Pre-payment Discounts

Discussion in 'Pesticide & Herbicide Application' started by Nebraska, Feb 24, 2002.

  1. Nebraska

    Nebraska LawnSite Senior Member
    Posts: 525

    Why are there so many companies willing to give 10% off for a customer pre-paying for the year of service.
    Seems rather excessive to me? Any opinions on this?
     
  2. cantoo

    cantoo LawnSite Silver Member
    Posts: 2,910

    I've often heard it said that the hardest part of any job is collecting your pay, this might be one reason for the discounts.
     
  3. GroundKprs

    GroundKprs LawnSite Bronze Member
    Posts: 1,969

    Being paid in advance for services is beneficial, especially in a seasonal type business. Relieves the business from two months of materials and payroll outlay before revenues start to roll in. And there is definite value in receiving funds in advance, getting to put them to use before they are actually earned.

    Then there are the marketing companies, like many of the big national lawn care providers. Since the business is so intensely competitive, advance payment kind of imprisons clients in your program for the season. Better choice to give a prepay discount, rather than to try to replace deserters during the season.
     
  4. Nebraska

    Nebraska LawnSite Senior Member
    Posts: 525

    All that is very understandable, yet doesn't 10% seem excessive? I am asking to try and find a reasonable discount to offer rather than being like the "pack" and give 10% off. $200k in applications justifys $20k in discounts?
     
  5. HBFOXJr

    HBFOXJr LawnSite Bronze Member
    Posts: 1,712

    5% does the job for me. 10% is easy to blurt out. No one has ever complained about 5%. Maybe if prices are juiced up a little 10% is OK. If I juice my prices we'd probably come up a few jobs short.
     
  6. GroundKprs

    GroundKprs LawnSite Bronze Member
    Posts: 1,969

    Harold has it right. If you want $100 for a job, and want to be prepaid, your list price is then $111.12, if you give a 10% discount. Or $105.24 if you give a 5% discount. Or $200 if you want to give a 50% discount, LOL.
     
  7. 1grnlwn

    1grnlwn LawnSite Bronze Member
    Posts: 1,261

    No trickery here. If I want $100 I charge $100 and give 4% for prepayments. If they want to prepay thats great. I usually run out of money 1st of March. I have some people say well thats not much of a discount, I say then you will be paying by the application then? Prepays are a mental bummer come Sept. Most people that prepay just want to get it over with so they aren't bothered. IMHO

    Mark.
     
  8. Nebraska

    Nebraska LawnSite Senior Member
    Posts: 525

    I guess my point is that 10% is excessive. How much does it really cost to not have to bill a customer for the 6 steps? Approximately $5? If your that concerned about them paying why take them on as a customer.
     
  9. 1grnlwn

    1grnlwn LawnSite Bronze Member
    Posts: 1,261

    Pre-paying gives you money to work with in the spring, when funds are scarce. What we are trying to tell you if you want to be flashy and offer 10% mark your price up 6% and give em 10. Your costs would be about the same whether they pre-pay or pay on application. You still have to give them paperwork/flags, etc. I picked 4% because I figure thats about what the money is worth to me. IMO

    Mark
     
  10. Nebraska

    Nebraska LawnSite Senior Member
    Posts: 525

    Six step program @ $50 per application. Pre-Payment $300. :angel:
     

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