Mike Schmitt

Mike Schmitt, owner, Shamrock Irrigation & Landscape, Los Angeles, Calif., employs a different approach to set pricing, but he adheres to it consistently."I asked a lot of people about their hourly rates before I started this company, and I decided to use one of the higher hourly rates out there to see if the market would bear it," he related, adding that companies should lose at least 30 percent of the bids they submit because their prices are too high."If you're not losing jobs that often, then you're prices are too low."

He also noted that while pricing work from the standpoint of recovering costs is logical, contractors who do this could shortchange themselves in the long run."I want to push the envelope in terms of pricing in order to yield the best gross margin," he related."If I say that for every dollar we bill we can afford costs to be X, then I'm not taking into account what the market will bear and I may be undercharging."

ONLINE ONLY SIDEBAR: The Commercial Target

Oftentimes, companies that maintain some residential properties only maintain residential properties.For whatever reason, these landscape firms haven't made the leap from residential to commercial clients, but that's not necessarily because they don't want to take on these larger clients.
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"Not everyone can go from residential to commercial and vice versa," related Mike Schmitt, owner, Shamrock Irrigation & Landscape, Los Angeles, Calif. "They're two different beasts.If you try to go commercial, you still need a niche, whether it's high-end properties, strip malls, homeowners' associations or whatever.Then really go after that niche because every type of client's needs are different and you want to learn what you need to deliver and get good at delivering it."

Of course, bigger doesn't necessarily equal better.
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"We make more money for pruning, fertilizing or checking irrigation systems than we do for mowing," Schmitt agreed."That's why when I present an estimate to a customer I just show them one price instead of a price for every service.If they see all of those numbers, they may go through and pick all of the lowest profit portions of the business."

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"I approach every negotiation with the idea that it's OK to walk away on price and disagree with the customer," Schmitt commented."You need to be in business for the long haul, and that means accepting that you won't get every customer.You have to articulate your services well, convince them that you can alleviate their concerns and that you're better than whoever is handling their property now."

By the same token, certain jobs demand flexibility in pricing.

"We're a growing business, and if we have the opportunity to get our truck into a new neighborhood with a prime property, I might think about cutting my price a little," Schmitt admitted."However, there are also times when you have to raise prices.For instance, an irrigation system that is in horrible shape typically means more plant replacements, so I want to protect myself by pricing that job higher."

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"I may raise my price based on my interaction with a client," Schmitt said."If I think someone will be challenging to please, then I want to make sure it's going to be worth my time to try to do that.

"The last thing I want to do is cut my price to keep a challenging client happy, which is what a lot of companies do when a client is particularly difficult during negotiations," he continued."The problem is that such a client may never stop beating you up."

The author is Editor of Lawn & Landscape magazine.

For information about how companies added commercial jobs to a residential mix, check out the online only sidebar above by clicking here: ONLINE ONLY SIDEBAR: The Commercial Target.

Mike SchmittPhone: (818) 519-5700Fax: (805) 581-2990E-mail: schmittmj@earthlink.net