if 12 month month is NOT a good option,

Discussion in 'Business Operations' started by 205mx, Jan 19, 2014.

  1. 123hotdog

    123hotdog LawnSite Senior Member
    Posts: 481

    I love the 12 month service agreement. I find that it only works with HOA's for me. I have never got a residential customer to do that. Nor do I want to. I am very very good with my money. I don't need income in the winter to make it. It is nice to have though. I try my best to keep my company within my industry but as diverse of a customer base as possible. I have a good mix of residential, business, foreclosures, and HOA's.
     
  2. 32vld

    32vld LawnSite Gold Member
    Posts: 3,984

    People tend to give general advice because most people operate within common parameters.

    49 states do not have their own section here. 1 does.

    I have not seen that many posts now. Though when I first came here there were many posts where LCO's had tried the 12 month billing. Many had problems with large material costs up front such as with mulch. With not much cash on hand or flowing in the spring.

    Then seemed to be no shortage of customers that would sign you for 12 month billings. That would drop you come June and not want to pay you anymore.

    Balanced billing holds no advantage for me. I do a job where extra materials or had to hire extra help. Having to pay these added costs are going to cause cash flow problems if the payments get stretched out.

    I'd rather save my money from the peak work season so come the winter months and early spring.

    Like a fat person saying I can't lose weight yet they do not cut back.

    Saying you are broke in the winter means you have to cut back on spending during the busy time of the year so you will have money during the slow time.

    A wise man, once said:

    Because you fail to plan does not make it an emergency.
     
  3. 205mx

    205mx LawnSite Silver Member
    Posts: 2,342

    I don't think that's what we are talking about, 32
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  4. A. W. Landscapers  Inc.

    A. W. Landscapers Inc. LawnSite Bronze Member
    Posts: 1,287

    Then what are we talking about?

    How does purposely manipulating one's billing by slowing down the rate at which revenue comes in from a particular job sold at the beginning of the year provide a benefit to one's company that is derived from this particular sale's payment plan?

    Now before this gets turned into a discussion about the skills of the salesman by saying that the salesman can get the customer to increase the amount of the sale because a payment plan is offered, let's just say that the salesman's ability/inability to close sales and/or ability/inability to up-sell is not what we are discussing here.

    Let's just stick to the benefit that is derived from each individual interest free 12 month payment plan.

    I want to make it clear that I am not against the use of offering the payment plan as a sales technique which enable the salesman to do his job better. I'm interested in hearing the benefits (real or perceived) associated with purposely slowing down the rate at which cash flows into the business from jobs that have been sold and completed.
     
  5. whiffyspark

    whiffyspark LawnSite Fanatic
    Posts: 6,093

    It allows you to budget for slow times. It keeps cash flowing instead of draining your reserves in the winter.

    If we hit a drought, I'm still getting paid.

    We do 8 or 12 months maintenance. Mulch and installs are not included.

    We also have half of people paying by the 1st and half by the 15th. That helps in with cash flow too.

    Like I said in the previous thread. When you have several employees its a different game than the guy that is solo
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  6. 205mx

    205mx LawnSite Silver Member
    Posts: 2,342

    One word: planning
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  7. 205mx

    205mx LawnSite Silver Member
    Posts: 2,342

    No point in doing that, that's exactly what I'm talking about. For me it has little to do with making money through the winter.
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  8. A. W. Landscapers  Inc.

    A. W. Landscapers Inc. LawnSite Bronze Member
    Posts: 1,287

    "Still getting paid" as opposed to already being paid??? How does this benefit one's company? Are some business owners doing this because they are not willing to manage their own money if the money were to be in their care? Is there a problem with controlling the money in one's bank account so that in December there is still money left over from the jobs sold, completed and paid for earlier in the year? There is no new revenue coming in, it is just old revenue from jobs previously sold and completed/partially completed that the business owner purposely delayed the arrival ofÂ…the business owner told the client "don't give me all the money now, don't pay me when the job is completed, hold onto my money and distribute it to me a little bit at a time."

    There is obviously something I'm not seeing here or that isn't being expressed in these posts. For the guys that are doing this, are you receiving more of the total yearly revenue in a shorter time period than you would if you were to bill at the time of completion? If so, could you please share an example that shows a side by side comparison of money received at time of service vs. money received in 12 equal installment over 12 months.

    As I see it, 12 equal payments over 12 months means that for each payment you receive, 1/12 of the money is allocated for work you completed that month and 11/12 of the money is allocated as either a prepayment or a post payment on work from other months. So all work completed in January isn't paid for in full until the December bill is paid and all work completed in December isn't paid in full until the December bill is paid. So all work completed throughout the year is not paid for in full until the December bill (final bill) is paid. Is the bulk of the revenue from jobs that are completed in December or is the bulk of the revenue from jobs that are completed earlier in the year?
     
  9. 205mx

    205mx LawnSite Silver Member
    Posts: 2,342

    AW it's obvious you don't like 12 month billing. We do services in each month, so it's a bit easier for us.
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  10. A. W. Landscapers  Inc.

    A. W. Landscapers Inc. LawnSite Bronze Member
    Posts: 1,287

    I never said I don't like it. In fact I said, "I want to make it clear that I am not against the use of offering the payment plan as a sales technique which enable the salesman to do his job better. I'm interested in hearing the benefits (real or perceived) associated with purposely slowing down the rate at which cash flows into the business from jobs that have been sold and completed."

    Other than a sales technique used to close sales/increase number/dollar value of sales, what are the benefits (real or perceived) associated with purposely slowing down the rate at which cash flows into the business from jobs that have been sold and completed?

    If it doesn't benefit one's company in any way other than enabling one to close sales, please say: "It is just a sales technique. There is no benefit other than closing sales." If there are additional benefits, could someone please share their list of benefits along with explanations and/or examples of 12 month payment plan vs. payment due at time of service so that I can see how the benefit you are stating impacts the business.

    From a business perspective, I am truly interested in hearing anyone's thoughts on this.

    You started this thread 205mx and I'm interested in learning more about it from you and the other people who offer the 12 month interest free payment plan. I've asked a few questions so that I can gain a little more clarity on this subject. Hopefully someone will chime in and give specific answers to my questions and help me learn.

    As I stated earlier, "There is obviously something I'm not seeing here or that isn't being expressed in these posts."
     

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