Service agreements

Discussion in 'Lawn Mowing' started by lawnworker, Jan 31, 2003.

  1. lawnworker

    lawnworker LawnSite Senior Member
    Posts: 900

    How many of you still just do residentials on a fee per service basis. For example, if I mow 3 times in a specific month I only bill for 3 times. I have tried residential contracts in the past without a great deal of sucess. Receiving my money is not a issue, all my customers are good payers. Should I still try to push contracts for them?

    One real bad experiance I had with contracts was when this man thought his shrubs should be trimmed every week becouse shrub trimming was in the contract. His shrubs showed galling and leaf spot from excess trimming. I realize he was probably the one customer from hades. Also, when we were under summer dormency and the grass was not growing he would freak if I was not there doing something like he was being ripped off. This has given me a bad feel for contracts with residential; ever since then it has been pay as you go for them.

    In addition, if the summer got so dry and I could not mow at all, I would feel bad taking money for not peforming service. This could also lead to dissatified customers dropping you at the end of the season. Am I looking at this wrong ? what do you all think?
     
  2. bruces

    bruces LawnSite Senior Member
    Posts: 648

    You can use contracts and still bill on a "per service" basis.

    You have the written service agreement with billings for actual services performed, vs a contract with level monthly payments.

    You could specify either method in your contract.
     
  3. JimLewis

    JimLewis LawnSite Fanatic
    Posts: 6,842

    We bill every customer a flat rate - all year long. We have it spelled out pretty well what we do each month of the year. But I never use contracts. My experience is that you don't need a contract as long as you give the customer a schedule of what you're going to be doing. And I also find most potential customers are resistent to sign contracts too. They don't want to feel committed to a company their unfamiliar with. But I've found that as long as we do good work, we keep most of our customers for a long time - no need for a contract.

    I don't know why you wouldn't come every week - at least during the growing season. I guess it depends on climate, client base, etc. And maybe I am spoiled. But around here 80% of the lawns we care for have sprinkler systems and are always needing mowing every week. And most of the other 80% do a good job of keeping their lawn watered with an above ground sprinkler.

    Regardless, and even if someone lets their lawn turn totally dormant in the summer, we always come and mow every week. If they didn't water, that's their fault. But we still come and do our job. And I don't let people skip a week and pay less money that month. We just don't offer that kind of a service. There are those who do, but we don't. I just made a decision several years ago that we really wanted to cater to those who WANTED regular weekly service. I'll leave the others to the scrubs. But for us, it's every week service or nothing. (Ev. 2 weeks in winter).

    And we keep 160 or so clients paying every month of the year with this system - and no contracts.
     
  4. Fantasy Lawns

    Fantasy Lawns LawnSite Bronze Member
    Posts: 1,913

    Could not have said it any better Jim .... if it was not for Monthly billing I would be out of business

    For us it's 42 cuts per year .... we give this to each new customer n then send back out in the fall before we go to bi-monthly

    Monthly Billing Structure:

    General Cash Flow is a concern for the immediate and long-term health of any business. A true understanding of the yearlong commitment with month payment breaks down to 42 visits per year. What we wish to do is spread the cost of “per visit” through out the year so in the wintertime we have steady cash flow.

    Example:
    Mr. & Mrs. Smith have a nice home in Merritt Island and wish to have lawn service, they have received a bid for $ 105 per month. This breaks down to $30 per cut ($30 x 42/12 = $105). This means in the Summer Months when they receive 4 cuts they still only pay $105 not $120 and in the Winter Months they may only receive 2 services yet still pay $105. We must keep in mind that there will be 3 Summer Months when they receive 5 cuts ( $150 those months) and 2 Winter Months when they receive 3. November thru March they will receive bi-weekly service and April thru October they will receive weekly service, yet what they are truly paying for is 42 visits per year.

    These are only examples but it breaks down the bidding process. Using our hourly rate in relation too the estimated time needed to perform a task or job than multiple these by 42 and divide by 12, which gives what we will bid the monthly price at.

    ANY Extras they want built into monthly cost is the same if they want hedging 6 ... 4 ... or 2 times yearly we fiqure the time x our rate n divide by 12 .... if they want weeding weekly or mothly (which takes more time) its the same ....on n on n on fore any extra services

    Have I been burned by this .... Yes .... but it is only a very small % maybe 1-2 new ones a year .... generally it's from me not picking up on the "signs to look fore" .... do they own or rent .... condition of property before I took it .... finding out a little about them .... is the home neat .... do they drive a beater ... are they a realitor, lawyer, banker, insurance agent, own 10 7-11's or Shell's .... etc

    They say "oh come back next spring" n I say sure but understand the price will be this much more n the above example is why
     
  5. JimLewis

    JimLewis LawnSite Fanatic
    Posts: 6,842

    Well, you're nicer than I am. I won't ever take them back if they terminate service for the winter.

    Once this winter I had a customer call me and ask about cancelling for the winter. She also asked if it would be a higher cost when we started back up in the spring. I told her that we wouldn't be starting back up in the spring. I explained that we only offer a year-round service agreement and explained as you did above, about how we charge a flat rate all year rather than more in the summer and less in winter. I also explained that there were several valuable services she was getting during the winter, even though we weren't mowing much. Chemical apps, tree and shrub pruning, clean-ups, etc. I said, "Also, keep in mind that come April your lawn will be nice and green and moss free and the beds will look perfect and your shubs will look well kept while your neighbors lawns will be yellow, full of moss, 10 inches high, and bushes starting to look overgrown."

    She understood what I was saying but still tried to pressure me. She said, "You do our parents house too. And that's a good account for you guys. You mean to tell me that if we both cancelled for the next 3 months you wouldn't take us back again???" I said, "Yes. That's what I am saying. That's just the nature of our service. And it may not be exactly what you're looking for. There are some people who just want a mowing service to stop by and cut the lawn during the growing season. And if that's all your looking for I could probably find someone for you who will do just that. They may not be licensed, bonded or insured. And they may not be very regular but they'll get the job done. But we really cater more to those people who EXPECT their landscape to always be in perfect condition. They WANT us to keep coming all year. And if you find that's what you want, then that's what we're good at. But it costs money each month of the year. If you'd still rather just have the mow and blow gusy just during the growing season, I'll understand. Just let me know."

    My point was to appeal to her snobby side. I was being polite but also explaining how our service is a luxury and something to be revered. And at the same time I was politely belitteling the other companies or scrubs who she could use if she chose. I was trying to appeal to her sense of prestige and status.

    So far it worked. That was 2 months ago and they haven't cancelled yet. And now it's too late. We'll be doing their automatic payment for February in 2 days so they're stuck until March now anyway!

    Point being, you can build a big business on just these kind of customers. And this case was a rare exception. All of the rest of our 160 clients understand how we work and actually do expect and look forward to us coming all winter. And that's just the kind of customers we like to get!!!
     
  6. kutnkru

    kutnkru LawnSite Silver Member
    Posts: 2,662

    The basic purpose IMHO behind a service agreement is to plan out your work weeks accordingly. This way if you know that you wont have mowing or pruning being done say the first week of July you can then schedule either a landscape or hardscape job, or give a client whos not a regular mow but you do everything else for a time frame for their mulch installation etc.

    The nice thing about the agreements is it sort of gets cleints to okay the work prior to the start of the season.
    ** This way they will have a mowing schedule for say 32 cuts specifiying which weeks to expect you (and) it should alleviate much of the why are you here this week or that banter
    ** They have it in writting that shrubs sheared once per year will be done in June and if its twice a season then its once in May and again in Oct
    ** Their lawn care program will be spelled out as well. They will know to expect you during these 4 months if its a feed ONLY program, or that their 5-step program does'nt include grub control because that was a proactive option they didnt take etc.

    It just seems to make both your and the clients lives so much easier because any potential ???s that may arise they can simply check their calender of events and if somethings not on there or their not sure they can call -- but usually its right there spelled out for them ahead of time.
     
  7. kutnkru

    kutnkru LawnSite Silver Member
    Posts: 2,662

    Jim
    What about if your client was strictly a mow only and you charged them $65 ($756) for 12mos basic service. If the client was just that looking for basic mowing services wouldnt it make sense to charge them say $25/cut for the growing season (31 cuts) and then pick them back up next season if they werent interested in all the whistles and bells???
     
  8. Fantasy Lawns

    Fantasy Lawns LawnSite Bronze Member
    Posts: 1,913

    Oh I hear ya Jim .... fore the most part I really never take em' back .... the conversation is more to try n fully explain the concept behind monthly billing ==>which is explained up front when hired ... yet some don't hear

    N I have been successful to keep some when they really think of it ... but we all know this is only a very small part ... those that leave ..... leave for the best as far as I am concerned
     
  9. JimLewis

    JimLewis LawnSite Fanatic
    Posts: 6,842

    Here's the problem with that;

    Say we have a slot on Friday from 2:00-2:30 open. I can either choose to fill that slot with a client like the one you described who is basically paying me squat and is going to leave me come winter. OR - I can fill that spot with a client who is willing to pay me $135 a month - ALL YEAR!

    Secondly, I run some serious spreadsheets and track time at each house we do. The spreadsheets tell me how long we spend at each house and how much money we make (per month) for a given day of the week. For instance, Thursday for Crew 1 makes me $2720 per month and $30.91 per hour, including all travel time, going to and from our shop, dumping debris at the end of the day, getting gas and everything. We can make this rate because this day is packed with homes that are significantly more than $65 per month. We have 22 lawns that day at an average of $125 per lawn per month, all year. And note that the $30.91 hourly rate almost trippled in the winter months when we labor hours are very low at each landscape.

    Now, if I were to pack that day with lawns that were $65 lawns that wouldn't pay us squat all winter - well, you can see what would happen to our bottom line, hourly rate, etc. Not pretty.

    Even if we let 4 or 5 lawns like this sneak into our schedule that day, it dramatically lowers our hourly rate for the day and juts kills our winter hourly rate.

    You see, whether they are mow, blow and go or full service, we can still only do about 20-25 per day. So we just have to fill each slot with the most expensive customer we can get.

    Sometimes, it's better to wait and fill a slot with a good, high paying customer, than to hurry and fill it with a low paying seasonal customer. And I don't need new customers THAT badly. ]

    Hopefully that makes sense.

    But I agree with you on the service contracts. I give all my clients what equates to a service contract - explaining what we do every month of the year and every week. I just don't make it a binding contract. It's more of a handout. If there is a problem later I refer to that handout.
     
  10. Cutright2002

    Cutright2002 LawnSite Member
    Posts: 15

    Do you think those customers feel bad in the spring when your double and triple cutting and they are not getting charged for it ? I think not. Service agreements are the way to go. Through out the season the time will all even out.
     

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