Unless you only use electric equipment or are fueled by propane, a landscaping company can’t run without one key element. It’s not a mower or a backpack blower. It’s the gas that goes into those trucks, chainsaws, lawnmowers, tractors … and it’s expensive.
The national average cost of fuel has steadily increased over the past three years, according to the U.S. Energy Information Association. For landscape contractors, that means it’s going to cost more each morning the trucks roll out.
As of the middle of September, the current average for regular fuel is $2.85, while a year ago at the same time it was $2.61, according to AAA.
Stefan Shoemaker, owner of Shoemaker Bros in Baltimore, Maryland, learned early on to cushion the company’s bottom line in case fuel costs were to skyrocket. “We haven’t had any issues this year,” he says. “But when fuel costs rise, you pay more for everything.”
In order to give the company some leeway, Shoemaker built into contracts that the company may have to surcharge service costs to compensate for added fuel expenses. Right now, the contract states that if fuel rises above $3.50 per gallon, the service costs will increase a percentage.
The company is 100 percent residential including a few HOA contracts. They provide landscape and hardscape installation service, but 65 percent of their revenue comes from maintenance. Right now, the company has two full-time employees and runs one maintenance crew, so they just fill the trucks up at the pump.
The good news for Shoemaker – and his customers – is that the company has only had to implement the surcharge a few times. And, with the signed contracts, it seems to go over better with the clients when they’re told they’ll have to start paying more.
“We really have to justify it,” Shoemaker says. “We don’t want to (raise service costs), but it’s a last resort.” If they company does have to raise prices, it’s a temporary fix.
The company has even explored other options to avoid purchasing additional fuel. Propane equipment didn’t fit in with their operations, and battery-powered trimmers and edgers didn’t support the productivity they needed.
Saving where possible.
In the south, Corey Handley, vice president of WAC Landscapes in Greenville, North Carolina, says he’s also had to approach rising fuel costs with an increase in service costs.
“We have had to raise prices to deal with the costs,” he says. “A lot of clients went along with it.” WAC tackles the increase at renewal time, rather than including a clause in all contracts. They won’t raise prices in the middle of their service term.
With 16 mowing crews, four installation crews and four enhancement crews, it made sense to stop fueling up at gas stations and start bringing the fuel to the trucks.
“When we got to about five or six crews, it just made no sense to go fuel at the pump,” Handley says. “We just buy in bulk and have it brought in.” But his efforts to keep fuel costs low don’t stop at the pump.
“We got away from diesel,” he says. “And we have a fleet mower that uses propane.” Handley also took supervisors out of the larger trucks that are less fuel-efficient. He makes a point to convey the impact that fuel use has on the company, too.
“The guys see the gauge when they fill up,” he says. “So in staff meetings I’m able to stress to them about where we are at (with fuel use).”
Turning to GPS and fleet management has also helped Handley monitor use and keep costs low. His software can alert him when a truck has been idling for a while. “When I see that, I can ask the crew what’s going on and tell them to shut the truck off.”
Increase versus absorb.
In Alabama, Mike Skelton, owner of Tuskaloosa Lawn & Sprinkler, says he knows his customers well enough to approach them when fuel costs start to rise.
“The ones who are 30 minutes away for instance, we might have to go to them and raise some prices a little bit,” he says. He hasn’t had anyone cancel service on him because of it, and he credits that to being able to pick out those he knows will be understanding of the increase.
And, he says in his area of Alabama, contracts aren’t worth much, so he doesn’t feel the need to include anything about potential price increases.
Some contractors, however, have been able to ride it out with the changing prices of fuel. Molly John, owner of MJ Design in Ohio, says that while fuel costs are a direct hit to their bottom line, budgeting strategies have helped the business prepare for fluctuation.
“We look at the price of fuel every year,” she says. “And we just budget off prior years.” The company hasn’t had to charge more for their services, and Johns says she thinks that’s something she won’t really ever consider.
“We basically eat the costs,” she says. Although the company does a lot of design work, John says they run four maintenance crews who travel a wide range of distances. “Basically, it’s our own interpersonal information we use to figure that budget,” she says.