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Downward price pressure

Discussion in 'Commercial Snow Removal' started by Deere John, Dec 11, 2000.

  1. Deere John

    Deere John Senior Member
    Messages: 410

    This season, I noticed that some (only two) customers were asking about price breaks for OUR efficiency. We invested in vee plows and other small things to allow us to take on more work, and the customers are doing the math to get up the nerve to ask for a break.

    I responded with a qualified NO, based on our costs to provide a finished product ( with some detail). Question: I was wondering if others have noticed the same thing, particularly those using the push boxes that improve efficiency so much?? Are people noticing the time vs. cost ratio for your services?
     
  2. John Allin

    John Allin PlowSite.com Addict
    Messages: 1,327

    If they have noticed, they aren't saying. And if they do, my answer will be "no", just like yours.
     
  3. Alan

    Alan PlowSite.com Addict
    Messages: 1,393

    Not just NO,, HELL NO!!

    We make improvements in efficiency for OUR benefit, not so we can cut out own throats. Nobody has approached me with that yet, but I'm sure they will at some point. I'm not about to even consider it.
     
  4. blades

    blades Junior Member
    Messages: 27

    Deere John,

    I'm a real newbie here (first post), and have been loitering this past weekend, as I'm seriously considering getting a plow for my truck.

    My guess (regarding your question) is that this sounds like automotive supplier tactics, and this may be the result of a trickle-down theory. The auto (and other large) companies put a lot of pressure on their OEM suppliers to actually give price concessions each year on thier product, the logic (if you can call it that) being that the supplier is getting better at making a particular part, and should be improving in terms of both process and efficiency. These concessions are actually demanded by the larger companies, and are typically negotiated up front. I think GM is typically 4% reduction per year for the first 3 or 4 years of a product cycle. All this results in, however, is a higher up-front piece-price to the large company, as these concessions must be built into the price of the supplied product.

    What does this have to do with you? The smaller companies attempt these same tactics with THEIR vendors, whoever they are, in an attempt to reduce their costs. Usually doesn't work, though. More OEM suppliers should try to use the same logic you presented to your customer. Unfortunately, when dealing with large companies, there is no such thing as logic.

    Sorry for rambling so much :)
     
  5. landscaper3

    landscaper3 Senior Member
    Messages: 309

    We picked up a few accounts (new ones) they had me come over for a estimate and when I gave them the estimate the customer siad WOW thats too much can you work with me on price, I siad no I cant I have set prices and its late in the season for me and im real full and cannot ajust my costs, at least 6 asked me too, got 3 of them made them sign a contract which they didnt like but WE - DO - NO - WORK - TILL - CONTRACT - IS - SIGHNED. I even tell them if they want me to run one over for them to sign ill be glad too. If they say mail it ill look at it I say until contract is back no work is to be performed. I run a hard and direct system from being burnt by residential people so now all go on contracts. The ones who have no problem signing are the ones youll get paid by and the ones who dont want to sign are the ones who MAY not pay.
     
  6. GeoffD

    GeoffD PlowSite.com Veteran
    Messages: 2,266

    Last year I started useing the F 650 on private roads, for years we just beat a 1 ton down them. Only last year we used the F 650, I think after the first storm i got 6 phone calls asking if the price would go down, because it took less time. My answer everything no, no, no, and no.

    Geoff
     
  7. RB

    RB Senior Member
    Messages: 197

    I would acutally consider giving them a price break.

    If a customer asked me for a price break I would polietly ask them how much of a break they need. I'd then try to find out why they are askign for a break. Maybe they just received an unsolicited bid that is a little lower than yours. They like your work and want to keep you, but they are in business and you know you probably won't be there next year if you don't lower prices. How much do you want the job?? I'd also ask myself if I can afford to give them a break.


    I guess for me it would have to be a win/win -- what am I getting out of this deal by lowering prices??

    Am I crazy??
     
  8. GeoffD

    GeoffD PlowSite.com Veteran
    Messages: 2,266

    if you give them an inch they will take a mile. In the snowblowing biz it's true.

    Geoff
     
  9. Alan

    Alan PlowSite.com Addict
    Messages: 1,393

    I won't dicker, period! If I can't work for my rates I'll park the truck. If you want a cheaper price get somebody who does cheaper work.
     
  10. RYAN

    RYAN Junior Member
    Messages: 3

    NO WAY!

    I never budge on a price. The time it takes to do the job should have little or NO bearing on price. Say my truck breaks down one day and I have to remove there snow with a hand shovel. Are the going to let me triple charge them sice it took a lot longer? I doubt it. And I won't budge either.
     
  11. DaveO

    DaveO PlowSite.com Veteran
    from Ma.
    Messages: 299

    Price Decrease

    I have seen a trend towards down pricing around here. The lack of snowfall in this area(S.E. Mass) has created a lot of "lowballers" just trying to get work.

    Most larger acct's still retain the better contractors for their seasonal contracts. The smaller commercial acct's are getting lower and lower bids every year due to the number of plows around, and the lack of work.

    Almost every smaller commercial is switching contracts every year because of a "lowballer".

    I am now a single person operation due to a split with my partner, and have lost two commercials this year. One to a "lowballer", the other to the property owner who bought his own $100 plow truck in attempt to save every $$.

    The weather has been so warm the past couple of years, that customers watch the weather and decide "NO PUSH", because it should melt in 2 or 3 days anyways.

    I think we NEED a severe winter of snowfall to remind people of the value of our service, and weed out the fly by's.

    Dave
     
  12. GeoffD

    GeoffD PlowSite.com Veteran
    Messages: 2,266

    I have some relatives in the portland area. The winter of 1995/1996 weeded out the men from the boys. I think the winter before one of my reliatives parked his truck and plow because of low ballers. Well in 1995/1996 where portland had record snowfall, his old customers were calling him back pleading for his services. That was a weird winter I think Portland had more snow than Caribou for the month of september, because all the storms were costal.

    Geoff
     
  13. JD PLOWER

    JD PLOWER PlowSite.com Veteran
    Messages: 751

    I have to agree with Dave, here in the Boston area we have seen a DRAMATIC DROP in prices . That trend has been going on since the early 90s when the economy was slow and every cowboy with a pickup called themselves a contractor. Its only become worse with the explosion of 4x4s. I am praying for a severe winter just so we can show that a contractor who is willing to do a quality job for a little more money is worth the price they ask. I have come to the realisation that a buisness around here will always go with the cheaper price unless they are forced by Mother Nature to see the error of their ways.
     
  14. John DiMartino

    John DiMartino PlowSite.com Veteran
    Messages: 2,154

    I find that if you go after the bigger commercial/industrail sites,the prices arent affected by low-ballers as bad,because they cant handle them,and they usuallu do not carry any insurance other than normal auto policy,so they arent allowed on the sites.I am picking more of them up and dumping the residentials,since they are easy to lose and dont pay great anyway.
     
  15. jrblawncare

    jrblawncare Senior Member
    Messages: 121

    John,I'm new at the plow game this year,but I'm with everyone else.NO WAY...on the price break....You said it,you got your V's to help with your efficiency,not for the customer.Competition in your area may have a bearing on this,you will know that better than us.I guess I'm looking at it like on the "green side"...If I'm mowing with a 48"walkbehind and go out and get that 9k 72"ZTR mower and cut my time in half,will I give them a break...I should say NOT! JRB
     
  16. MJ

    MJ Senior Member
    Messages: 129

    If anything, you need to raise the price to pay for the equipment. Not only is it more efficient from a time-saving perspective, but it should also be more effective in performing the job. The result would more cleaner lot etc or better visual effect in the case of lawncare. So, my response would be "No, but I do need to consider an increase." End of discussion.

    Mick
     
  17. plowking35

    plowking35 2000 Club Member
    from SE CT
    Messages: 2,923

    I will admit that in one respect I have saved my customers some money over the years. It was probably during the lighter years when my contract minimums were not met, and I didnt charge the full amount of the contract price. But overall we charge 3-5% more each year. Every per push account goes up every year, and all seasonals go up, unless it is a multi year contract, and they rate locked . Some of our contracts have a built in increase every year, and we just charge the new amount the next season.
    We have a serious lowballer in town, and the rest of are still waiting till he flames out, but so far he has stayed alive. We cant figure it out, but he is still out here, putting pricing back to 1981.
    Dino
     
  18. Michael F

    Michael F Senior Member
    Messages: 203

    We had a serious lowballer for lawncutting, snowplowing prices were OK, we had a mutuall friend, after he went out of businees I got copies of his snowplowing & lawncare estimates, as well as accounts recievables list, didn't add up his bills far exceded his income, $ 100,000, he had 4 pickups all within 7 years old, a F600, skidsteer, two tralers equiped for mowing, and a dump trailer, I'm sure more I was never at his shop, I never could figure out how he was advertising weekly lawn service starting at $ 10 and was buying this stuff +property, a boat, a bagel/donut shop ect., I told my friend I know there is money in this business, but not that much, especially when you have only been in business 2-3 years, he was one more year after that discussion. His wife was just recently arrested and charged with embelzing aroun $ 500,000 from the law firm she worked at.
     
  19. John Allin

    John Allin PlowSite.com Addict
    Messages: 1,327

    RB -

    I don't think you're crazy. But, I do believe that after a few years your attitude will change. Especially when you figure out what it's costing you to do business, get enough customers that you don't have to be beat up like that, or if you get burned a few times.

    All these guys on this thread can't all be wrong....
     
  20. JCurtis

    JCurtis Banned
    Messages: 862

    Fuel prices continue to rise, insurance continues to rise, interest rates continue to go up, etc., etc., etc..

    With all of the costs associated with running a legitimate business increasing, it is out of necessity that we look at ways of running more efficently. If we didn't we would all be out of business.

    Our landlords, electric companies, fuel suppliers don't give us price breaks if they do things more efficently. If anything they raise prices to make up for the added investments they just made to improve services.

    HELL NO TO PRICE BREAKS!!!!