Are pre-payments bad?

[dpld]

Originally Posted by Steve What % of your total net income from a customer is profit? This needs to be known first before you can take the next step to figure if it is worthwhile offering such discounts. Then you gotta try and figure if you are getting any discounts from your suppliers to buy in bulk. And then you also have to account for what % of your customers pay on time and how much time you spend tracking down late payers or how much you lose from non-payment. When I would see discussions on 10% discount for prepay of a full year I would kind of cringe because we see how crazy some of our members get at using credit cards to accept payment. That is what 3% of the sale? Now how about dealing with 10% of the sale? At 25% yikes! Could you get better results by billing each month ahead of time? To figure this out, I would play with some figures on two fictitious customers and see what the results are to service. Have each customer projected out over 3 years where one prepays with a discount and another doesn't prepay. when i used to do the pre payment, the discount alone was not suffice as well as counter productive from a profit standpoint. i found if you are going to discount anything voluntarily you have to make it up and compensate elsewhere because if you just offer a discount straight up with nothing to equilize it it is a losing proposition. the way i did it with the discount combined with smart shopping and buying in bulk while it was still the slow season to take advantage of the suppliers at a time when they are just scratching for sales usually worked out to getting the discount money back with a added 5 to 7% additional profit. this way i basicly was making the same money but the customer seen a savings as well as a better value. it also saved me time and effort such as getting preferencial treatment at the supply yard as well as haveing all my lawn products on hand with no trips to that supplier. with the lawn products i was able to buy everything up front and get the savings and i would break up the deliveries so i would not have to have all the materials at once to minumize how much space i was using as well as reduce any issues with pesticede storage. with that said, if i were just offering basic mow and blow services without all the extras or my customers mostly kept it simple i would have never done any type of discounting because the less services you offer the less room you have for a mark down.

[Steve]

Lawn care business tips

when i used to do the pre payment, the discount alone was not suffice as well as counter productive from a profit standpoint. i found if you are going to discount anything voluntarily you have to make it up and compensate elsewhere because if you just offer a discount straight up with nothing to equilize it it is a losing proposition. I think this is a great point and something for anyone who may want to offer a prepay discount to consider. Troy, has this effected your view on the concept?

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[mac83]

I for one give my customers the right to pre-pay for my lawn service's

threw my website i usto to do a once a year type deal but it was a headache so i made it a once a month type deal also giving them like $10.00 off when they do it makes it easier . so if on month they do not pay thsy do not get serviced for that month .

[RSE]

I like pre payments because you can inject it right into your business at the time (usually very early spring) when everyone and their supplier is chomping at the bit for work. You now have capital to work with and you are in a position to call the shots.
My parts guys will offer me an early season discount on blades, oil and string where as if I was to purchase these items in July I could not receive the discount. I am able to pony up cash for preventive maintenance items where as I would have to tap into reserves without the prepayment agreement.
The only holdback is the timeframe. Never go over a year, period. You will lose track of who paid what when and leave the job feeling underpaid. A yearly contract is left partially open to cover unforseen circumstances such as fallen, chainsawable limbs, litter and animal damage ( I once had a moose or bear s#it all over the putting greens and then kick sand from the trap all over the place ...took two hours to get right again!)
The point is do a prepay were you see fit and plan on where that money goes. Stick to that plan and you shall be golden....Good Luck!!

[willshome]

I would like to know more about prepay like what about up-sales or add-ons (cleaning up after a storm...) And what about customer being a pain about when you mow, i have customers that bug out if most of the time i am there thursday morning and i get there in the afternoon what would happen if they already paid. With fall cleanup how do you pick when to do it and what if leaves take longer than normal to fall?
has anyone had these problems, I could just see some problems with doing it like that but knowing you have the money in the bank must be GREAT!

[dpld]

Originally Posted by willshome

I would like to know more about prepay like what about up-sales or add-ons (cleaning up after a storm...) And what about customer being a pain about when you mow, i have customers that bug out if most of the time i am there thursday morning and i get there in the afternoon what would happen if they already paid. With fall cleanup how do you pick when to do it and what if leaves take longer than normal to fall?
has anyone had these problems, I could just see some problems with doing it like that but knowing you have the money in the bank must be GREAT!

any additional work would mean additional money unless you plan on working for free.
the pre payment is for the normal week to week services and it would not include storm damage or anything else that reared it's head in outside of the norm.

leaves take longer to do and schedules generally do not go unaffected as a result especially as you get into the peak of leaf season.

as far as customers complaining goes, they need to be informed that you do not work exclusively for them and every customer wants their lawn done on thursday and fridays as well as when it rains or the grass is growing fast and furious that it will effect the schedule.

there are a lot of things that come into play that alters our schedules and weather is a obvious one.
the smaller guys that are limited in how much equipment they have can be greatly hampered by a breakdown. it always pays to let your customers know that the normal schedule is that your lawn will be done on this particular time slot but when unforeseen circumstances arrise like rain, breakdowns etc etc that it will reflect on when you arrive to their home for the week.

my route is the same every week in the same order and if rain pushes us back a day then mondays route is now tuesday and tuesday is now wednsday and so on and so on.
it is the only fair way to do it and every one of us has to deal with changing the schedule a dozen times every year.
it is not worth losing sleep over and you really can't let your customers dictate when you work.

i have had new people come along and say i will sign up with you right now only if you cut my lawn on fridays and meanwhile their house is located in a part of my route that i do on tuesdays.
i can't re-arrainge my schedule for one new customer when i have clients that been with me for 15 years that don't tell me when i got to be there.

i tell them, sorry the only day i can service this area is on tuesday. then they try to come up with some line like, its the only day i can be here, and i tell them there is no need for you to be here.
you have no fences, no pets, no kids and your yard is wide open, why would you need to be here?
then they say well i just like my yard to be nice for the weekend, and then i am like so does you and every person who hires a landscaper and if we cut your lawn on tuesday it is not gonna be in desperate need for a cutting in 3 days.

unfortunately it is part of being in the business dealing with insane customer demands and delays, and there is no way to thwart off these complaints ahead of time and you cant please everyone.
so the best bet is to tell them staright up from the beginning that your schedule is only as solid as mother nature allows you to be.

also, to re touch on the subject of add ons those questions and issues can be cut off right from the start by having a detailed contract drawn up that is signed and each party has a copy of.
something like that is even far more important when dealing with pre pays because going by word and handshake don't cut it when someone hands you over a lump sum and then they think you are doing everything for one price.

[willshome]

So sounds like it does not add to many problems for you. The other thing is some customers act like spending $40 on mowing is a big deal, I would hate to think about what they would do if the bill was $800+. Some customers would have no problem with this and may like saving some money and only writing one check. So do you tell all customers about perpay or just the ones you think would like it?

[Steve]

So do you tell all customers about perpay or just the ones you think would like it?

I would think the more they know, the better. If they have payment options and can see they are saving money in the long run by going with one payment option over another, you may be surprised to see which payment plan they feel is right for them.

I'm tossing a thought around in my head about staging pre payments.

Whole year pre payment, no discounts, but the customer is on a "special" list, such as after a storm, branches and such won't wait until the next mowing service. First on the list for snow removal & Priority for leaf removal. Work in POSSIBLE ( i have to run numbers) discounts for leaf removal mulch jobs or other extras.

Monthly pre payments would be just that, monthly pre payment

or Pay at time of service.

Last years tornadoes here in the St Louis area brought in a lot of rip off artists taking money and never doing the work and that is fresh in people's minds. That and the BBB and Local News Consumer Watch segments warning customers not to pay up front for services, what is the best way to sell this to customers?

[willshome]

Originally Posted by SaberLawnCare

First on the list for snow removal & Priority for leaf removal. Work in POSSIBLE ( i have to run numbers) discounts for leaf removal mulch jobs or other extras.

so would you drive by other customers house to do this list first that would cost alot in fuel. Maybe they get the 2nd push for free?

I would let everyone know how long you have been in business put it on everything