Discussion in 'Business Operations' started by PLL, Nov 20, 2003.

  1. PLL

    PLL LawnSite Member
    Posts: 3

    I was wondering if anyone out there had any information on how to set up 3 year contracts. We currently only do one year contracts but I have heard of people having great success with the long term contracts. I would like to know how you set the paperwork up and also how you sell it to the customer.
    Thanks for any help
  2. cklands

    cklands LawnSite Senior Member
    from MA
    Posts: 360

    Personally i can't see the point in making the sign a deal for three years. What's the advantage? It's not like they can't cancel right? Are you giving them a discount for signing for multiple years? Can you raise their price to adjust for rising costs or are you stuck. My contracts say the "we are a continouos service from year to year until notified in writing to stop" I send a letter to each customer in Feb. stating which services are scheduled and what others are available.
    In my opinion if you are doing quality work then you shouldn't have to worry about the customer staying with you for three years. Just my .02
  3. John from OH

    John from OH LawnSite Member
    Posts: 144

    We use 3 years contracts, but only after we have taken care of the property for at least 1 year. This way we learn the clients expectations and know how to service the property to meet their expectations. We also only do 3 year deals with commercial clients that we like.

    Figure your price for this year. Talk to your accountant and calculate expected increases for the next 2 years. We usually figure 4-5% for year 2 and add 5-7% to that number for year 3 to cover the increased risk of inflation and unforeseen cost increases. Add all 3 numbers together, divide by 3 and give a flat rate for the 3 years. Your are ahead in year one and 2 because you have averaged the price. Year 3 should put you right at your bid. If they cancel in year 1 or 2, you are ahead of the game.

    Sell the 3 year deal by letting them know they have a 3 year flat rate, no bidding hassles, and consistency in service.

    Your benefit is the property is out of the bid cycle for 3 years. You bid 1/3 of your accounts each year saving you time to sell more work. You also will get more efficient each year on the property. As you establish a relationship with the client, additional add on sales increase your value to the client and your bottom line.


    We use long term contracts on commercial properties to keep them out of the bid cycle. If you are on a year to year deal, it is easier for a competitor to come in and outsell you. When the property manager tells the competitor that the property is locked up for 3 years, it is a tougher sell, not impossible but tougher. Another advantage, since the price is averaged, year 1 is over billed (more upfront $$ for you), year 2 is right on the money, and year 3 is under billed, but if you are not much more efficient by year 3, you are doing something wrong. Early in year 3 we will try to negotiate another long term deal or an extension to keep the property from going up to bid. It keeps us from being vulnerable when the contract ends.
  4. PLL

    PLL LawnSite Member
    Posts: 3

    John thanks for the info but what kind of contract termination agreement do you have.
  5. John from OH

    John from OH LawnSite Member
    Posts: 144

    PLL, we use a clause along the lines of contract can be canceled by either party with 30 day written notice with billing adjustments for completed/ uncompleted work. We have never had a long term contract canceled and retain most of our commercial accounts until we decide their work no longer fits our goals. That being said, we avoid any regional or national account that could at anytime be taken by a national company such as US Maintenance. We target locally owned properties that are not handled by property managers. We want to deal with the person that controls the money spent so we are less a commodity to them and more of an adviser. You can't sell value to a property manager, they are strictly numbers people. We also try to get the grounds management budget moved into their marketing budget. (Sales hint - You never get a second chance to make a good impression).
  6. MacLawnCo

    MacLawnCo LawnSite Bronze Member
    Posts: 1,847

    How do you go about that?

    John, you sound like you are on the top of your game...looking for an intern next summer?
  7. RyanVT2005

    RyanVT2005 LawnSite Member
    from VA
    Posts: 17

    Long term contracts allow for projections of income. This allows you to plan for equipment purchases, business expansion, etc. I would say the more business you can get under long term contract the better.
  8. cklands

    cklands LawnSite Senior Member
    from MA
    Posts: 360

    John from OH-
    How do you guarantee that they will keep you for the three years? Is there now way for them to get out of the contract? From the sounds of it you are not giving them any sort of a discount for signing for multiple years. How do you make it attractive to the customer to sign a three year contract.

    I am not being sarcastic. Just don't get it i guess. Maybe because I don't really get into much of the commercial work.

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