Pricing Sense: Pricing Irrigation Services

PRICING PHILOSOPHIES. Southern Lawns, Montgomery, Ala., works from a set price list that illustrates the company’s pricing structure. This is based on a volume discount - the larger the area, the cheaper the rate per thousand square feet, according to James Bartley, the company’s general manager, who added that the price list indicates what each base price is for a range of properties - anywhere from 2,000 to 20,000 square feet. Having this pricing information in writing has been a reliable system that makes a good impression with customers and alleviates any potential misunderstandings, he noted. "It shows them that we’re being open with them and we’re not just coming up with arbitrary numbers," he said. "Sometimes it’s a situation where they’re comparing the price with another company and ask, ‘Why are you charging me $55 when my neighbor pays $50?’"

While this might seem obvious, always measuring a property is equally important in the estimating process, Bartley added. "We take a measuring wheel and measure the property as close as we can so we can accurately price for the customer and ourselves," he said, adding that knowing precise square footage increases application accuracy.

"It’s disturbing how some companies guess at the lawn size," he observed. "How can they know they’re putting down enough product?"

Chuck McIntire, vice president, TurfPride, Kennesaw, Ga., agreed with the necessity of measuring. "We don’t quote prices over the phone since that can be misleading," he said. "We normally insist on looking at a lawn and measuring the turf."

When setting up its pricing system, TurfPride conducted a survey of what its competitors were charging. The company then set its prices about $1 per treatment higher, to account for its emphasis on superior customer service, McIntire explained. "In our program, we charge to keep costs in line."

Part of keeping costs under control is carefully choosing customers, Bartley suggested. Before it takes on a new customer, Southern Lawns always assesses a lawn to see if there are severe pest problems. "We ask, ‘Can we really help that lawn?’" Bartley said. "After all, the results will have our name on it."

Being cautious can help a lawn care contractor avoid being liable for a lawn that was destined to fail, anyway. Bartley noted that installation flaws can signal future problems. Contractors need to take these factors into consideration when pricing. "You’ve got total shade and someone planted Bermuda that is beginning to die," he said, describing one hopeless situation he’s encountered. "Bermuda has to have full sunlight."

If a lawn has problems, Southern Lawns might take on the customer but charge them in the upper end of the company’s price range, Bartley described. Conversely, "a lawn in excellent shape or next to a customer we already have will get the lower end."

PRICING FOR PROFIT. Ensuring a profit can be a challenge for lawn care companies facing constant pressure to keep prices low. In Lawn Master’s case, budgeting for profit has been a trial and error process throughout the company’s history. When it comes to setting up a budget, "experience is a big help," noted Joe Williams, president of the Pensacola, Fla.-based company. He added that details are the secret to good planning. "We try our best to anticipate the cost of sales and overhead," he described. "We put a lot of detail, and always have, in making projections, such as knowing what sales need to be for the year."

To make profit a priority, Williams advised lawn care operators to put their target profit in their budget as a line item. Lawn Master, for example, generally tries to aim for the 8 to 10 percent range.

"The big thing is to keep up with product and labor costs," Bartley added, noting that he reviews his financial statements religiously. "We need to know how low is still profitable."

Keeping chemical costs under control is especially important, Bartley said. "Most companies will try to keep chemical costs around 20 percent of sales," he observed. "Keep it down in that range. If your product costs are higher than that, you’re not going to make a profit."