A business owner admits he hasn't raised prices for long-time customers because he fears their reaction, but Mike Andes shows the real cost: he's working unsustainably with no profit margin. A 10-20% price increase, say from $70 to $80 per mow, would add roughly $86,000 annually and fund a manager so he can actually take time off.
As we dug through his numbers and his pricing, I realized he is massively underpriced. There's customers he has been doing service for 8 or 10 years and not raised their prices. Is this just a matter of like you're afraid of what customers will say? Yeah.
Yeah.
But you haven't raised prices for how long?
Like, I tried to raise them, but I don't know who, what, where, when, and how.
We're going to tear the Band-Aid off, double our profits, and increase everyone across the board by 15%. Now, 15% is not bad on a $70 mow.
Yeah.
You're raising prices to $80.
Yeah, yeah.
That's not bad.
Right.
And you're at capacity. It's not like you can take a bunch more customers. Yeah. So like, that's like probably number one. And the reason he didn't is because he wasn't tracking it in his software. He didn't know what his budget hours versus actual hours were on all these jobs. And so he just kept serving the customer and they were faithful and loyal to him. And he's like, I'm not going to raise price on them. At first, everyone rallies around that. Everyone's like, oh, good on him, not raising prices. Let's go. Not being a capitalist. Okay, great. But the problem was he had to work 7 days a week and couldn't go on vacation with his wife who was wanting that simply because he was not willing to raise prices. Now, if he just raised prices by 10%, 10% on $860,000 is $86,000 a year. Guess what you can afford for $86,000 a year? A pretty decent general manager or have Cruz take stuff off of his plate so he doesn't have to be working 7 days a week. Although we have altruistic ideas of like, oh, we're not gonna raise prices, we're gonna be good to all our customers, they've been loyal to us. Realize that by doing that, you're actually just on the short fuse that eventually you will get capped. As much as I love him, he would have gotten sick. He would have broken an arm. He would have broken a leg. Something would have happened. And at that time, no one's there to step in. And it actually hurts the customer. The people that he had served for 10 years no longer would be served if all of a sudden he got wiped out. If all of a sudden his team couldn't take care of the properties because he wasn't there to instruct and train them. Although you might be having a good notion of these customers have been loyal, Therefore, I will not raise prices. By not raising prices, having the margin and having the time to make sure that the business is sustainable. That's really the word we're going here. We wanted the business sustainable. And in order to do that, you have to have profit margin. Justin just needed to raise his prices by 10% to 20% to give himself that margin, hire a general manager, or just offload things to his crew, allowing him the time to spend time with his family and make the business sustainable. And that kind of business he could very easily keep doing for the next 10 or 20 years and not risk burnout.
