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Passing along increasing costs

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Joe Yedowitz added a surcharge to customers’ monthly bills and they’re reacting with empathy.

Carolyn LaWell | May 18, 2011

Joe Yedowitz looked at his bill. His eyes scanned the list of items, tallying up each cost to ensure the correct total.

Four tires at $150 a pop.

Tax, well, of course.

A $10 environmental fee – interesting, he thought.

“Mechanics can charge to throw away your tires. Mechanics can charge to throw away oil, anti freeze, all environmental things,” he says. “The landscaper, while we may not have disposal fees that we are subjected to with hazmat-type material, I think we have a lot of compliance issues that we are forced to abide by, i.e., the home improvement licenses and the dumping permits.”

So that day when Yedowitz picked up his car with its new tires, it sparked the idea to add a monthly surcharge to each customer’s bill in order to recoup the costs of permits, license and government fees he continues to get hit with as municipalities look for ways to increase revenue. For example, last year, Yedowitz, owner of Emil Yedowitz Landscaping & Irrigation Solutions in Ardsley, N.Y., saw the city of Yonkers add a $500 dump fee to drop leaves at its composting center. The city won’t pick them up and they don’t allow the filled bags to sit on the curb.

“So how does a businessman protect himself from these variables in business?” Yedowitz says. “I think a surcharge is one way of doing it.”

Yedowitz refers to the extra $3.95 as a government compliance surcharge. And he hasn’t heard a peep of discontent from a single customer. In fact, the feedback he has received is a sense of empathy. The reaction, he believes, is mainly because adding $3.95 to a $150 or $200 lawn mowing bill, for example, isn’t a painless expense for a consumer to pay. But at the same time, he was upfront with customers about why he was doing it. An approach, he says, all contractors need to take when implementing surcharges.

Yedowitz has always placed at the end of his contracts a disclaimer that says customers’ accounts could be and may be assessed a surcharged based on increasing rates. But when he put the $3.95 surcharge in place, he included with each bill a professional message on a nicely printed statement stuffer defining the government surcharge. Yedowitz, a certified landscape technician, wanted customers to know what the extra fee was getting them – a licensed contractor with liability and workers’ compensation insurance.

“My only advice would be to be upfront and be honest,” Yedowitz says about reaching out to customers when adding additional expenses. “If you get out there and explain to the customer exactly what the surcharge is getting them and what the municipality is doing, I think a couple things will happen. Next voting season, I think the consumer will certainly put some pressure back on the politicians to do away with some of these ridiculous fees and licenses that they’ve mandated on the contractors and maybe some of them will even go away.”

Yedowitz came up with the figure $3.95 for the government compliance surcharge by adding the cost of licensing and fees for the various municipalities in which his company and seven employees work.

“I annualized it and amortized it over a 10-month-operating period and rounded it up,” he says. “So if it was $3.50, I said $3.95 is transparent. It’s just another 50 cents, and I’m sure there will be another fee down the road.”

That other fee may actually be the cost of gas, which Yedowitz didn’t figure into the equation at the beginning of the year. If gas prices continue to rise, he may increase the surcharge to $4.95 or even $5.95.

As lawn care and landscaping contractors toy with the idea of raising rates because of increasing gas prices, Yedowitz is spreading the word of what he’s done. He says he hasn’t heard of friends or competitors tacking on surcharges, but he urges them to think about the idea.

At the end of the day, it’s a philosophical concept, he says. Contractors go through all of the work to obtain proper licensing and insurance, but in Yedowitz’s experience, the consumer cares more about the bottom line. That allows unlicensed, uninsured, guys with just a pick-up truck and lawn mower to bid cheaper and win business.

“I just think (a surcharge) is a different philosophy that enables you to level the playing field a little bit with the illegitimate contractors,” he says.
 

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