When Should I Raise My Mowing Prices?
You might be asking yourself “How do I raise my prices?” or “When is the best time to raise my prices?” The answer to these questions may be simpler than you think. Most of the time, when we consider raising prices, we look at the situation from a theoretical perspective, allowing our emotions and best judgment to guide our decisions. However, this way of thinking is what causes the anxiety and stress surrounding this topic. Here we’ll give you the tools to analyze your numbers, make educated decisions, and give you the knowledge to back up your prices.
- When Should I Raise My Prices?
- How Do I Raise My Prices?
- How Will Increasing Prices Affect My Business?
- Is Raising Rates Best For Me?
Raising your rates is part of running a successful business and providing quality service to your customers. It is easy to cave in and offer discounted rates and keep your veteran customers at their original rates. These practices are not sustainable in the long run however and will lead to turmoil down the road. Raising your rates at the appropriate time and in the right manner will ensure you retain your customer base, while creating profit within your company.
When Should I Raise My Prices?
Most lawn care and landscapers consider raising their rates at the end of the year or at the beginning of the next season. That said, there is far more to the equation. Waiting to raise your rates in this manner can cause damage to your business. There are a few telltale signs that you should raise your prices and some simple rules to consider when raising your rates.
Firstly, ask yourself how busy you are. Is your schedule booked out 2 - 3 weeks? Are you and your crew working overtime and weekends? Are you unable to answer calls, give estimates, or reply to emails? These are clear indicators that you need to raise your rates. This typically happens in the middle of the year when the grass is growing and everyone is booking their summer projects. With the high demand, you can be assured that if you raise your prices, you will be able to afford more employees, offer better service, and maintain your company. The easiest method in this case is having a minimum price for service - for example, a $30 minimum for mowing. Every market is different however. Having minimum rates will weed out some potential leads, allowing you more time to service your desired market. Later, we will look at exactly how to raise your rates and what impacts that actually has.
Next, you’ll want to ask yourself, “When was the last time I adjusted my price for existing customers?” It’s easy to keep mowing a lawn for $15 or $20 when you’ve been mowing their lawn for years. The dread of upsetting a loyal customer can create hesitation when looking at price increases. Taking a step back and removing yourself from the equation, you need to increase your rates for your business and the customer. CPI data shows that between 2020 and 2021 the average price for goods and services rose 5.4%. Thus if it has been a year or more since your prices have increased you are losing money to interest alone. This can be a major killer of businesses that have operated on the same pricing structure for the past 5 to 10 years. The best way to increase your rates for existing customers is in incremental steps over time: 15%-20% per year. This avoids the shock of a huge pay increase and allows you the opportunity to provide them with increasing levels of service while remaining profitable.
One of the more discrete indications that you are charging too little is your close rate on estimates. While it might seem at first that closing 90%-100% of estimates is good for your business, it actually is causing a lot of harm. This is a clear indication that you are charging too little, customers can clearly see that you are charging too little for your specific USP (Unique Selling Proposition). Closing about 80% of new estimates allows you room to profit while curtailing your client base to maximize profitability and growth. On the contrary if you are closing to little estimates this could be an indication to lower your prices or adjust your sales process.
As time goes on, the price of services and goods increases, so you need to make sure that you are staying competitive and profitable. Two of the easiest ways to maintain comprehensive rates…
- Using incremental price increases
- Establishing minimum prices for new customers
The increase in revenue will help you grow your business and continue providing quality service to your customers.
How Do I Raise My Prices?
Worries about interrupting your income, destabilizing your business, and losing your customers create a lot of hesitation and stress around raising your prices. However, taking a tactical approach to the question and implementing some simple systems will take the worry out of raising prices and allow your company to grow and adapt.
In an ideal world, you would run a report on the budgeted hours on each job against the actual hours spent on each job. However, most of us don’t have the time to sit down for hours to run the numbers, so we instead suggest a blind price increase. This may sound random or impractical, but it is one of the best ways to ensure you can provide quality service and still make a profit across the board. In the case of mowing, it’s as clear-cut as: Lawns under $40 per cut increase by $5 and yards over that $40 mark increase by $10. This can range widely depending on your market, but finding a similar rule to follow can lay the groundwork for you to become more profitable.
For most the real stress comes with communicating the price increase to the customer. Fears around losing customers, betraying long-standing clients, and “ripping off” people can be some of the main detractors from raising your rates. Although you may have these feelings, it is imperative that you still raise rates for the sake of your business and your employees. The fact of the matter is that most people are used to prices increasing as time goes on. The problem comes into play when the price is up for negotiation with the customer. The number one way of avoiding conflict with the customer is to send them an email or give them a call informing them that effective on XX/XX/XXXX their mowing rate will be increasing to $XX amount. To avoid the back and forth and turmoil of battling your customers, let them reach out with requests and questions - but the key point is to have your email be as clear and plain as possible; State the increase as FACT, not a suggestion.
In the case of new customers, it is a matter of increasing the amount that you estimate on each job site. Influencers in the field, like Brian’s Lawn Maintenance and Keith Kalfas suggest using minimum rates to ensure they are making profit on each project. This method is a great way to give you the tools to get estimates back to customers in a timely manner and close jobs. The caveat with this method is accounting for route density. If you can mow a lawn at the base price, but their neighbor with a smaller lawn also requests service, it might be in your best interest to adjust their price because you are already in the area. Unfortunately, this comes with experience and might not be the best option for everyone.
Using a combination of blind price increases and matter-of-fact verbiage in your communications with the customer will set you up for success with your price increases. Remember that you are increasing your rates to continue providing quality service and paying your employees a living wage. Remember that your biggest proponent of gaining more work is simply working and providing professional reliable service. You aren't going to be the best fit for everyone and it is ok to lose customers.
Will I Lose My Customers If I Raise My Prices?
One of the scariest notions when raising prices is exactly this and it can be especially daunting if you have a family or other dependents. However, if you are considering raising your rates, odds are that losing a few customers could be a blessing in disguise. Typically, the first clients you lose are those who are taking up the majority of your time. The ones who constantly call to complain and expect far more than you are equipped to supply. Let’s take a look at how increasing your prices will affect your business.
The real driving reason behind adjusting your pricing is profit generation. This isn’t a secret. Businesses are designed to make profit and the point of running a business is to afford a lifestyle that you strive for. Furthermore, if you are servicing clients in an unprofitable manner, you aren’t achieving the goal you strived for from the beginning. You may lose customers along the way but the idea is that each customer that you retain is more valuable than the last. This is clear to see in the example of raising your minimum to $40 from $30. If you have 10 mowing clients and lose 20% of them, your revenue before the increase is $300 and after losing them is $320 with only 8 remaining customers. This is also assuming that you don’t get any new customers, which typically isn’t the case. With fewer customers, it gives you more time to service each client, allowing you to reduce overtime and free up your schedule for new customers.
Another thing to consider is your ability to compete in the labor market. Especially after experiencing labor shortages in 2020 and 2021 following the pandemic, it became more apparent that you have to have the means to compete in the labor market. This starts with offering higher wages without thinning your crew. Starting at $3 - $5 above the going wage instantly grants you interest from high quality employees and more interested applicants. The only way to do this is to increase your prices, but you might not have to increase them as much as you think.
Let's look at why raising your rates is actually a good thing for your customer and give you the tools to educate them and feel confident in your decision. Firstly, curtailing your client base in not only price, but also location and service allows you to foster a better relationship with them. For example if you’re a lawn care provider, the odds are that you can’t fix their plumbing problems nor should you. This is an extreme, but highlights one of the main issues we face on a day-to-day basis. Customers are always asking for just one more thing like, “Can you bag clippings?” or “Can you blow off my deck?” or “Can you pick up my dog poop?” Most of the time these are out of the scope of the services provided or estimated and it is important to adjust your rates accordingly. This will do two things:
- It will help you avoid these interactions in general. Picky clients will find new providers and customers with more needs will find larger providers.
- It will allow you the tools to combate unruly customers, stand up for your team, and possibly fire customers who don’t fit your niche. This is easier said than done but it will save you from a lot of headaches and financial woes down the road.
This affects more than just you and your employees - it will affect your business as well. Appropriately charging for services gives you the funds to afford quality equipment and trucks. Missed jobs, jumbled schedules, and damaged property can set you back and make you look unprofessional. Using the extra cash generated from charging customers more allows you to provide reliable service. Furthermore, it gives you the time to grow a team or limit your routes so that you have time to do the office work that sets you apart from the competition like answering calls, replying to emails and quickly returning estimates. All of these things offer a better experience to your customers and reduce the day-to-day stress you face as the owner.
Is Raising Prices Right For Me?
After reading this, you should have the tools to make an educated decision on if this is the best choice for you. If you are bogged down with work, tired of challenging customers, and struggling to make ends meet, then you need to raise your prices. Don’t wait till next month or next year - do it now. Your customers will stick with you and you will gain new ones as you continue to provide professional, quality service around your area. Build a sustainable business for you and your employees to live the lifestyle that you envision for yourself. Don’t let your emotions guide your decision-making. Back up your choices with facts and the numbers driving your business. A rising tide floats all boats and by continually improving yourself and your company, you will drive the change you want to see in the industry.