Making my 12 month contracts more effective ?

Discussion in 'Business Operations' started by Bunton Guy, Nov 20, 2001.

  1. Bunton Guy

    Bunton Guy LawnSite Bronze Member
    Posts: 1,746

    I am comming into a small problem I have had a few industrial companies come up to me asking for bids on there property for spring. I let them know before I even did the bid that I work ALL of my customers off of 12 month contracts. He asked well what in the heck do I do for his money in the winter when the grass has stopped growing. I told him that we do many things I showed him a copy of the normal contract and it has that we make X amount of visits per month blowing off the parking lot area each visit and blowing leavs into a area when visiting. Picking up some trash...and I said that the money is used towards our work in the summer because we do X amount of work in the summer the money from the fall/winter will pay for those extra services..I didnt know how else to put it to him. Its the fact that he dosent have any trees or shrubs to trim so I have several of these industrial places that have flat lawns no shrubs trees or mulched areas. So I want to be able to change my contract to make it better for all customers. To him picking up the trash,blowing and preparing for spring wasent enough for his money. I had quoted him $128.00 per cut so you times that X 4 and that was his monthly bill 12 months of the year which for signing the contract many other things would come with it like round up apps...and so on. His last service included all of that for LESS than half the price. I couldnt beleive it. Its over 2 acres of mowing and lots of edging...and blowing. BIG parking lot. Any suggestions ?
     
  2. keifer

    keifer LawnSite Senior Member
    Posts: 320

    Iam not much up on the contract thing but as far as price goes if you think your price is fair then stick to it. there is always some one that will do it for less. When my old man was in lawn care he had a set price to start and wouldnt get out of the truck for any less stick to your guns
     
  3. Lawn-Scapes

    Lawn-Scapes LawnSite Silver Member
    Posts: 2,810

    $128.00 times "X" amount of cuts per year divided by 12 months..

    128.00 per cut
    x36 cuts
    --------------
    4608.00 per year

    4608/12= $384 per month
     
  4. ScotLawn

    ScotLawn LawnSite Senior Member
    Posts: 309

    Most comerical contracts around here are on a 12 month. I haven't got into it yet but from what I hear the cuts are based on 32-36 cuts and totaled up with any landscaping twice a year and divided by twelve. lower price per month for customer and gives you money during the slow winter months when you don't have to go out. Some customers think it's a rip off but let them know that they will be paying the same amount for the years service but not spread out all year. That usually gets them.
     
  5. HOMER

    HOMER LawnSite Gold Member
    Posts: 3,183

    I think I would have bolted when you told me that too!:blob4:

    128.00 x 4 cuts and that's what his bill would be for each month?

    Just figure how many trips you plan to make over the 12 month period like TSG pointed out and average the cost over a 12 month period.

    Using TSG's example: If you plan to make 36 trips @ 128.00 per then your total for the year would be $4608.00.

    Split that up into 12 monthly payments and they would be $384.00 per month.

    512 - 384 = 128

    That's what you need to explain to the man/woman. Your losing money ($128.00 per month) in the summer when you make 4 trips but you pick it back up in the winter when you make only 2 trips or even 1 trip. He needs to know that work will be performed and he will get his moneys worth. You on the other hand will have to get used to losing a little in the summer and waiting til winter to pick it back up.

    Make sense?

    What I have started doing is estimating how long I think I would spend at a property each time and adding that up

    Ex: Property takes me 1.5 hrs middle of summer, maybe an hour in the spring and 2 hrs a trip in the fall and an hour in the winter

    12 trips x 1.5 = 18 hours
    3 trips x 1.0 = 3.0
    10 trips x 2.0= 20.0
    5 trips x 1.0= 5.0

    My hours add up to 46 for the year, again this is just an estimate, so then I multiply the annual hours x $60.00 and come up with $2760.00/12= $230.00 per month

    Maybe your bid is too high, maybe not. If he was getting it for 1/2 of what your asking then I doubt he's gonna give it to you. Type up another proposal explaining everything your going to do . Guesstimate your total hours per year and work it out. You might be able to come off that price a little and convince him that "you da man".

    P.S. LONESTAR..............CHECK MY MATH:eek:
     
  6. GroundKprs

    GroundKprs LawnSite Bronze Member
    Posts: 1,969

    Your simplified pricing structure is your problem. This type of pricing gaurantees, in the long term, that you will lose easier jobs, and get the more difficult ones. In time then, you will be working for less each year. You need to break out all work on each jobsite nad assign times and costs to each function, then get a total annual cost for client. Then you can give a 12-month, 8-month, lump sum, or whatever payment plan you wish, or you agree on with the client.

    To charge 128.00 for mowing times 4 to equal monthly amount is a gross oversimplification of the bidding process. Better way to prepare your bidding on this site (I'm just using any numbers to give an idea, use your own numbers):
    Mow: $100 x 36 = 3600
    edge: $50 x 12 = 600
    blow: $25 x 48 = 1200
    shrubs: $200x2 = 400
    TOTAL ANNUAL COST = 5800.00.

    Now you can bill $483 for 12 mon, $644 for 9 mo, or even give a discount for up-front lump sum payment if you wish.

    You do not have to reveal the construction of your pricing to client, but you are accurately calculating all aspects of the job for yourself.
     
  7. KerryB

    KerryB LawnSite Senior Member
    Posts: 661

    I never show a copy of a contract to someone unless I have designed that contract for that person or business. First I talk with the customer to find out what they expect, I make suggestions and we come to an agreement on what needs to be done.
    Then I get out the measuring wheel. After I have all the particulars of the job I design a contract based on that customers needs.
    I try to make all my commercial accts year round, however, I just bid on one that is an insurance co. that is owned by all the customers. They can only pay for 2 cuts per month April - October and 1 cut in Nov. if needed.
    Sometimes you just have to cater to the account. I have to agree with the way these guys are arriving at their price. You have to break each job down into the different parts to arrive at your monthly price.
     
  8. sheppard

    sheppard LawnSite Senior Member
    Posts: 542

    For what it's worth here is what I do: I put everyone on a 12 month contract. Most people want 20 to 26 visits a year. Some want a weekly visit (52). I tell them they are getting a bargain in the high growth summer months and in the winter I will come once an month (unless they want weekly leaf removal) and 'go over the lawn and make sure it does not deteriorate". That satisfies most of them. If they cancell the contract before the year is up I bill them the final bill based on what a per cut charge would have been if they paid per visit. If they don't pay I take 'em to court!

    Cordially,
    Sheppard
     
  9. Runner

    Runner LawnSite Fanatic
    Posts: 13,496

    There's a glitch right there in your market layout and terminology. First of all, your telling this guy that HE is footing the bill (through the winter) for your loss of profit margin in the summer. NNOT a good way to put it. If you WERE going to connote such a message, there are two different approaches you may want to look into. The first one being that you convey to the customer that they recieve a DISCOUNTED rate through the summer months, (for the amount of work done) in return for the same amount being paid through the rest of the year. In other words, let them think they are getting a discount on (or for) something they really are not. Second, and the best method, is convey to the customer, that your price is set on the basis of all the work that is done for the regular season, and the vistits during the winter are an added bonus to the service. In other words, just charge them for the cutting season, (higher rate) and then come in during the winter months for "free". Let them think they are getting something for nothing. It's done all the time, in many many services.
     
  10. rixtag

    rixtag LawnSite Senior Member
    from Lehi Ut
    Posts: 280

    Hey, Guy
    On this very forum it was explained to me like this. A school teacher works roughly 8-8.5 months a year and they get paid monthly like everyone else. They aren't working every month but their pay is divided by 12 to make keeping the books easier for them and the payroll department. They also are not being charged interest on the money that they get while on summer vacation either.

    Or for instance take the gas company and their equal pay program. You pay the same every month regardless of how much or little gas you use.

    I too am trying to figure out how to positively explain this to a customer without things looking as though I am getting paid for not working. :) I realize that it's not that way but it looks that way.

    The people around here don't give a rats butt about budgeting and the predictability of their payments. All they care about is cheap. Looks are secondary to cheap. It makes it difficult sometimes.

    Rick
     

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