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Pre-pay for services?

Discussion in 'Lawn Mowing' started by hulan2, Oct 21, 2004.

  1. hulan2

    hulan2 LawnSite Member
    Posts: 44

    Being new to the business, this is the first time I have had this question come up presenting an annual contract to a potential commercial account. Please give me your thoughts. After I talked to the office manager on the contract, I told her what the monthly payment would be and she ask if they could pay for the services at 6 months intervals, two pay checks for a years work. She said it was an accounts payable issue??? It was like she did not want to worry about taking time to write another check each month. I replied that I had never had that reqest before and she basically is trying to get my price down for " paying up front " that is her words. Of course I am not budging on my price because it is fair and decent as I am providing service to the building next door. This is probably a simple thing for you all to figure out, but like I said it was a first for me. Would a quarterly payment be better if she is set on not paying every month? It is a really nice property, so I would like to get the bid. Thanks up front for the advise.
  2. oneandonlyjojo

    oneandonlyjojo LawnSite Member
    from NY
    Posts: 125

    if she is set on 6 month intervals she will most likely not want to pay any other way and get rid of you. give her the 6 month price and drop it barely to make her happy or dont drop it at all.
  3. SodKing

    SodKing LawnSite Bronze Member
    Posts: 1,648

    Make sure she is paying for work you are about to do. I would hate to see you get stiffed for six months of work.Don't start any new work until you have the check at teh six month interval.

    We offer a 6% discount on prepaid chemical programs. If this is for mowing I wouldn't give her more than 2%. Which is a standard amount in business eg. 2% net 15.
  4. JimLewis

    JimLewis LawnSite Fanatic
    Posts: 6,839

    How long have you been in business? I was in business for about a year or two before I got a request like that. And I remember thinking it was a rather odd request at the time. I was thinking, "Why would someone who doesn't even know me want to pre-pay for a whole year ahead of time?" At the time, that notion seemed odd, partially because I hadn't ever had that request before, and partially because I lacked the other person's perspective.

    But I took them up on the offer anyway - and since that first request, I've had dozens of people ask for that. Get used to it if you are doing residentials. There is a decent percentage of people who like to do business this way. And there are several reasons for it. One reason is that some people travel a lot and are gone for a month or two or three at a time. They don't want to let you down and not pay, but they know they won't be there every month to get a bill so they just pre-pay for everything they do in life. That's the luxury of being rich - you can do stuff like that. Another very common reason is because people get their tax returns. I have two customers that pre-pay every year around April when their tax return comes in. It's just easier for them to pay it once, when they have a few thousand extra, and not have to worry about it every month.

    Regardless, I have always looked at this as an opportunity. I love it when people pre-pay. We currently have 12 customers who pre-pay for their service. That's about 7.5% of our customers, so that tells you how popular it is. I look at it as them investing in our company. They are giving us money before we need it. With that, I have lots of options. I could chose to save it, earn interest on it, and pay myself each month out of that. Or I can chose to invest it in some equipment that I wanted, or whatever. Either way, it's a boon to my business. Either way, I always welcome it.

    Like SodKing, we offer a discount when people pre-pay for their service. We offer 5%.

    The only downside is that if you spend the money they give you up front, then you have to basically mow for free for the next 12 months. For me, having about 160 clients, that's no big deal. The loss of mowing one customer for free isn't missed much when you have so many other profitable accounts paying you each month. And especially when 12 people are pre-paying, I always seem to be getting a big lump sum payment about every month. Works out well.
  5. hulan2

    hulan2 LawnSite Member
    Posts: 44

    Thanks a lot guys. Lewis, I was thinking exactly what you were saying. 5% is o.k. with me like I said, I've got one next door and that makes it even better. As far as time this is my second season part time. But the way my full time job is going I hope to be full time with it by this time next year. I am in the avaition field and, well I think you get the picture. I don't have much time to post or reply to this site, but I have learned a lot from all you guys. Wish me luck and thanks for all of your replies.
  6. mtdman

    mtdman LawnSite Gold Member
    Posts: 3,137

    I've been doing season prepayment for about 4 seasons now. I give a 10% discount if the customer pays the season total, based on 26 weeks here, up front in April. I have about 20% of my customers that do that, and I get anywhere from $10 to $12 grand up front at the start of the season. People love it, I love it, it's a win-win situation. I see no problem with people giving me money up front. Cuts down on my billing time and costs, as well.

    The only thing is you have to be disciplined with that money. The first year me and my partner both blew that up front money, and it kinda hurt. Taken over 7 or 8 months, that's $1000 to $1400 per month, quite a big chunk of regular revenues. I learned from that and now I put it away at the beginning of the season and don't touch it.

  7. shepoutside

    shepoutside LawnSite Bronze Member
    Posts: 1,205

    I give 15 % off, and have maybe 40 % summer, and 60 % snow customers doing this.
  8. Envy Lawn Service

    Envy Lawn Service LawnSite Fanatic
    Posts: 11,062

    100% of mine pre-pay, reguardless of payment plan.

    I would give a small discount to a neigboring prospect who requested one in return for bi-annual payment, so long as payment was in advance. In other words, the first 6 months would be due at signing or the first service visit. The second would be due within the next 6 months.

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