discounts

[HOMER]

Gave an estimate the other day for a lawn renovation so to speak. Aerate, fertilize, fill divoted areas with top soil, mow, edge, trim. Customer also wanted price on yearly maintenace package so I quoted him $1200.00 for the year, $100.00 per month. He calls today to give me the go ahead on everything but asks this question, if he paid everything up front, which he would rather do:blob3: (me too at this point) would I offer him a discount. This is not a common question for me so I told him I would be interested but would get back with him soon...............after I talked with all my buddies on here!:p

I can always use lump sum money, how much of a discount is customary for pre-payment. I was thinking 10-15 % How bout it?

[kris]

Only you know if you can discount 10% and still make your money...Sounds okay to me...think I would start at 5%,,,see how he reacts

[Charles]

Ya i agree with the 5% at the most just to make him think he is getting something off and not hurting your bottom line that much. Since this doesnt happen to you often and the drought may continue and the up front money will come in handy. But bringing in topsoil and areating, spending money on fertalizer all that doesnt give you much room to play with.

[Barkleymut]

7.5%, is my vote. Still haven't had anyone take me up on it.

[LoneStarLawn]

I wouldn't give anything over 9%...it is typically around 7% to 8% in our area for that type of discount.

[Holloway Lawns]

He has already said he wants you to do it and that he would rather pay up front that is great. I would almost bet he will take any discount you offer him. I would probley offer one free month so take an even $100 off the total. That is about a 8.4 % discount.

[Randy Scott]

What happens down the road when the money is spent and you're buying gas and doing maintenance and wondering where the money went? Not that you will, but it is possible. I prefer my people on monthly payments, gives me a little more of a steady income. To each his own though. The thing about this deal is it costs you the same to do your job whether you get paid up front or not. That $1200 is not going to go in the bank or wherever and make you any kind of money, like they are doing you a favor or something. I had one customer offer it and I said the price is the same either way. Still got the account! I know every situation is different, but when I shop once a week or once a month for groceries, the price is the same.

[Lee Homan]

Sounds like you may want him to sign a contract so that down the road say in july and august when your not mowing his lawn that often he doesn't expect some kind of refund.

[AndrewLawn]

percents,decimals,fractions of numbers......why don't you just make it simple and take a month off(in other words,first maintenance month is free).

[GreenQuest Lawn]

Hey Homer,

I give 5% off for pre-pays. Saves time & stamps.

[cantoo]

Homer, if he doesn't go for the 5% then maybe some other service for free would help to land the account and still get you the same amount of money. Something like pruning or some other job you could preform while you are there. when I used to sell apples and flowers I gave an extra bushel or a dozen flowers instead of a cash discount. That way I got all the money that was available and the customer still felt they had a good deal.

[Mike (MLC)]

I think 5% would be a good starting point. But I wouldn't go past 8%. Don't want to cut too much into your profit.:blob4:

[HOMER]

I like the one month off. The yard was overpriced for the size anyway and I wouldn't be hurt by giving up 100.00.

All of my other accounts are set up on monthly payments so cash flow wouldn't be an issue. He has agreed to $285.00 for the initial cut anyway with some additional work, this would not be discounted.

$1385.00 lump sounds OK to me.....................now if I could find 10 more just like him.

[Fantasy Lawns]

We give 1 month also .....think of it ....upfront $$ ...no cash flow issues ...pleaseee sign me up ;->

[HOMER]

Hey, the timing is good anyway..................got a balloon payment coming in August on one of my leases:D Wondering where that money was gonna come from?????????????????????????

I say go for it Homer

OK, think I will.

Thanks for the advice

No problemo, anytime!

[kutnkru]

Alot of the LCOs in our area will offer a 10% PRE-PAID discount before the start of the season only.

The exception to the rule would obviously be the nbew accounts you aquire throughout the season.

State Sales Tax is 8% here in NYS so thats what I discount. I think its a happy medium between my likeing of 5% and the overkill of 10%.

The only time that I have ever given out the 10% discount was when a new client referred us to four of his friends that got our foot thru the door in 4 different neighborhoods.

All of whom were paying in advance as well. If they are going to be able to give us that extra business, in big numbers such as that situation or they are going to be throwing in a HUGE landscape installation, then I would up it to 10%.

Good Luck!
Kris

[racerdave]

Homer, I think a prepaid discount would be fine. But be aware that this customer is going to always want a discount from then on. So be sure to build that into his future bids.
David

[jaclawn]

Prepayment discounts must benefit you. If you are giving them a discount, you are in essence, taking a small loan out.

If you need money in the start of the season, this can be fine. I wouldn't give much of a discount, just for the sake of getting my money up front, IF I did not need the money at the start of the season.

You need to run the numbers, figure out what it would cost you to "borrow" that money from another source, while your customer paid you on an on going basis.

Also, if you do not need the money at the start of the season, and you do have prepaid customers, figure out the what you could make in interest investing that money ofer the course of the contract. Your discount should not exceed this amount. You need to put a little coin in your pocket.

I have a client that does not like monthly billing, and I came up with a solution that benefits everyone involved. He pays for half a year up front, then the balance at the end of the season. For the first half of the year, I work off of his money, and for the second half of the year, he works off of my money. This gives me some extra startup capital, as well as a little "bonus" at the end of the season.

[Remsen1]

another suggestion would be to tell him how you typically increase your prices "periodically" or "quarterly" or "yearly" etc. (whichever is true) and tell him that he is locked in; so in essence he is getting a discount by being locked in.

[thelawnguy]

"He calls today to give me the go ahead on everything but asks this question, if he paid everything up front, which he would rather do (me too at this point) would I offer him a discount."

He has already told you his preference. I dont see where a discount would be necessary.

Ten per cent discount is $120. Now stop and think for a moment what you can get with that money if its in your hands not his.

[alfabetsoop]

As a residential customer, I thought I'd jump in. I have service including , fertilize, seed, aerate, and dethatch (I cut myself). I was given an estimate for each application, and the total was around $800. He said if I prepaid, he'd throw in a free lime application (around $75). I signed up for it, but I suppose he could have already figured in this "free" application. In any event, I'm pretty happy with the arrangement.

[JimLewis]

You'll notice on our web site (in the specials area) that we give discouts whe clients want to pay us a year in advance as well. I began this several years ago when I got my first request. Since that first request, I've signed up a good 10 clients or so on this program. I love it. As you'll see on our web site, when a client pays for a year-in-advance I give them 2 months for free. For some that may be too much. Do what fits you. But for me, I'll make that deal any day of the week. Not only does it give me instant cash flow that I can invest in equipment, etc. but I don't have to worry about late payments, etc. for an entire year. All and all, I think it's way worth it. Besides, another client in a neighborhood where we are already in every week doesn't at that much to my bottom line. It's just another 20 minute stop for us each week.

I just had a guy yesterday go to a search on the web, find our company's web site, clicked on the specials button, and then emailed me to say "sign me up for that year-in-advance deal. I'll pay you as soon as I receive the invoice." Come to find out his lot is even smaller than most of our accounts. So it's even a better deal.

[smburgess]

I would never be interested in giving someone a discount for paying for the year in advance. My average amount on yearly agreements is AROUND $3400 on my residentials, and varies wildly on commercial accounts. Other than losing the discount amount of pure profit, I really don't have a reason, just not something I would consider...

[slabpile]

hes got a point. he already said go ahead. my guess would be 120 will not change his mind

[JimLewis]

Steve's got a point. And if my accounts were that big I may have to reconsider. But our average monthly account is between $115 and $155 per month. And we don't take on any big commercial work. So it depends on your setup I suppose.

I am often guilty of forgetting that most other lawn maintenance companies aren't set up as we are. We are fortunate in the fact that almost all of the lawns around here are very small (average is 2500 sq. ft. front and back) and all of our clients are in neighborhoods where we already service another 20 homes. So to me, giving away two months' of service isn't that big of a deal. It's 15 - 20 minutes of time once a week for two months. We're already driving by that house anyway.

[Scott H]

Take an even hundred off. that is less then 10.00 a month and the customer will be satisfied. This way atleast you are garunteed your money

[D.Holley]

I'm pretty sure that you will come up with the answer for your problem but what i would do is probably figure in your discount rate in before i gave the price. If his reaction is suprised when you give him the price you can always come done to your bottom line or if you are asked that question again it will already be in the price and you are always in the black.If that question is not asked then you gave yourself a five or ten percent raise.

I have a partner and we are new in the business so we are learning this very same thing.Although we have not had anyone ask us i think we will have a quick comback.

[Freetime]

We will go 5% discount for payment in full received before December 31st of current year for service in next season to customers on signed yearly maintenance contract. When the I.R.S. (they get 30% of your dollar anyway) starts giving discounts I will think about it. LOL

I would not go any more than 5% for any service (maintenance)
:)

[casey]

How much of a discount if he pays CASH for full payment??
CASHCASHCASHCASH

[slabpile]

how's that for response! Now all you have to do is choes what to do there hommer

[HOMER]

Uh, gee, thanks guys! I'm going to see the guy today. I'll do something along all these seperated lines!

[JimLewis]

Ooh. :eek:
I just also realized that maybe not everyone has their cleints set up on year-round agreements. All of our clients pay us the same 12 months out of the year. But I guess if you don't get that, the suggestion I made, of 2 months free, would be a little crazy. For us, it's easy because 4 out of the 12 months, we are only there every two weeks and even then just breifly.