if 12 month month is NOT a good option,

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

  1. whiffyspark

    whiffyspark LawnSite Fanatic
    Posts: 6,093

    Aw,

    Theres two different ways to do this. For commercial work, you can add your entire year of services and divide by 12. Mulch, apps, etc. You can also add up all your MAINTENANCE services. Then divide by 12.

    I do not include mulch and other high dollar jobs in residential plans. We do have a plan with annual plantings. But that's pennies on the dollar.

    We add up 38 weeks of mowing, fert, neccasary pruning and trimming, and a few other small things. Then divide that by both 8 or 12. Obviously 12 will have a lower price, but it helps in the winter.

    Mulch, landscaping jobs, hardscapes, etc are not divided over 8 or 12. Those are paid for at the time of service.

    You can do commercial either way. We generally don't include mulch. But we do include everything else.

    The secret to landing commercial is to make your money outside of mowing.
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  2. 205mx

    205mx LawnSite Silver Member
    Posts: 2,342

    What you can do AW to eliminate some of that, is when you first sign up a customer, have them pay for their first mulch service up front.

    the next year, you will be getting paid ahead of time in January and February for mulch in the first part of spring.

    how does that sound? A little better than having to wait i agree.

    :)
     
  3. whiffyspark

    whiffyspark LawnSite Fanatic
    Posts: 6,093

    Good point ^
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  4. grass-scapes

    grass-scapes LawnSite Bronze Member
    Posts: 1,552

    Its a sales technique for me. Lets say they get 3 quotes. They want mowing, pruning,weed and fert, aeration, and leaf cleanup.

    company 1 offers 50 per cut, 250 each pruning, 65 each fert and squirt, 450 for aeration and seeding, and they bill per hour for leaves.... paid when completed each week.

    Company 2 offers just about the same prices, but bills once per month when services done.

    Company 3 offers a monthly equal payment over 12 months which in most cases is cheaper in the customers eyes. Monthly payment around 350 per month in this case with moderate leaves.

    Depending on when the job is sold, your break even point (the point where the income from all three companies would be equal) is about 7 months out. I have found that the income per month isn't a significant difference most months except pruning months and September.

    With the cancellation clause, there are several ways. The software that I use has an installment option which assigns a value to each and every service you do at the property. It keeps track of everything and gives a running total. It also keeps a total of the "installments" paid. Agreement could be worded that all services completed at the time of cancellation would be tallied and compared to what was paid and the balance is either refunded or paid. Its not the exact, but for these purposes, it should suffice. Or, just give a 2 or 3 month cancellation fee.

    Again, its just a sales tactic. No benefit other than that.
     
  5. A. W. Landscapers  Inc.

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

    Somewhat.

    If I understand you and whiffyspark correctly, the client's mulch for the year is billed at the beginning of the year or prior to the year starting and the client pays upfront for the mulch material.

    Landscape and hardscape jobs (and sometimes mulch jobs) are paid for at the time of service.

    But other materials like fertilizer and plants are not paid for up front…those material are paid over a 12 month period.

    So if I have this correct the following line items for the year are added up and divided by 12 or 8 to arrive at a flat monthly charge:

    Mowing/trimming/edging/blowing
    Fertilizer applications
    Fertilizer material
    Plant installation
    Plant material
    Pruning/Trimming
    Spring/Fall clean-up/leaf service

    So you add all that up for the 38 weeks (or however many weeks you have) and divide that by 12 to arrive at a monthly fee that will be billed each month. Do you guys bill in advance for the month or bill for the current month? Are you collecting any portion of the 12 months up front? Does the client pay you January at the time the contract is signed and February is billed in January due February 1st or due some time before February? (< that part really intrigues me) How do you structure your billing?

    Now here is where I get lost on this (this might get answered in the billing questions above): If all that work is completed by let's say November first, what is the benefit of waiting one and a half to two additional months until the middle or end of December to collect 1/6th of the money that is owed for the work that has already been performed?

    I also understand that some people also add in winter services like snow removal…So even if you add that in you are still waiting for 1/6th of the money from the bulk of your services (see list above) and the client has prepaid 5/6th of the winter service but still has 1/6th left to pay on winter services…assuming you are billing the 12 months on a calendar year and are not billing March 1 to February 28th or something like that…If you are, please specify that for me.

    And I am totally baffled by this statement "Obviously 12 will have a lower price, but it helps in the winter." "Helps" how?

    Thanks for your help guys…I'm just trying to wrap my head around this.
     
  6. A. W. Landscapers  Inc.

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

    Thank you.
     
  7. whiffyspark

    whiffyspark LawnSite Fanatic
    Posts: 6,093

    You're following correctly. I bill a month in advance for any maintenance work. No payment no service.

    When you have cash flow in the winter it helps smooth out the wrinkles. Yes I'm aware you can bank the majority of your money in the summer and just save it for winter.

    When you do this for maintenance, you aren't really financing anything. Sure we spread fertilizer over a few months, but it keeps the clients happy.

    But by doing maintenance plans you have a steady cash flow year round. Steady income.

    I Dont do residential snow work so I can't comment on that. Although I may setup a route next year and that would be on a winter seasonal plan.
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  8. 205mx

    205mx LawnSite Silver Member
    Posts: 2,342

    Yes, and we still take clients the good old fashion way.

    I will unlike wiffy include mulch, we have enough capital in retained earning to pay for it. Haven't had issue with non payments. People around here aren't put to stiff you for the most part. Just stay in certain parts of town.

    I love my pay per cut customers as much as my others. And still accept both types. I just sell the other first.

    One thing it helps with is billing and scheduling. If they're paying monthly, you know next year your likely to get the job
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  9. Woody82986

    Woody82986 LawnSite Silver Member
    from DFW, TX
    Posts: 2,128

    It's a sales tactic for me. There really is no benefit to me personally other than being able to use it to increase my sales closures. Sometimes a client wants this and that and the only way they will close the deal is if the monthly payment amount is brought down by a 12 month agreement. Unless extraordinary circumstances exist, I don't allow mulch installations or much of anything else that requires materials to be included in the 12 month agreement. Those are paid for upon completion. I suppose a small case could be made for the predictable nature of the 12 month agreement income, knowing that a set amount is coming in each month from particular clients, but for me that isn't the case. I know how to manage cashflow so even "predictability" isn't a benefit in my case.
     
  10. TX Easymoney

    TX Easymoney LawnSite Platinum Member
    Posts: 4,065

    They are paying for all the work which will be performed over the 12 month cycle in 12 equal installments...one billed each month. When you say 'flat rate', folks think this is the same as their cable service and they can stop at any time without having to pay for the work which has already been performed. Mine states a higher rate if they cancel midcontract.
     

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