lowering prices

[yellowdogsvc]

I generally work on the 1-10 acre tracts where a compact mulcher and big chipper are cost effective and productive. Lately, I have had some opportunities to work larger projects where the landowner does not want a large machine or it won't fit under the tree canopies.

Let's say I charge $1200-1500/day to mulch on my daily jobs or where I work 2-3 days mulching on a small tract before moving.

Does anyone lower their daily rate for large acreage? The problem I have with lowering my rate is I am not making a huge profit should I need a repair and with at or above $4/gallon, it gets expensive driving to the site which isn't close not to mention what I use mulching on a daily basis. On a larger project I have to move more support equipment and run a crew of tree trimmers, too, so I am having a hard time justifying lowering my rate to accommodate the customer's imagined budget.
What do others do?
And this isn't limited to mulching. It could be shearing, dozing, etc. so please weigh in.

 

[cat 297c]

In my area I get 175 an hour with a four hour minimum. On jobs that take more than two days I get 165 an hour. I really need to be round 200 an hour with the 140 but got so many guys down here doing it for 125 an hour with skid steers. That's all I hear when someone calls is so an so is getting 125 they don't understand its a 80 hp skid steer vs a 140 hp purpose built machine. Not to mention all the up keep on this type of equipment, folks think your just ripping them off I set down and figured it one day at 140 an hour I'm pretty much braking even with up keep on the machine fuel teeth grease wear an tear on truck an trailer insurance etc.

 

[Fasttalker]

I understand your dilemma,but the issue right now, and for the foreseeable future is going to be fuel prices. As you know it's not just the fuel you burn in your equipment and vehicles, it's every part you have to buy or order, all your supplies (hyd fluid, motor oil, grease, etc.), every thing has gone up or will soon. Unless your client has asked you to lower your rate, or you are bidding against others I would not lower my hourly rate until I saw how my expenses are running. If you still want or need to discount for the client, just knock off hours. I sometimes will knock off every 10th or 20th hour. I have found that if you ever lower your rate word will get out and everybody will want that rate. This has worked for me in the past, hope this helps.

 

[AGGIE00]

Don't be the fool that only counts fuel, labor and payment. I run at 140/hr and won't take a dime less. Equipment depreciation, truck and trailer depreciation, project consumables ie teeth and filters, fuel and lubrication, overhead and insurance on machine, truck, and liability, marketing, time bidding jobs, and finally my favorite, the unforseen repair due to the hidden object. And if you actually want enough money left over to replace the machine at the end of its life, well good luck.

 

[yellowdogsvc]

it's certainly frustrating bidding the projects that are a week or more. I have generally stuck to the "get in-get out jobs" where I can charge what I feel I am worth and what lines up with my costs of doing business. I carry liability and workman's comp and have yet to come across a competitor who is even carrying liability anymore. Some of the guys I knew that were insured dropped their insurance when times got tough. I kept it and cut back on frills.

It doesn't sit well lowering prices to "beat" another estimate. I also don't like when a prospect calls me and says "I'm getting 4 bids and looking for the lowest bid.." I generally will pass because I know what I'm up against. There is a yahoo down the road charging $100/hr for mulching with a CAT 256c and tushhogg. He has no insurance, no cdl but tows a 20k trailer, and doesn't carry a sales tax permit and runs farm tags.. That just irks me when I see him working because he will a small ad for mulching. His land clearing looks like Godzilla leveled Tokyo but hey, he's cheap.

 

[AGGIE00]

I never make excuses for my prices because I'm worth every penny, as I percieve. This is where a business built on word of mouth can make it.

 

[pjbci]

I never make excuses for my prices because I'm worth every penny, as I percieve. This is where a business built on word of mouth can make it.

My thoughts exactly. Do not lower your rate. No category of your many expenses has gone down, so why work harder to go broke faster.

 

[yellowdogsvc]

I don't want to lower prices and probably won't even if I have to do more bids to get the more lucrative jobs. I would hate to get into a contract where I lowered my price and have the job drag along with a bad taste in my mouth every day. I'd rather hunt elephants occasionally than dine on rabbits day in and day out. :licking:

 

[DIRTROAD]

I'd rather hunt elephants occasionally than dine on rabbits day in and day out. :licking:

That's a good way to look at it! Never heard that before.

 

[Robbie Hegwood]

All points are so true. Also when sticking to your price you can use this. Tell them if they have a budget you will work till the budget/hour is meet. Once they see you mulch at your price and the job you do, they will either add to your job with hours, or find you were able to do the whole job in there budget. Usually you can cover more ground than a customer anticipate's, every once in a while NOT. You can do a better job when your not under the gun money wise and the work quailty will be better and that is.....word of mouth!

 

[timberwolf71]

All points are so true. Also when sticking to your price you can use this. Tell them if they have a budget you will work till the budget/hour is meet. Once they see you mulch at your price and the job you do, they will either add to your job with hours, or find you were able to do the whole job in there budget. Usually you can cover more ground than a customer anticipate's, every once in a while NOT. You can do a better job when your not under the gun money wise and the work quailty will be better and that is.....word of mouth!

I also charge $140.00 per hour and am considering raising my hourly rate due to the ever rising cost of fuel,etc....The only concern I have with this is possibly loosing potential jobs as it affects everyone in the food chain and most people are afraid to let go of a dollar in this economy. What do ya do?? With that being said,I feel very blessed to have enough work to keep food on the table and make ends meet(Barely). I wish each and every one of you the best! It's tuff times in a tuff economy. Good luck to you.

 

[redprospector]

Yellowdog,
If you keep doing it the same way, you'll probably always be in the same place.
I have to bid most of my jobs by the acre. I don't want to go back to charging by the hour. You will probably have to get creative getting rid of the bigger stuff, because mulching it takes too long.
I completed a 234 acre job last year, and the only times I had to move equipment was hauling the infamous PT-100G to the dealer for repairs, and when I brought in my used FTX-90 to finish the job. :laughing: Not having to move equipment every few days saves a lot of money.
I generally make quite a bit over the hourly rate working by the acre, it's all up to you. How hard do you want to work. Of corse there are always those weeks that nothing goes right, but at the end of the year is what counts.
One of the advantages to working by the acre is that the land owner knows right from the get go what the job will cost. If the land owner wants to see what I've done for other's I'll usually take them by someone elses job that doesn't look so good. They almost always ask, "Who did this?". I tell them, take them to my job, and try to set the hook.

Andy

 

[tonyoz]

Five years ago I was charging $185 per hour for our RC100,now some outfits are charging $135 per hour even with all the extra cost of the machinery,fuel etc. There now plenty of machines parked because they can not afford to fix them, hurray. Now as soon as a potential client wants to talk price I figure we will have trouble getting payed so the price stays the same. I reckon I can go broke slower with our gear parked than working for below cost. Just my :2cents: worth

 

[DrRick]

as a land owner, i am curious as to the average cost people charge to clear an acre. Lets say it is cedar in the texas hill country around a lot of live oak. the NRCS considers it a 75 to 100 % coverage. They pay a cost share of 50% of 300 bucks an acre. (pays 150 an acre to rancher. It has been my method to clear and burn with dozers and other equipment, as I figured the cost of multching the cedar would be prohibitive. some of this land only sells for around 6-700 an acre.
rick

 

[WestshoreConstruction]

As Tonyoz said you go broke slower sitting than you do working below cost. You have to charge what you have to. Our average rate is 1500+ per acre, on some jobs I will go down to 500 but I can do 20+ per day with one of the 600's on them. Let the others go broke don't follow them over the cliff.

 

[mulcherguy]

I was just browsing and came across this thread. It sounds like some inexperienced folks are hurting themselves and others by quoting hourly rates that are far too low.
If we can provide the customer with the exact cost and description of the end result it is very hard for someone else to mess up our industry by working by the hour at impossible rates.
10 years ago not many land owners knew what could be achieved with a mulcher so it was quite easy for a low flow skid steer with a light duty head to undercut us on a compact mulcher job. We felt 200 per hour for a 200hp mini mulcher, operator and truck was fair and sustainable. I got a call from an operator one morning that the job he had traveled 100 miles to already had a skidsteer on site mulching away. I called the customer and he was livid at me for "trying to rip him off". The skidsteer guy was apparently charging under 100 per hour. I asked the customer if I could come out that evening and spend an hour mulching his site to show him what our 200 per hour bought him. I got there after the skid steer was done for the day and it was apparent that he was in way over his head because of the density and size of trees. He had done less than an acre in the whole day. The skidsteer was brand new and had a little meri crusher mounted to the front. All of the trees over 4 inches were still laying on the ground with occasional chunks taken out of them. I spent about half an hour gobbling up the stumps and rails left over and then did about 15 mins of clearing in the biggest timber the customer had. He called his neighbor to come over and had me drop a giant Spruce while they took pictures. The end result was about a month of work in that area for him and other farmers in the area. The skid steer guy actually ended up buying a purpose built compact mulcher and worked for us as a subcontractor during the winter months. He kept his skidsteer and used it for jobs that were appropriate for it's capabilities.
From that point forward I decided to only give a turnkey price on private jobs. It did require more preliminary work but it solved the problem of landowners not being familiar with the vastly different capabilities of similar looking machines. I created a simple portfolio to show customers. It had photos and text descriptions of the varying levels of mulching possible. The customer could select the end result he wanted and a price would be given per acre. I gave them a booklet as part of our contract that described exactly what they would get. It included photos of delimbed trees (or rails as we called them) hidden by mulch. It pointed out that our typical spec requires that all rails be eliminated. It gave a specification for stumps to be cut off a certain distance below the surface or removed completely.
I know it can be hard to judge some jobs but for us it was critical to keeping the compact mulchers busy and earning significant profits. The photo album was the key to giving a new customer fair representation of what he will get for the quoted price per hectare or acre. Generally after the first job was done in a new area the rest were easy. Potential customers had an example and could indicate to our competitors that they wanted the same result and a turnkey price per acre. Once land owners became more educated on the capabilities of mulchers the industry grew very quickly and there was more work than machines in many areas. It was just a matter of eliminating the confusion associated with matching hourly rates to machine capabilities, and selecting the right size equipment for the scope of the project.

 

[kensnelling]

As Mulcherguy pointed out, people today are looking for the most value for their dollar, and they will pay the higher price if the percieved value is there.

For example, you carry liability insurance. If you damage a fence or a culvert people can file a damage claim instead of hoping the amature will make it right. Work comp insurance. I don't know about where you are, but in Oklahoma if a contractor has his men working on my place and one gets hurt, if he doesn't have work comp then I (as the property owner) am liable for the injured parties injuries, and other damages if they decide to sue.

As Mulcherguy stated, take the extra time to show why your higher pricing is a better value. And no, I'm not in your line of work, but I never cut my hourly rate. My expenses really don't change whether I'm on a 2 hour job compared to a 20 hour job.

Ken

 

[yellowdogsvc]

As Mulcherguy pointed out, people today are looking for the most value for their dollar, and they will pay the higher price if the percieved value is there.

For example, you carry liability insurance.
As Mulcherguy stated, take the extra time to show why your higher pricing is a better value. And no, I'm not in your line of work, but I never cut my hourly rate. My expenses really don't change whether I'm on a 2 hour job compared to a 20 hour job.
Ken

I try to explain our process, end product, and why we are "safer" to use than the competition because we are pretty well insured. I don't come across very many contractors that are carrying liability insurance much less workman's comp and I've seen some damage and been told about contractors running off after they start a fire or damage something. I've also heard of local contractors lying about being insured and then being unable to prove it when the customer demands it. I've picked up work because I keep my insurance up to date. I even had a subcontractor tell one of his own customers that I insured him on his jobs.. when the landowner called me, I set them straight and had a talk with my sub. I don't think he meant to tell a big lie but I also think he figured I'd just cover him no questions asked. Insurance is too expensive to mess around with.. but that's another story.

I admit it's been tough differentiating my work from my competitors. My machine is average (Bobcat) in ability but my personal skills are fine tuned after many hours in the seat. I know that is only my perceived value but when I look at my work and some of my competitor's work, there is a big difference. I guess some customers just want "it done" but I've talked to people on the phone that immediately dismiss mulching because they saw a mess in their area. It's tough being in the machine and finding time to do bids and still make repairs and have a family life. These days bids are taking longer and longer as people are asking more questions and making comparisons. I've already stopped making time for people that tell me they are "getting 3 or 4 bids" and want me to meet them. My time is worth more than just being the lowest bid or taking a job for under what should be a market rate just to keep working.

I don't know what the final answer is. I know I spend a lot of time talking to window shoppers but at least I'm trying to prequalify people before spending fuel $$ driving around to be the low bid. I like the idea of portfolio of pictures but I generally direct people to my website or send them to a job site we did in the area.

 

[mulcherguy]

"These days bids are taking longer and longer as people are asking more questions and making comparisons. I've already stopped making time for people that tell me they are "getting 3 or 4 bids" and want me to meet them. My time is worth more than just being the lowest bid or taking a job for under what should be a market rate just to keep working."

This makes a lot of sense. No matter what you say to the customer, there may be 3 other guys that are too inexperienced or desperate to quote a profitable price. Also, as you mentioned, the current price of fuel makes it difficult to cover pre job costs if you have to make a PR visit and presentation to each potential customer with a 4 hour job.
At the end of the day I guess it boils down to word of mouth. It's a real shame that some people are willing to undercut responsible contractors who carry proper insurance etc.

 

[yellowdogsvc]

This makes a lot of sense. No matter what you say to the customer, there may be 3 other guys that are too inexperienced or desperate to quote a profitable price. Also, as you mentioned, the current price of fuel makes it difficult to cover pre job costs if you have to make a PR visit and presentation to each potential customer with a 4 hour job.
At the end of the day I guess it boils down to word of mouth. It's a real shame that some people are willing to undercut responsible contractors who carry proper insurance etc.

There's a lot of shameful stuff that goes on. We clear a lot of juniper. It's an evergreen that will not grow back when cut down or mulched. There is a contractor going around telling people that he has to poison each stump after a tree is cut (an additional $1-2k added to the quote. He tells the people that if they don't do this the trees will be back in a just a few years. That's a flat out lie and makes us all look bad and it's not all that uncommon when times are tough.