is a great, great point there. This is the bottom line. $15 to $20. I'm not talking about changing your price. I'm talking about changing your efficiency. Because, look, without changing your prices, let's say you charge $20 per cut. That's like the going rate in your market. The bottom line is, instead of trying to get super worried about increasing your price on $20 to $25, ask yourself, instead of getting 10 lawns done in a day, is there any way I can do 12? Is there a way I can rearrange my equipment? And is there a way that I can rearrange my schedule, make my route more efficient, cut waste, make everything from my equipment to my truck to my trailer to where I park on the road? Can I make all of that so efficient that I can get two or three more lawns done in a day? Because if you do that, you're going to earn more money in the same amount of time, effectively making more money without raising your prices. All right, so I'm just going to answer that one question. There's only about 10 of you watching live. Thank you for everyone that is watching live in the middle of the midnight hours. But I hope that was helpful for all of you. I hope it cleared up some things, and I hope that you do join landscapebusinesscourse.com, lawn care, web Design, and all those other resources that we made available. Thank you so much for your support, and we'll see you in the next video.