Switching from per cut billing to contract

Discussion in 'Lawn Mowing' started by HOOLIE, Sep 6, 2004.

  1. HOOLIE

    HOOLIE LawnSite Gold Member
    Posts: 3,981

    After 3 years in business for myself, and reading the advice of more grizzled veterans, I see the future lies in switching my customers from a "per cut" billing to a monthly contract, preferably 12 months. Problem is, this seems to be a foreign concept to every customer I've mentioned it too. Most of them have used other LCOs before me, and they've always paid per cut. I try to explain the benefits to them (fixed billing price, lawn can be cut more/less frequently as needed, etc.) But they seem to feel that I'm trying to get one over on them, like all of a sudden after 2 or 3 seasons I'm suddenly gonna take their money and show up every 3 weeks or something.

    Just looking for some feedback from guys that have done this switch in the past.
     
  2. mbricker

    mbricker LawnSite Senior Member
    Posts: 505

    Hoolie, I am also in an area where the monthly contract concept does not go over well with the customers. About the only outfits I know of that can do that with their customers are the bigger high dollar full-service lco who take care of high visibility commercials--like cardiologist offices and such.

    I really think this is the way to go. You might submit the proposal to all of your customers and the ones who refuse it can still remain on a per cut basis. It is possible that over a couple of years you can end up with a full schedule of monthly/annual contract accounts.

    Another idea is, if there is little or nothing to do on your lawns during 2 or 3 winter months, put the contract on a 9 or 10 month pay, so people don't think they are paying good money for nothing those 2 or 3 months.

    I believe if you get this started in your area, and make it know to the other lco's, some will follow, and help get the public used to the idea.
     
  3. HOOLIE

    HOOLIE LawnSite Gold Member
    Posts: 3,981

    mbricker,

    Like you said, I think I will offer it as a payment option for next year, rather than force everyone to switch. I have offered it before, with no takers. My wife had the smart idea (she does have one every once in awhile LOL) to show them what the cost for them would be "$xx over 12 months or $xx over 9 months" A lot of times if the info is in their face its easier for them to comprehend.

    This would, besides the reliable cash flow, give me more flexibility. Like right now, my in-laws could use my help moving. They both have major health problems, had to quit working and go on disability. Can't afford their mortgage, gotta move to a much cheaper place. Can't afford to pay a moving company for the whole 9 yards, just enough to pay to load the truck, but not drive it or unload. Since its been so dry here, I could realistically pick up and go help them for a few days, but I just can't blow off a thousand dollars worth of work. I know they understand, but sometimes the per cut billing makes me feel like a slave to the job.
     
  4. selnoil

    selnoil LawnSite Member
    Posts: 162

    In the oil biz we offer budget plans which is a basic contract. Residential cutting contracts are foreign up here as well but I'm going to try a couple things. I'm thinking about offer my customers 3 options which will hopefully get them turning toward an up front paid contract.

    1. 10% discount if they pay the total up front (people love saving $$).
    2. A 6 or 7 month budget equal payments per month plan (our season only lasts 6-7 months)
    3. Regular pay as you go, no discounts, no advantages

    I'm still thinking about it but those are my ideas at the moment, I don't need to put them in writing until March.
     
  5. Acute Cut

    Acute Cut LawnSite Senior Member
    Posts: 980

    i am ecstatic to see people improving. I have been telling people for a while now that monthly charges are the way to go. I was discussing this with Sean Adams just the other day as a matter of fact. This is where the industry is going. Once customers get used to it (if we all did it) then it would be no thing.

    Here is what i do personally. I am NOT saying it is tweaked or perfect yet but it is a start. For simple math lets say you were charging Mr. Smith 25$ per mow and you mowed every week. That said ill try and write what i say to my customers.

    "Acutally Mr. Smith we dont charge per mowing. We charge per month. We have alot of senior citizens on Soc. Sec. that like the budgeting factor. So, for example, we mow your lawn every week. Your bill would be 100$ per the month but only through the growing season. If there are five mowings in a month then you just get a free mowing. The nice part is you can look down the road five months and still know what your bill would be. We like this system because then i dont have to second guess every fall weather you want the lawn mowed or not. I can just show up and keep the place nice and tidy."

    Now, if you want to go for a full year round then basically here is the math i do. Take the 100$ per month that you were charging Mr. Smith. Multiply that by the number of months you actually mow. BE CAREFUL NOT TO FIGURE TOO SHORT OF A CUTTING SEASON!!!!!!!!!!!! This will give you what that customer will be charged for the year. Then you simply divide that up by 12. So if your season was only six months and you were charging Mr. Smith 100$, then it would now be 50$ but year round.

    I personally like to have some of both. The seasonal customers help to balance out the low spots in the busy spring, but year round helps balance out the non existant winters. Hope this helps.

    And of course this is JUST MY OPINION. I'm just a small guy like some of yall. :D
     
  6. LwnmwrMan22

    LwnmwrMan22 LawnSite Platinum Member
    Posts: 4,372

    Holud up before you start charging people basically 1/2 rate for your mowing.

    "This will give you what that customer will be charged for the year. Then you simply divide that up by 12. So if your season was only six months and you were charging Mr. Smith 100$, then it would now be 50$ but year round."

    This will not work, and I'll tell you why.

    You're basically giving people a line of credit.

    You're working 6-7-8-9 months, and not getting paid until later.

    You've got to get paid in the months that you're doing the work.

    I've got it set up, as well as others on here, that we send out our invoices at the first of the month, for that month's contract. Meaning this weekend, I sent out all the invoices for September's work. If there's anything extra that comes along, say a storm or sod repair from someone, then we'll send an extra invoice for that, and whenever that gets paid is fine.

    However, the contracted work will be paid throughout the month, depending on when a company pays. Some I have pay as soon as they get the bill, about 25% pay on the 10th, about 50% pay on the 15th-20th and the rest pay about 30 days out, depending on all the loopholes and sign-offs the payment has to get.

    This is all for 6 months, and then the snowplowing contracts kick in the same way.

    What I had to do, to begin with, was sit down with people and show them the costs, one way or another.

    I said I'd throw in 2-3 cuts / year, or basically a 5% discount if they went to a contract.

    I also explained that I'm trying to support a family, and have equipment payments and cannot keep doing this job if I don't have a steady income. I explained that if they don't have any garbage because they were on vacation for a week, that the garbage guy still gets his money.

    If they don't watch any cable because they were at a family picnic, the cable company still gets their money.

    The only way I can see a per cut type of billing working, is in the far south, or somewhere that you've got grass growning all year round, and it's irrigated. Basically then you're still contracted.
     
    Acute Cut likes this.
  7. dkeisala

    dkeisala LawnSite Senior Member
    Posts: 911

    I've used service agreements, or contracts, since day one. I just recently added an escape clause that basically says the customer can leave at any time but we have a formula to pro rate their service to make sure we got everything that is coming to us and vise versa.

    I tell people "this is a business and my bills don't stop coming in Dec., Jan. and Feb. I merely take the total annual cost of service (based on receiving a total of 45 services per year) and divide that by 12 to come up with the total monthly amount due. Some months you are receiving more service than you are paying for, some months you are receiving less service than you are paying for. We also guarantee your place will look great throughout the year. We've had incredibly mild winters where we've mowed in Jan. and Feb. So with an annual maintenance plan, we can both more effectively budget throughtout the year and you place will be taken care of year round."
     
  8. ThreeWide

    ThreeWide LawnSite Bronze Member
    Posts: 1,116

    When starting earlier this year, I pushed billing for actual services delivered (by the cut, etc.) However after getting client referrals with some credibility, I've started pushing flat monthly rates for accounts ONLY where I provide fertilization. If you don't control the fertilization, you are at risk by quoting monthly rates.

    I like this for two reasons:

    - It allows me to utilize my own fertilization program that helps prevent excessive nitrogen, resulting in a more reasonable mowing schedule.

    - I basically have a monthly budget to manage any given property. By providing the desired result while spending less money, better for me on the bottom line.

    I do NOT actually ask for a signed contract, because most clients are very reluctant to sign them in general. Yes, they could cancel me at any time. By putting that amount of trust in them as a client, I normally receive an equal amount of respect.
     
    Acute Cut likes this.
  9. dkeisala

    dkeisala LawnSite Senior Member
    Posts: 911

    TurfUnlimited - I apply the chemicals to all my clients therefore I have the control of growth rates and appearance. I agree this is important as you don't have 50 different people applying got knows what at god knows what rate at 50 different times of the year.

    LwnmowerMan22 - Advance billing IS important if you are doing contracts. I as well bill in advance of the month service is to be received.
     
    Acute Cut likes this.
  10. Lawn-Scapes

    Lawn-Scapes LawnSite Silver Member
    Posts: 2,810

    I switched to an "agreement" a couple of years ago. I was reluctant and nervous at first... but after I presented the first few (in person) it got easier. I was extremely surprised by (almost) everyone's acceptance of it. The way I explained my reasoning for the "agreement" to them was... that one, it made my scheduling easier if I knew in advance what services they were interested in. Two, they have in writing what services they were going to receive, the cost, and when it would be done. Three, for their convenience there are 3 billing options... 12 equal payments (for the budget minded), 9 equal payments, and 3 equal payments with 5% discount (for those with money and like a savings).

    I convinced the client that the "agreement" was to their benefit. Most of them didn't even question it. I believe people love to have a choice and that's why I offered 3 billing options. There were a few that did resist... so I kept them on pay as they go.

    FYI.. 50% took the 3 equal payments option. All 3 billing options begin on March 1st.. the month before my season begins.
     
    Acute Cut likes this.

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