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Commercial vs. Residential

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  • Commercial vs. Residential

    Hey gang,

    I have built my business about 95% residential clients and have done a few big commercial bids in the past week or so (still no word on if I got them or not). But to be honest I kinda hope I don't get them & may turn them down if I do. Seems to me everybody out there wants the big commercial jobs so bad that it's so cut throat it's not worth it.

    Say for example there is a 5 acre commercial property, everybody wants that big contract so bad that the going rate seems to be $9,000-$10,000 a year. If you break it down it's much lower margins thatn the already tight residential market!? My average residential area lot is 10,000 SF. So in terms of square footage 5 acres is equal to aprox. 22 residential lots. What I make in going out & servicing 22 lawns in day (which is about what I do daily) is nearly what these contracts pay per month!?

    So I ask the guys who focus on commercial properties..... what gives?
    If I can go out with 1 helper & in a day (16 total labor hours) make almost as much on residentials as a big commercial property pays for a month(that will take 2 guys a half a day 4 times a month=2 days=32 total labor hours) Why the hell does anyone do it? If you were just starting out & needed the work I could see it, but the companies that focus towards this are usually well established.... I just don't get it? I can't get passed that what I get for 22 residentials monthly is over a grand more per month than these places are paying for the same square footage. I'm not hurting for work by any means (thank god) and I don't "need" these jobs. I got calls from my advertising so I went & bid them, what the heck right? I looked at them several ways.... by sq footage, by time, accounted for the fact that one big account means less travel, fuel, even oil changes & brakes.... Still don't see it. I bid the jobs a decent bit over what they are currently paying but still less than what I think it's worth to me really so as I said earlier.... I'm not gonna cry either way over these. I just hope maybe somebody can help shed a little light as to maybe a big advantage I'm not seeing here? I consider myself more intelligent than the average idiot but maybe I'm looking at this from the wrong angle? Thanks in advance. Sorry to be so long winded.

  • #2
    The benefits I could see are small in size, but add up. Like for instance you said less gas, travel time. But also less people to deal with (sometimes customers can take up a ton of your time chatting, or this and that), 1 bill instead of 20. Less paper work, less stamps. I think you do more in a day than most other companies, so they may be sevicing 10 residentials in a day, so half a day job would only replace 5 of them instead of your 10 or 12. So the pay seems better for them.
    Northern California


    • #3
      What I like about commercial jobs is you can usually quote a bit higher, since the person taking bids for the job isn't the one paying you. They don't care what you charge, so they're not going to be offended if you bill them a bit higher. I've just taken on 3 commercial accounts, 2 at $300/month and one at $350/month. All I have to do is cut the grass twice a month (none of them take over 2 hours) and do a bit of weeding/other stuff maybe once every two months. It's a pretty sweet deal if you ask me.


      • #4

        Yeah, I see what you are saying, but by gaining one big account & adding a large income, you also risk losing that one account all of a sudden. In this case that account would nessesitate me purchasing a 2nd mower too. So I'd spend more on the machine than I'd make off the account this year. Granted I could take on more accounts like it. But I don't think I realy want to. I'm not having any trouble picking up more & more residential accounts and as I continue to do so they are getting inevitably closer & closer to each other, making me even more efficient as my travel time & distance bettween each one gets less. We do alot of lawns yes, but I do a nice job (not a mow & go). I don't miss anything and I treat each lawn like I would want my own done. This is gaining me huge refferals & a great reputation. I guess my situation maybe different in the number of accounts I can service per day, but if you only service 10 res. a day... than these big accounts would take you all day.... maybe smaller machines? You get my point either way it's not apples to apples....

        The accounts you have seem good & that's a different story, the mid sized store front or condo accounts seem to pay comparable, the huge developements, hoa's, church grounds, medical complexes don't seem to pay the same here. It's like they get a massive discount for the volume of work? (seems to me about 40% off). That kind of dis**** really skeews the dollars per hour ratio for me ya know what I mean?

        Thank you guys for your replys here


        • #5
          I think one of the factors that should be taken into consideration is the direction you want to take your business.

          Have you thought about how big you would like to take your business? Then how will you fuel it? Would you fuel it with commercial jobs as you grow?
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          • #6
            well guys... here is my .02...
            residential is the way to go... were in south jersey, where every pickup truck has a mower in the back... they go after these small commercial properties cause the misconception is that they pay better... might have been so in the past, but companies now are hiring people to cut costs... so they are going thru contracts with a fine tooth comb. With residential, as you as you have a good reputation, if you fall within $5 dollars of all the other bids, youre gonna get the job. i recently combined my crews and was able to downsize my cutting crew to three guys... they are cutting... and no BS... upwards of $8,000.00 a week... that right... over 180 accounts, and my foreman just called and said they are done for the week... 10:30 on friday morning. With those numbers, I cannot see why id go underbid myself on a commercial property... in fact, all this recession BS, I just gave all my guys a $1.00/hr raise across the board. Its all about efficiency with residential. My guys dont speak with the customer unless they have an issue that needs immediate attention, otherwise they call the office. And to address the issue of billing, since we've switched to automated billing, we bill out over $3500.00 of weekly lawn service every sunday. Payroll capital is never an issue now. And it cost a little less than invoicing with paper and stamps. My advice is to keep tightening your routes and know you limits... take a map of the area that you do work in and created boundaries... and you will make money!!!!

            Gentlemen, we are in a different age now... the computer age... everyone is online with a website and talking about going green... time to stop talkin and start doing... especially with the industry we are in.

            and be sure to check out our forum for our clothing line!!



            • #7
              Thank you Jamie! I was seriously starting to wonder if I had lost my mind? Or if I was the only one to notice this trend in the market?
              Nice to hear someone else has crunched the numbers & came up with a similar conclusion. Well, I spoke to one of the administrators at one of the commercial jobs I bid today, seems they can't make a decision to award the contract to anyone for 2 weeks when they have a board meeting, but the lawn will need service next week. I offered to cut it the once or twice at a per cut rate & said it would give them an opportunity to experiance the quality of my work & for me to see how long the job takes me, at that point I explained, once I've done it a time or 2 I might be able to adjust my bid in their favor if it takes me less time than anticipated. The idea seemed we recieved, more like Ias doing them a huge favor by being willing to do so. So I think I'll have a chance to check it out hand on (this one at least) first & it'll get my foot in the door. So we'll see.


              • #8
                That is fantastic! Great idea Chuck.

                How long do you feel it will take you to service this property?

                What % capacity do you feel you are working at now? Can you still fit in more weekly customers or are you reaching a point where you would have to form another crew?
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                • #9
                  I belive it will take about 4 1/2-5 hours to service it, well see right?

                  With my current crew (me & one employee) with our current equipment, I believe I am now at about 98% of what we can do weekly. This week was insane. Worked a full week, dropped my help off at the end of the day & did a few more solo, Can't afford all that overtime! I have about 7 to go do tommorow solo. Which isn't much, but considering I schedual to get my lawns done mon-thurs, this week bettween rain delays, new lawns that we're CRAZY overgrown & breakdowns.... (broke a belt, no doubt due to the tall lawns, & today had a blade seized on.... tall friggen lawns! had to have an auto shop use an impact to remove it) we ran over into a full day friday & as I said above .... saturday too.

                  Hoping to add a 2nd machine to my arsenal & that should boost efficiency, if it's not enough I'll add a 3rd guy to my crew. That should do it. More than that I don't want to grow. Growing too fast is no good either like we've spoken about earlier. The other thing I may do if it's too much is drop all my per cut accounts to make room for the more steady, reliable, annual service accounts. I anticipate I'm going to have to do that shortly anyway.

                  If I can I'd like to get through this season running one truck, one crew. At our current growth rates I figure next spring I may buy another little truck & trailer, let a crew handle most of the work with that rig, & free me up to service some of the higher end accounts, do estimates, sales, & pop up to check on them at random. I'll run solo so that my employees will never know where I am or when I'll show up to check on them. My father always had issues, catching employees doing side work for cash on the clock with his equipment. I remember one time he heard his guys we're doing a lawn across the street from a client of his, but they never reported it to him. So he waited patiently biting his tongue.... the next week he asked me to take a ride with him, we showed up while they were doing the side job & my father lost it... hehe. He Fired these 2 guys, had em remove the company shirts off their backs & told me to drive the other truck & trailer home. I was like what do you mean dad? He looked at em & said "you azzholes better get f*ckin walking, Don't you even look at me you peices of sh!t" (it was literally like 8 miles from anywhere & pre-cell phones).
                  He was pissed off..... The way he handled it still makes me laugh though.
                  Last edited by musician/lawnman; 06-27-2008, 11:58 PM.


                  • #10

                    As always, you have great insight and you sparked a lot of thoughts in me as I read your post.

                    Here are some of my thoughts on this.

                    If you were to add more crews, could you think of them as franchises? Where you want them to work their butts off to make as much as they can to make more money for themselves and for you.

                    I don't hear too many other lawn care business owners doing this and I do wonder why.

                    Could you pay the crew a salary and then split 50% of the profit with them. Or maybe you could pay them flat out 50% of the profits without a salary to each of them with the crew leader getting a higher %. Kind of like how the fishermen get paid in the TV Show 'Deadliest Catch.'

                    If you were to work the figures, how would that come out for them? Good or bad? I don't know for sure. Maybe you would need to have a base salary of something.

                    Then what you are doing is harnessing their energy and creativity as you provide for them an infrastructure to perform it from within. They won't have to start up a business of their own. They will in a sense have the benefits of running a business and more because you handle all the behind the scenes, office stuff.

                    On top of all that, you let each employee know that you will pay them $x amount of dollars if they catch another employee stealing from the company with side jobs. Maybe make the number big, like $500? Something that you hope you never have to pay out, but it would make the other employees nervous so they wouldn't try to all steal from you. Then if an employee catches a crew chief doing side jobs, the crew chief gets fired and they will get the job, provisional if they can handle it.

                    This should help you keep to a minimum the need to have to watch over everyone all the time. And free your time up to do other more important things to help the business grow. You could also implement a gps tracking device for the vehicles so you could always check and see if they were where they were supposed to be.

                    Then, you would have the time to build up your persona as the go to guy in your community for lawn care and landscaping needs. You could become the green thumb ambassador for the area you service. This would bring you in a tremendous amount of new work. Think of yourself as a Dave Thomas of Wendy's. You and your image sells the business while your staff performs the service.

                    Then you are working on your business, not in it.

                    What's your thoughts on that?
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                    • #11
                      I work in a similar situation to the "franchise" idea that you were talking about. The owner of our company, who oversees all the landscape installation, gives me the equipment etc. and then I work on my own managing the "landscape maintenance" portion of our company. In turn, I take 60% of the profit as my pay. There are some legal issues though, which we are trying to legitimize this year. In reality, I am considered a "contractor" to University Landscapers, which would make me self employed. However, if I am a contractor, then I am not covered by our Worker's Compensation coverage. So last year, he paid me an hourly wage, then adjusted the number of hours to work out how much I made.

                      We're trying to figure out how to make it more "legal" this year, and we think we may be able to include me in our WCB coverage as a contractor, but we're still waiting for some paperwork from Revenue Canada.

                      The main thing I'm getting at here, is that you have to be careful how you organize these sub-units to make sure that it is done properly within the law.


                      • #12

                        That is fascinating! I do believe it is possible to make this work. You can pay a salary and then offer a % of profits.

                        Now tell me this, if you were to start your lawn care business tomorrow and plan it out where you paid your staff a salary and a % of profits, how much profit would you share with them?

                        What would work best and be ideal for you, to keep the employees honest and happy and what would keep them to want to push for more company growth?

                        Can you share with us what your ideal situation would be?
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                        • #13

                          Good Ideas & definately food for thought. I suppose it could work like that, I'd have to crunch the numbers pretty hard to see how it might play out & check different scenarios. You'd almost have to make it a base + bonus type situation.

                          Like years back I ran (was the general manager) an independant auto repair & maintenence facility.... The owner was NEVER there. Maybe once a month he'd pop up to check on things & say hello, In return I'd make a (pretty good) salary + 10% of the net at the end of each month. By doing so It kept me motivated to avoid breakage, screw ups, over or under orders for parts would cost you either too much in parts or you'd lose business by not having parts ready to go.... So I ran a tight ship. But after 2 years I had been growing his business significantly from where it was gained a good reputation.... He got real greedy & wanted more & more.....He set the goals for me so high I never could have hit them without screwing people over. I reminded him how I had turned his store around from a failing business to a thriving shop & now that things are going well & steady the increases he wanted were unrealistic and that I didn't "have to" work for him. I also explained that my salary wasn't enough to make it worth all the hours I was putting in & that if he refused to renegotiate the goals I would be resigning. He refused, I quit. A couple years later he sold the business as the store was no longer profitable.

                          So similarly you want a set up like that. If you pay the guys a percentage of gross, they won't mention a weird squeak coming from the mower because that means downtime this week & less money for them on friday.... they'd run it til something broke.... If the repairs hit their pockets too, maintenence is cheaper than repairs so you'll hear about potential problems.

                          Lot's to think about there. But an interesting idea.


                          • #14

                            You got a lot of ideas to work with here.

                            Can you elaborate more on this so we can talk about how it went wrong?

                            He got real greedy & wanted more & more.....He set the goals for me so high I never could have hit them without screwing people over.
                            How did the 'goals' work? Was it more than 'salary + 10% of the net at the end of each month?'

                            Tell us your thoughts on how it went wrong and what you would have done differently to avoid this?

                            If you pay the guys a percentage of gross, they won't mention a weird squeak coming from the mower because that means downtime this week & less money for them on friday.... they'd run it til something broke.... If the repairs hit their pockets too, maintenence is cheaper than repairs so you'll hear about potential problems.
                            I agree, ideally you would want it set up where all of this would be factored in so the employees would want to take care of the equipment and make it last as long as possible.

                            The % bonus could be based on a net possibly? Where it included expenses, so they would want to keep expenses as long as possible. Meaning, you don't want your equipment to break or get stolen because that would take away from your bonus. Is that what you are thinking?
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                            • #15
                              Where it went wrong? Well, kinda like we may average out our $ per hout to see how we are doing..... A maintenence shop especially on geared towards oil change, trans, radiator services, gear box services, filters etc. Looks at their car count (# of cars coming in) & their ticket avg. When I started there a base oil change was $24.99, $26.74 with taxes & fees. for 6 months before I started the averaged only $8 over oil change in sales. Average ticket just shy of $35.... His goal at the time was $12 over base ($38.74) Within 2 weeks of my getting there & had fired some bad apple employees (attitude issues), hired their replacements, Cleaned up the store, stocked & organized it, & got the ticket average to $45 per car..... a huge change when you are running 40-50 cars a day, 6 days a week. 2 months in he raised the expecations from $38 to $42 avg. but still bonuses the first year there were huge as I always exceeded goals by a mile & the profit was good. Year 2 ticket average goal went up to $46 , then going into year 3 he wanted $50 I think..... plus car count was dropping a bit then due to an economic slump after 9/11 and people were getting a bit more thrifty. He wanted $4 more per car, & a 10% increase in car count for the year in a town that wasn't growing & an economy that was slipping..... I would have had to sell people more work than their car needed to get the ticket average to offset the falling car count (which only leads to pissed off customers & an even more rapidly falling car count) so basically he wanted me not to make my bonuses so he'd have more money. Ungreatful for what I had done for him.... I moved on.

                              I don't think I could have done anything much different. Was just an *** of an owner who wasn't thinking clearly, blinded by greed.


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