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Pre pay comparisons

Discussion in 'Pesticide & Herbicide Application' started by MacLawnCo, May 20, 2006.

  1. MacLawnCo

    MacLawnCo LawnSite Bronze Member
    Messages: 1,847

    Im starting this thread for us all to compare prepays with each other... Are they hurting of helping us. I have a point to make Ill make later when we get some answers.

    What percent of your fert clients prepay for the entire year upfront?

    What percent discount do you offer them? (how do you economicly justify this discount?)

    When is your prepay due by?

    Could your business survive without the prepay monies?

    ME: 10% ish prepay
    I offer 5% off... but I cant justify it
    Its due by March 1
    And to answer why i justify it, I simply rely on the cash flow.

    Now its everyone else's turn.
  2. Az Gardener

    Az Gardener LawnSite Gold Member
    Messages: 3,899

    I don't do applications, just weekly gardening service. All my bid clients pre pay monthly and my T & M clients(anything over 1000 per month) give me a retainer before we begin.

    I don't give any discounts. I have lost one job before I got it because of this in 4 years.

    Prepay is due by the 15th of the month we are servicing.

    Now it could survive, but not for the first couple of years.
  3. philk17088

    philk17088 LawnSite Fanatic
    Messages: 17,386

    I have about 8 percent prepays. I offer 5% discount if paid in full by Feb 1.
    I wouldn't make it through March with out them. Just about the time the well goes dry...
  4. MrBarefoot

    MrBarefoot LawnSite Senior Member
    Messages: 515

    about 35% maybe more

    We offer 5%. There really isn't any economic reason to offer this discount, but all of my competitors do this, and the pre-payers will go to them if I don't offer it.

    When their first treatments payment is due.

    Yes I could, and I wish I had fewer customers pre-pay.
  5. ThreeWide

    ThreeWide LawnSite Bronze Member
    Messages: 1,116

    I had about 10% take advantage of prepay.

    The discount was 7%, and I can easily justify this due to sending only one invoice per year versus seven. The time required to prepare the additional invoices plus postage is worth it to me.

    Plus, the prepays help with Round 1 because it is the most expensive product wise of the year which also translates to the lowest profit margin as well.

    It also gives you the option to make less visits to that customer if you choose to apply a high amount of slow release N. Once they pay for the season, who cares how many applications you do as long as the results are good.
  6. turf hokie

    turf hokie LawnSite Silver Member
    Messages: 2,751

    I had about the same 10% take advantage of a 5% pre-pay due by March 1.

    I was thinking of doing something to get all the contracts back by March 15. I have had a lot of slow returners this year.

    Some companies around here also require a deposit equal to the first round when the contract is signed. Not a bad idea for customers that don't prepay.
  7. garydale

    garydale LawnSite Senior Member
    Messages: 813

    We have about 30% prepay each year.

    Renewals are mailed to arrive on December 1st each year.
    If paid by:
    December 31th they can take 10%,
    January 31st take 7%
    Feburary 28th take 5%.

    A one time $5.00 senior discount is also offered.

    Rest assured a job is estimated with these discounts being covered.

    Cash flow
    Locking in work
    Takes care of slow payers(require them to prepay)
    Cash for preseason purchases(big savings)
    Great sales tool with older folks
    Cushion against no snow to remove.
    Funds major equipment repairs in off season.
  8. MacLawnCo

    MacLawnCo LawnSite Bronze Member
    Messages: 1,847

    That is exactly what Im going after. However, im aiming for an even higher prepay number.
  9. LawnTamer

    LawnTamer LawnSite Gold Member
    Messages: 3,986

    We have a ton of people pre-pay. It is actually just over 50%. We offer a 6% discount and it is due Feb 15. We also offer an additional bug spray around the house to people who pre-pay in the fall for the next year.
    How do I justify this? A few reasons.
    1 much easier to do 1 invoice instead of 6 or 7
    2 Pre-pays are non refundable, once they pay I don't have to worry about a competitor lowballing them away
    3 It gives us the cash flow to be able to make purchases (supplies and equipment) in winter when we have more time.

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