Pre-pay Lawn Customers

Discussion in 'Business Operations' started by mike48114, Dec 29, 2002.

  1. mike48114

    mike48114 LawnSite Member
    Posts: 124

    I am starting a new Lawn Maintenance buis. I worked for a large co. for the last 5 years which went out of buis, so here I am starting on my own. My question is this...

    How many customers do you think will pre pay for the season if I offer a 10% discount. The pre-payment will help with start up costs. Let me know what ya'll think...Thanks a million!
     
  2. bubble boy

    bubble boy LawnSite Bronze Member
    Posts: 1,020

    maybe try and have the investment, even if its a loan. then the pre pay is gravy money ( you will need it)

    i have never had much success at lawn maintenance pre pay. maybe 5%. but paying with 6 post dated chq's, about 25% do that. applications, all paid up front, 100%

    10% IMO is a big discount. 5% is usually as high as we will go.
     
  3. mike48114

    mike48114 LawnSite Member
    Posts: 124

    Thanks for the info. I think I might offer 5% rather than 10%. I dont mean that I need the pre pay money for start up, Just the 1st few months will be tight, as you know so every penny helps...Thanks again for the input and keep it comming!
     
  4. dougaustreim

    dougaustreim LawnSite Senior Member
    Posts: 488

    We will be sending out our renewal letters for the coming seasons fertilizer/herbicide applications and irrigation service in about two weeks. We offer a 7% discount for payment by March 1. Actually this discount is reflected in our overall pricing structure, so that it really isn't a total giveaway. There is also the cost savings by not having to invoice each time etc. We get approximately 90% of renewals prepaid for the season and probably 60% of new customers prepaying. This is money that we don't have to borrow to get through the winter and for statup funds in spring.

    The first two years that we tried to get prepayments we gave the customer a price per application and offered a % discount. Becuase the customer had to do the math, we had very little response. After we changed our format to show the total cost with the discount, sales tax etc and showed the total cost comparison to pay as you go, our results were fantastic.

    The customers like the easy one time approach, they sign up for the service and take care of all billing in one easy step. It is amazing that someone would pay in January for an irrigation winterization that they will get in late Oct or November.

    The most significant problems we have had with this have been when on a few occassions we accidently invoiced someone for a service that was prepaid. For some reason, most people go ballistic when this happens. Be very careful this doesn't happen. Also prepaid customers are more difficult if you get behind on your schedule. Once you cash their check, you do have an obligation to perform. We also accept VISA, Mastercard, and Discover, that seems to be popular with a lot of folks for preparyments especially.
    Doug Austreim
    Austreim Landscaping INc
     
  5. bubble boy

    bubble boy LawnSite Bronze Member
    Posts: 1,020

    i've done that. with the 6 chq's, most people write their chq's dated the last of the month. a few the first of the month. come end of october, it can seems like some customers are missing the 6th chq. when in reality the oct payment was done on the 1st.

    but i don't find they get angry, they just ask us to double check. heck, i've had some tell me they are sending the check, then i discover the error. even then they just say "okay just mail me the chq i sent".

    Never had anyone really get angry.
     
  6. MOOSE

    MOOSE LawnSite Senior Member
    Posts: 393

    Very Good Question.. I have 34 clients hoping to increase it to 40 or more for 2003. I have 10 who prepay at 10% discount for full year. Some pay a depoist for the contract with the depoist going towards the spring cleanup. Total coming in February or March of $10,000..
    Now almost all of my clients I acquired from my father.

    It is possible for a new comer to offer this also.. Just watch how you do your contracts for prepay or depoists.
     
  7. Randy Scott

    Randy Scott LawnSite Bronze Member
    Posts: 1,915

    I think it will be a little difficult since you have no track record with any of these people and have never been seen around town due to being a new company. Previous customers are one thing, you have proved yourself and they have gained your trust. Also, are you going to want to give money back if they decide they are unhappy with your work, or you are unhappy with that property?
     
  8. boohoo

    boohoo Banned
    from USA
    Posts: 77

    10 % Discount is about standard. dougaustreim I must say they are super impressive numbers but as he mentioned new customers are less likely percentage wise. Once you prove yourself exising customers are all for it. I have offered anywhere from 5 to 20 % discount but I would offer a 20% discount In a small area to prospective customers as a test market. Sometimes you need money to make money. Need to factor in cash flow projections & Net Present Vaue.
     
  9. HBFOXJr

    HBFOXJr LawnSite Bronze Member
    Posts: 1,706

    You don't need to give away the company store on discounts. 5% is all I give and it works fine.
     
  10. bubble boy

    bubble boy LawnSite Bronze Member
    Posts: 1,020

    20 % is excessive, unless youre padding the est. first hand...

    even at ten %, it better be cupcake,,,or she better be cute:D
     

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