9-11-21 (Update For Owners of Lawn and Landscaping Companies)
Is it price increase time for you and your company?
It’s a hot topic…
And for many landscape business owners, the idea of raising prices is a tough decision.
I’ll share a conversation with one of my price-increase-fearing clients in just a moment. But first, let’s review what’s happening.
Based on the data released by the Bureau of Labor Statistics (BLS) on Friday Sept 10, 2021…the inflationary trend is setting a brand new record. Here’s the BLS:
On an unadjusted basis, the final demand index rose 8.3 percent for the 12 months ended in August, the largest advance since 12-month data were first calculated in November 2010.
The Producer Price Index is used by economist and investors to make informed business decisions.
Some folks think I’m weird…I mean really…who really reads government financial reports? Well…when the data clearly show extraordinary movements…Your’s Truly is keeping a watchful eye!
This BLS report is sort-of-like your company’s profit and loss statement (P&L)…
Your P&L is a HISTORICAL report of the financial facts of your company’s past. Think of it as your ADULT report card. The cumulative decisions of how you run your company is revealed in the P&L.
If you have a big fat juicy bottom line, you are likely making pretty good decisions. If you would rather ignore your P&L because you don’t like the message it delivers…you are not alone. Lot’s of landscapers ignore their financial statements.
And here is the best news…
The government reports do not predict the future…they merely report the past.
Your P&L does not predict YOUR future. It simply teaches us about your past decisions.
But there is absolutely a lot to learn from the data. Listen carefully my friend:
Prices are going up at a faster rate than anytime in my 34 years in business.
This is a game changer capable of ruining a company’s financial performance in just a few months…regardless of how hard your work, you can’t hide from inflation!
Which brings me to my conversation with a client who is seriously troubled with the decision to raise his prices for lawn maintenance services.
When you consider raising prices, many folks get fearful.
This is especially true if you have not raised prices in a while (or ever).
to be rather blunt…
in today’s economy…
You have 3 choices.
- Raise you prices to try to get the income you need to support your business and family. Your costs are going up 5% plus every year…inflation could be even greater by the end of 2021.
- Don’t raise your prices and continue in a downward trend of income and lifestyle. You see, inflation is going to get you…sooner or later.
- Close shop and try to get a “real job”. Although I seldom recommend this option…it is an option. The problem for many long-term entrepreneurs is that they become unemployable. They are just too independent to work for anyone besides themselves.
If you remember our discussion – I just need you to go up on a few accounts…the ones that are generating the lowest dollar per hour income…pick out the 4 biggest losers…raise their prices.
My recommendation is that you choose option 1. The other two options are not all that attractive to me.
Jump on a call if you want me to review any of your numbers further.
You can overcome the fear of raising prices if you really “know your numbers”. That is…if you build a budget each year, plan your wage rates and plan your overhead costs a full year in advance, you can gain tremendous confidence when you present price increases.
But if you’re the kind of business owner who sets prices based on “market prices” (otherwise known as the prices I heard about from the other contractors I met at the gas pump or the prices my hard-negotiating customers told me about) you will always be fearful.
Which brings me to another powerful conversation with the owners of a wildly successful company who have grown from $1 million to pass $10 million per year in revenue since their first Profit Builder Training event.
“We’ve just completed our 7th (and largest) acquisition. We now have a clear path to reach our goal of $50 million in revenue before we exit. We feel confident this will happen in less than 10 years.”
From my perspective, the legacy of your company could change drastically in the next 12 months. The inflationary pressure of increasing costs could destroy you… or the adjustments you make could forever define your financial success.
We look forward to our upcoming series of Profit Builder Training events. These small-group events are perfectly organized to help lawn and landscape business owners learn how to build an annual budget and use this information to properly estimate lawn and landscaping jobs. Click here to learn more.
I look forward to talking with you soon.
Tony Bass, founder
PS – The #1 book ever written on the subject of Budgeting and Estimating for Landscaping Contractors was written by Charles Vander Kooi. If this is a subject you are interested in learning about, you can purchase a copy of his budgeting and estimating book right here.
When you purchase the estimating book, you get instant access to the digital version of the “Double Profits Guidebook”. The Double Profits Guidebook teaches lawn maintenance contractors the exact steps to double profit in 12 to 24 months.