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Residential Contracts


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  #1  
Old 04-02-2013, 07:24 PM
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Default Residential Contracts

We are considering using residential contracts to where customers can pay monthly for the entire year. The logic behind this is to make the customer think they are saving money instead of paying every week, but we are still making the same amount of money for the services, except we get payments during the winter months to help with still having an income coming in. I came up with this idea from the Lawn Business School on this website and reading an old post from a member who does this.

The object is to take the weekly amount times the estimated weeks we'll be actively mowing which is between roughly 32 weeks and then dividing that amount by 12 months (Example: $40.00 x 32 weeks = $1,280.00 divided by 12 months = $106.67 per month). I was wondering if anyone else has ever tried this, and also what others opinions on using this type of billing system is, and how could you explain the benefits of this type of contract to a customer?
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Old 04-02-2013, 09:28 PM
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Quote:
Originally Posted by GreenBlue View Post
We are considering using residential contracts to where customers can pay monthly for the entire year. The logic behind this is to make the customer think they are saving money instead of paying every week, but we are still making the same amount of money for the services, except we get payments during the winter months to help with still having an income coming in. I came up with this idea from the Lawn Business School on this website and reading an old post from a member who does this.

The object is to take the weekly amount times the estimated weeks we'll be actively mowing which is between roughly 32 weeks and then dividing that amount by 12 months (Example: $40.00 x 32 weeks = $1,280.00 divided by 12 months = $106.67 per month). I was wondering if anyone else has ever tried this, and also what others opinions on using this type of billing system is, and how could you explain the benefits of this type of contract to a customer?

Might want to add in seasonal cleanups, pruning, edging, additional services they might require.

so for example:

Spring cleanup $150
fall Cleanup $200
Prunning $100
32 weeks mowing $1280
Total $1730
Don't forget tax rate in my state is 8.125% $140.56

total with tax 1870.56 / 12 = $155.88 monthly...
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Last edited by warbuff; 04-02-2013 at 09:34 PM.
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Old 04-02-2013, 09:35 PM
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Quote:
Originally Posted by warbuff View Post
Might want to add in seasonal cleanups, pruning, edging, additional services they might require.

so for example:

Spring cleanup $150
fall Cleanup $200
Prunning $100
32 weeks mowing $1280
Total $1730
Don't forget tax tax rate n my ate 8.125% $140.56

total with tax 1870.56 / 12 = $155.88 monthly...
Yeah we are going to add those services into the contract if they are interested in using them along with mowing, I just used the mowing price by itself as an example. I do thank you though for reminding me of this. I'm working on a contract right now, and will be uploading a sample of it within the next few days.
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Old 04-02-2013, 10:01 PM
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we do that with customers that want multiple services. It gives them a chance to do all of the services that they want and be able to afford them. It is a good way to sell more than mowing and helps them and helps you for winter months. We have a section on that on our webpage (greatriverlawns.com) that shows customers what they can do. Good luck to you.
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Old 04-02-2013, 11:29 PM
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The problem is that you're relying on credit. This can come back to bite big companies, and certainly small companies too. I'm not saying don't do it, but it's a risk. You run the risk of not getting paid.

Also, there's a psychological issue of being charged for something you aren't receiving...kind of. If I got a bill in January for lawn mowing, I would think "why am I paying for lawn mowing, when my lawn hasn't been mowed in months?"

You might want to just divide it over the 32 weeks, then offer the option of dividing it over 12 months of the customer asks. Personally, I hate being owed money by a client. Sometimes, they just don't pay, and there's not much you can do about it.
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Old 04-03-2013, 06:07 AM
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Quote:
Originally Posted by ratchetmaster2 View Post
The problem is that you're relying on credit. This can come back to bite big companies, and certainly small companies too. I'm not saying don't do it, but it's a risk. You run the risk of not getting paid.

Also, there's a psychological issue of being charged for something you aren't receiving...kind of. If I got a bill in January for lawn mowing, I would think "why am I paying for lawn mowing, when my lawn hasn't been mowed in months?"
Bingo.

In the past I did monthly billing. It went well, but towards the end of the season, I ended up spending too much time trying to collect. When the year comes to an end, thats when all the major holidays are. Guess where the money is spent? X-Mas presents, traveling, etc.

Last month I picked up a full service account because of the season for your billing. She couldn't justify paying the $225 in January.

Maybe a signed contract will be much better. Who knows. It could be worth a shot though. I think you mentioned before this will be your first year....you may want to start off smaller and them attack at full speed. Advertising is a lot of work, the customers don't just all call at once when the weather gets nice. Getting into full service contracts your first year with no experience is a big risk.
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Old 04-03-2013, 12:00 PM
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Quote:
Last month I picked up a full service account because of the season for your billing. She couldn't justify paying the $225 in January.
How was that working out? Was she paying $225 per month to another company and she had, had it with paying per month like that? Or what? How did you differ to attract her?
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Old 04-03-2013, 12:19 PM
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The way I do it is each customer has 2 options. They can pay by the mow, or pay a certain monthly fee for the usually 8 months of mowing. For larger contracts I would consider the 12 month payment option but I would make sure to give each customer the option and write it all up in a contract. This way they can choose exactly what they want.

Thanks!
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Old 04-03-2013, 12:25 PM
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Quote:
Originally Posted by ratchetmaster2 View Post
The problem is that you're relying on credit. This can come back to bite big companies, and certainly small companies too. I'm not saying don't do it, but it's a risk. You run the risk of not getting paid.

Also, there's a psychological issue of being charged for something you aren't receiving...kind of. If I got a bill in January for lawn mowing, I would think "why am I paying for lawn mowing, when my lawn hasn't been mowed in months?"

You might want to just divide it over the 32 weeks, then offer the option of dividing it over 12 months of the customer asks. Personally, I hate being owed money by a client. Sometimes, they just don't pay, and there's not much you can do about it.
I personally prefer to only offer a contract like this to a commercial client but, if I were to offer this to a residential client it would have to be under contract and be a client I've had a long term relationship so payment wouldn't be an issue.
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Old 04-03-2013, 12:42 PM
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Originally Posted by Steve View Post
How was that working out? Was she paying $225 per month to another company and she had, had it with paying per month like that? Or what? How did you differ to attract her?
I estimated a cost for me to do it, but before I gave it to her, I asked her what she was paying. She told me $225. I gave her my price which was higher, and said I only charge for 7 months of service. I explained to her she'd save "X" amount of $$ and she was very happy with it. I was happy too because I got more than what I estimated.

She says the other guy was doing lousy work and charging too much, so if I do good, she has friends in the neighborhood that will change....I'll only believe that when I get the calls.

So far so good!
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