Discussion in 'Business Operations' started by Dix, Feb 23, 2002.

  1. Dix

    Dix LawnSite Member
    Messages: 50

    A point I have not seen addressed here concerns yearly contracts. We work harder and more during the growing season than in the off season. Many clients, however, want to pay equal payments ea. month of the year. So, if we work a hard summer and then for whatever reason get notice of cancellation of the contract, (they exercise the 30 day notice of cancellation clause many require) we get screwed out of being adequately paid for the services we performed. Do any of you have a clause in your contract to address this potential problem?
  2. LawnLad

    LawnLad LawnSite Senior Member
    Messages: 738

    You're working off of what might be called an installment contract versus a fee for service type contract.

    If your customers are contractually obligated for a period of time, you might have a cancellation fee that would help to cover any outlays you may have - that you'd be waiting to make up in the slower months. Or, do a job cost schedule that shows on a typical basis, month by month, where your short and where you're fat on cash, depending on the time of year, how much money you've received and how much expense you have into the property at that time. This way in your contract you might include "If customer chooses to cancel contract prior to the end of the term, customer accepts that there may be a cancellation fee of up to XX times the monthly installment cost." You might explain to customers, either in the contract, cover letter, or in person that this is in place in the event that you are a point of the season when you have in essence "loaned" them money, and expect not to take a loss should they choose to cancel. If you make this very clear, they should not object. If they didn't like it up front, then they shouldn't have signed the contract.

    We contract on a fee for service basis so that this very problem does not arrise. We also do not lock our customer in for any period of time. One of our selling points, since people are hesitant to sign a contract with someone they're not sure they'll be satisfied with, we tell 'em that you can cancel at any time, one week later or ten years later, for any reason or no reason at all. The only thing that keeps a customer coming back is that they're satisfied with our service. So we push the satisfaction angle - and it seems to work for us. Sure we get some complaints about the flucuation in charges from month to month as different services occur - but we seek to smooth this out with good communication and helping customers to look at their landscape costs on a yearly basis, not a month to month basis.

    Problem with people today is that they think of what they can afford in current dollars - "how much do I have left in my paycheck after I pay all my bills?" Why would you buy a washing machine for $14.00 a month... why not just buy the darn thing, if you can afford it.

    The month to month type mentality is easy for people to think about with fixed type payments... but unfortunetly it doesn't go well with landscape work if your services flucuate from month to month, season to season.

    I know there are many who do the installment plan and it works for them. Perhaps the work load is more evenly spread out. However, there are few contrators in the Cleveland area that I know of using installment type pricing (less than 5%... keeping in mind that 42% of all statistics are made up on the spot).

    LAWNS AND MOWER LawnSite Bronze Member
    Messages: 1,129

    I have some of my larger accounts on a 12 month payment plan. I figure their average yearly expenditures for my services by going back 3 years. Divide this by 12 and this is what they pay me every month. Runs from Jan til Dec. After their fall cleanup, I'll total up what they actually spent for my services for the year, and then adjust either up or down for the last 2 payments (Nov and Dec). My mowing season is about 30 weeks, so they might not see me for 3 months, but they understand how this payment plan works, so I have no problem getting checks in the off-season.

  4. HBFOXJr

    HBFOXJr LawnSite Bronze Member
    Messages: 1,712

    PAYMENT TERMS: Regular monthly invoices shall be due in our office, in full, before the 10th. of each month following the month of the invoice, except the invoice for the initial payment which shall be due in our office 10 days from invoice date or before the start of any service, whichever is earlier. Invoices for other services are net 30 days and are billed as they occur. A service charge of 1.5% shall be added to the balance of each overdue invoice each month.

    SERVICE SUSPENSION: Town Pride Lawn Service may at our option, cease service without any notice should any invoice or it's accrued service charge remain unpaid for 15 days after the invoice due date. Such suspension shall not relieve responsibility to pay the full face amount of this agreement if service is resumed. Town Pride Lawn Service will not under any circumstances give credit on, or perform any services missed during the suspension period. Repeated or prolonged delinquency shall be reason for cancellation of this agreement by Town Pride Lawn Service pursuant to the terms of the following paragraph.

    CANCELLATION OF AGREEMENT: It is understood by all parties to this agreement that the monthly payments invoiced under this agreement bear no direct relation to the value of the work performed in any given month. Notice of cancellation by either party shall be in writing 30 days before cancellation shall take effect, except cancellation due to the delinquency in payments. Contracts not going full term will be valued only on the work performed until cancellation takes place. Values will be determined from Town Pride Lawn Service's worksheet component prices for services specified in this agreement. Full credit will be given the buyer for payments already made. Refunds to, or money due from the buyer shall be paid within 30 days of cancellation. The buyer shall be fully liable for collection costs, if any, for invoices and service charges due.
  5. cos

    cos LawnSite Addict
    Messages: 1,253

    The service suspension is something I need to add to my contracts...Thanks.

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