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Multi year commercial contracts...

Discussion in 'Lawn Mowing' started by nobagger, Jan 7, 2006.

  1. nobagger

    nobagger LawnSite Gold Member
    from Pa
    Posts: 3,065

    I am bidding a few banks and some other businesses and I never bid a multi year contract before. I was wondering what % do you raise each year if at all. Or do you just bid them at a price that averages out "x" amount without them knowing its being raised.
  2. Flex-Deck

    Flex-Deck LawnSite Silver Member
    Posts: 2,846

    I try for three or four year contracts - I tell the customer that the advantage for them is that it locks the price in for them, and for me it lets me plan down the road without the yearly hassle of bidding.
  3. tiedeman

    tiedeman LawnSite Fanatic
    from earth
    Posts: 8,745

    I have done it both ways before. I found that by increasing it by 3% every year is the best way to do it. When you bid it at a flat rate for those three years, after the first year you are asking yourself, "Why did I do it that way?"
  4. dcondon

    dcondon LawnSite Silver Member
    Posts: 2,246

    That's a tough one. It all depends on how bad you want the account. increasing it every year is going to run you out of business because someone is going to lowball you. We have tryed to hold steady on prices but things do change from time to time.:waving:
  5. Precision

    Precision LawnSite Silver Member
    Posts: 2,995

    quote with a built in rate of increase. peg it to inflation if you want to be complicated. Or just pick a rate between 2.5 and 5%.

    If you don't build in increases, by the time you come around to bid again, you will be raising the rates (percieved) by alot. Or your first year bid will be (percieved) as too high.

    Personally, I run at 4% and have included a fuel surcharge schedule based on fuel prices.

    year 1 1000
    year 2 1040
    year 3 1081.60
    year 4 1124.87

    or you could charge $1061 each year but when renewal time came you would have to move up to $1240 to keep the same rate of increase over the next 4 years.
    Obviously, this effect will be lessened on 2 year contracts but it will still exist. More importantly they will often resent the increase at bidding time if they are not used to raises in non-bid years.

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