Commercial Accounts and Duration of Contracts

Discussion in 'Lawn Mowing' started by DFW Area Landscaper, Jul 28, 2004.

  1. DFW Area Landscaper

    DFW Area Landscaper LawnSite Silver Member
    from DFW, TX
    Posts: 2,116

    Question for everyone about commercial maintenance:

    With the landscapes that need to look nice, I mean really nice, not just mowed, but annuals planted twice a year, beds mulched, shrubs trimmed...full expectation customers, like high end apartment complexes and office parks...is there an automatic expectation by the decision makers that a legitimate landscaping firm would require a minimum 12 month contract?

    Or do these people still demand month to month or week to week service...with the right to cancel at any time?

    Thanks,
    DFW Area Landscaper
     
  2. HOOLIE

    HOOLIE LawnSite Gold Member
    Posts: 3,981

    Most of them I've dealt with prefer a years contract with equal monthly payments.

    We also used to offer a 2 year contract, telling them they'd be protected from any price increases that way.
     
  3. specialtylc

    specialtylc LawnSite Bronze Member
    Posts: 1,656

    All of my commercial accounts are 1 to 3 year contracts. From $3000 to $150,000 a year jobs. And 90% of our work is commercial.
     
  4. EastProLawn

    EastProLawn LawnSite Bronze Member
    Posts: 1,110

    I only have 3 commercial accts. but that's exactly the way I do it as well.
     
  5. BCSteel

    BCSteel LawnSite Senior Member
    Posts: 876

    Mine range from 8 to 12 months long. I wouldn't do it on a weekly/monthly basis.
     
  6. DFW Area Landscaper

    DFW Area Landscaper LawnSite Silver Member
    from DFW, TX
    Posts: 2,116

    Thanks for the feed back guys. This just confirms my suspicions. I think I've just wasted the last 19 months of my life trying to make a business model work that simply can't work: Mowing residential lawns. And that's been 100% of my focus up til today.

    Before I exit the business, I've got to try two more things. I've got to try the commercial property maintenance side of the business. I really think there is money in that. If I fail there too, I'll try the new construction install side of the business. If I can't make either of those work, I'll accept failure and go get a job in corporate america. Somehow, someway, I've just got to believe that my degree in Landscape Contracting isn't totally worthless.

    This Friday afternoon, I'm going to move all of my Monday and Tuesday accounts to the last three days of the week. I'm going to use my Mondays and Tuesdays to call on commercial accounts. Not sure what I'll do with my employee. I guess I could send him out to do door hangers, though I'm coming to believe that residential lawn mowing is a fools game. I'm afraid to cut his hours or I might lose him. He's a great hand.

    But first, do you think it would be important to develop a professional set of paper presentation materials...like color printed folders that you'd put the contract inside? How important is that sort of stuff when it comes to landing high end commercial accounts?

    Here is a list of pro's and con's of residential vs commercial. Feel free to correct me where I'm wrong.

    Commercial Pro’s
    Fewer competitors with general liability and workman’s comp insurance, which is important in commercial
    Approached by fewer competitors per year (no door hangers – requires cold call)
    Fewer competitors with the credentials/know how to do a good job
    More accepting of a minimum 12 month contract
    Hire out everything – shrub trimming – tree pruning – grub control – fert/weed control
    No DIY fertilizer plans at five times the recommended rate creating extra work
    Watering schedule is controlled by landscaper, so lawn isn’t wet when you get there
    12 equal monthly payments creates year round cash flow
    Payments – may be late, but will eventually pay and there’s no questioning their intentions
    No need to insist on credit cards – saves 2.4% of the gross – because you know they’ll eventually pay
    Fewer competitors with know how to price appropriately
    Much more recession proof, quite possibly 100% recession proof
    Easier billing
    Advertising is completely unnecessary as cold calls win the business entirely
    Don’t have to keep as many people happy all the time

    Commercial Con’s
    Easy to get all your eggs in one basket, one cancellation could be disasterous
    Cold call sales calls are more difficult than closing a residential prospect who has already expressed interest
    Sales calls must be made professionally – hair combed, nice shirt and pants, etc. – can’t be sweaty and dirty
    Accounts must be renewed when they near the end of the term
    Customers almost never pay on time and may even pay several months late

    Residential Pro’s
    Easy to hang door hangers
    Sales call is quick and easy
    Sales call can be made in sweaty, dirty work uniform
    Never have all your eggs in one basket
    No cold calling
    Easy to spread your risk out amongst a broad customer base

    Residential Con’s
    Customers can cancel for any reason at any time
    If the customer gets laid off, you’re fired
    If the customer gets a lower bid, you may be fired
    You only get portions of the landscape (mowing) while almost everything else is DIY
    Customers pay late and make you wonder if you’ll get paid at all
    Because customers pay late or not at all, credit cards are necessary and cost you 2.4%+ off the top
    Must keep more people happy all the time
    Because billing is a-la-carte, entering daily work in Quickbooks is a chore
    Doing estimates is a chore and still only a 50/50 probability of winning the business
    You've got to constantly be prospecting for new clients because they won't sign up for long term contracts

    Thanks,
    DFW Area Landscaper
     
  7. T.E.

    T.E. LawnSite Senior Member
    Posts: 799

    DFW, IMHO It would be a great help to all of us that are in this biz for you to get out. Your constant post of I can't, I can't are pathetic. You expect it sounds like, to be kicked back like some millionaire after ONLY 19 months geez. Didn't they teach you in college that most biz take at least 3 to 5 yrs. to begin to make money? and you expect this in 19 months? With this attitude you'll never make it get out now.
    I guess Jim Lewis has wasted several yrs of his life why don't you tell him mowing residential simply won't work!

    What about Gene $immons in OK I guess he is wasting his time too!
    You for one thing don't at this point need a helper! if you were doing the work yourself you might make alittle money!
    I have spent too much time answering this post as it is Good luck Tony
     
  8. DFW Area Landscaper

    DFW Area Landscaper LawnSite Silver Member
    from DFW, TX
    Posts: 2,116

    Well, TE, your welcome to your opinion. You want me out of the business, but I ain't going away just yet. I've made just over $10K this year. I'm not embarassed to say that. It's the result of a mistake...the mistake of trying to make money in a terrible industry...mowing residential lawns.

    I have great respect for Jim Lewis and Gene Simmons and several others who have earned a living mowing residential lawns. Tremendous respect for those guys.

    But I'm still convinced that by and large, the business model of mowing residential lawns professionally isn't a good business to be in. From what I've seen of the business so far, it's just a matter of time til you get fired. Either they move or they're too nit picky or they die or they get laid off or they get someone cheaper or they "decide to start doing it themselves", or, my personal favorite, they just won't pay you. I'll bet the number of guys making six figures mowing residential lawns, as compared to the number of guys making less than six figures, is a very high ratio...like maybe 1:10,000 or something like that. Jim said in a recent thread that he still hasn't crossed that number, though he does expect his business to gross $800K this year. And most of Jim's growth has been coming from his install & irrigation crew as of late, if I understand things correctly.

    If there's so much money in residential lawn mowing, why hasn't anyone taken it nationwide, or even region wide, for that matter? Why isn't there a Chemlawn of residential lawn mowing?

    Bottom line is, there aren't many LCO's who do only residential lawn mowing who are grossing over $1m per year. With the exception of cheep, cheep lawn mowing, I don't think there are any in my area.

    I've talked to several people, personally, not over the internet, who have all said the same thing. (Seems that no one on this websight ever says anything bad about this industry?) In fact, I spoke with a nursery man in Tulsa last September who told me exactly the same thing. If you've bought pansies in Tulsa, you probably bought pansies that he grew. He's been very successful in the industry. He said that most of the LCO's who only do residential mowing eventually end up with a bunch of broken down equipment and just eak out a living. I wanted desperately to prove him wrong, as I had made the decision that there was money in this and I had made substantial investment in it. I wanted to bump into that guy a few years later and be at Jim Lewis' level. To show him how wrong he was. But now that I realize customer acquisition costs are eating my lunch, and customer churn is a real problem, I can see that he's right. There's money in it, just not much.

    I'm not saying you can't make money mowing residential lawns. If you've got a full schedule, it ought to be easy. It's getting that full schedule and keeping it full that is the problem. All I'm saying is, you can probably make a lot more money doing just about anything else, besides mowing residential lawns.

    Hell, I look at what I've grossed this year and I look at the prices of some of those commercial maintenance contracts...for single properties. $150K a year on a single contract? I know a property manager, one of my customers, who pays a landscape maintenance firm over $40K per MONTH. So why am I chasing down clients that are worth $120 per month??? Why invest time in that??? God I feel stupid for spinning my wheels at this for 19 months without realizing it was a dead end...even after numerous folks had warned me that it was not a good decision.

    Call me a whiner if you want. But I've got to figure out how to earn a good living at this if I'm going to forego the corporate pay check. In other words, I've got to be able to at least project future cash flows that can make this worth my while. Right now, only pie in the sky, ridiculous projections can make residential lawn mowing look like a good way to invest more of my time.

    I've been wondering what I'm doing wrong ever since I got into this business. Well, now I've figured it out...I've been trying to make money mowing residential lawns.

    Call me a whiner if you want. But I'm convinced residential mowing isn't a good business to be in. I think there is real potential with commercial landscape maintenance for a number of reasons listed above.

    Later,
    DFW Area Landscaper
     
  9. ken50

    ken50 LawnSite Member
    from tx
    Posts: 142

    DFW, this is my first year in business, and I think I know where you are coming from. However, I think a good mix of both residential AND commercial is the way to go. As you stated earlier, each have their good and bad. Lose a commercial account, and it can HURT. That is where your residentials can keep making you money. I have had a great commercial account for about a month now, that pays year round. I am now bidding on another group of 21 homes that have lawn care included on their home owner's association dues, and I think I have a very good chance of getting it. These are both GREAT to have, but if I lost one next year to a low baller, I want to make sure I have my little residentials coming in. I am a solo operator, but MAYBE by next year, I can put on some help. RIght now, I would love to have the help, but simply can't afford it. The number just don't work. Some days I am sunup to sundown, some I'm not. To tailgate on what T.E. said, I firmly believe much of what we attain in life is based on attitude. Don't let the word can't, or fail, even enter your mind. You will get hit with problems deadends, etc, like we all will. You seem like a very intelligent guy. Commit to the business, figure out a model that works for you in your area, and relentlessly pursue your dream. Don't get discouraged NOW, you are 19months into this thing, just think if next year is the year you are going to turn the corner, and you bailed now...what a shame that would be. These are just some of my thoughts for you, they might not be worth a hill of beans, but I just thought I would offer them. Best of luck to you, you have a good, analytical business mind...use it...make money..be happy!

    Ken
     
  10. tiedeman

    tiedeman LawnSite Fanatic
    from earth
    Posts: 8,745

    yup, most of mine prefer the long contract. The shortest contract for commerical is 1 year and the longest that I have is 3 years
     

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