switching to contracts

[lukescaping]

I've been in the business for several years but never have gone real big. I've been 10 years now in a new location and business is growing. I think I'm at a point where I want to start contracts with my customers and not sure how to break them in. I'm thinking month to month contracts, but I'm not sure if I should do 12 months and figure in leave removal, spring cleaning, gutters, mulch, etc. I want to continue to offer all services. Any suggestions would be greatly appreciated!!! LUKESCAPING

[Steve]

Lawn care business tips

Hi Luke, Welcome to our forum. Why not scale it in by having your new customers sign annual contracts at first. Get the hang of selling the usage of contracts and then maybe next year, get your other lawn care customers on board with the contracts too. What got you to the point of wanting to use contracts?

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[lukescaping]

I'm looking for a set monthly income, if their is such a thing. If this works like I'm thinking, the customer would pay a lower amount per month for more services threw 12 months. Yes or no? Easier billing, I think? Whats your outlook on that?

[musician/lawnman]

Luke,

Annual contracts can be very good, but like everything else it will have a downside aswell. It seems there is no "standard" way to run your business in this industry, I've met guys that are perfectly happy to charge per cut, work all summer & take the winter off so to speak. I've met guys (like myself) that have set the majority of their customers up with the same monthly price year round, and I've met guys that set their customers up annually but charge say $100/month in season & $40/month in the off season. (that didn't make sense to me either?).

My 1st year (I started in late, LATE June) I worked by myself. I picked up alot of per cut client. Going into winter I only had 12 annuals paying in & about 40 per cut clients. I couldn't make ends meet, So I worked a 2nd job through the winter. Going into the next season I pushed the contracts real hard with my newer clients & by the end of summer I had 50 annuals & about 55-60 per cut properties. In the winter it made it nice, but the down side was in August & September most lawns were serviced 5 times, I had a 3 man crew by that point. So there was alot of labor, maintenence, & fuel expenditures for the month & despite the fact that they were some of the best grossing months I'd had to date, money was tight & we were kinda close to not making payroll on one or 2 weeks! It blew me away, I kept looking at the books going what the hell? When you average out the money it's nice on the back side where the cash flow well outweighs the expenses, but in season it flips on ya & goes the other way. You have to be prepared. I found at that point it's the per cut clients that are vital to your businesses cash flow. Now I am carefully keeping a good balance of both per service & annual customers.

Hope this helps.

[Steve]

Going into the next season I pushed the contracts real hard with my newer clients & by the end of summer I had 50 annuals & about 55-60 per cut properties.

Chuck,

What advice do you have for those newer lawn care business owners who are trying to push contracts? How should they go about doing this? Also what % of the customer base do you feel will balk and either not sign or want to cancel you? If they are really against contracts, how should you handle it?

So there was alot of labor, maintenence, & fuel expenditures for the month & despite the fact that they were some of the best grossing months I'd had to date, money was tight & we were kinda close to not making payroll on one or 2 weeks! It blew me away, I kept looking at the books going what the hell? When you average out the money it's nice on the back side where the cash flow well outweighs the expenses, but in season it flips on ya & goes the other way.

Ultimately is this an issue of budgeting properly? Does a lawn care business owner need to know ahead of time what they think their expenses will be for each month and then know what they think they will be making so their are no surprises?

Should Luke even consider not doing this? Which way do you feel is better now looking back at it? Or should you just have a mixture?

[musician/lawnman]

I think every client can see the value in essentially financing out the heavy expenses of the growing season over the coarse of the year as it makes it more budgetable for them. There are I'd say 50% that stay ona per service pay plan, usually for one of a few reasons... Either they are renting & may not stay there a full year, maybe planning to move?, they may not be finacially stable enough to commit to anything at all other than "well, cut it now, I'll pay you now & we'll take it from there". Typically if the home is for sale or if they are renters I won't do an annual agreement for them, I might if it is up for sale depending on what time of year it is (there's no way I'm signing on a annual accout that's up for sale in say June, You could work all summer for the lesser rate, & if it sells in October... your screwed). There may be a few that will balk at a "contract"... you don't want those people on a contract anyway, they're the ones that will cancel on you. I've only lost 2 annual contracted customers. One was because she didn't want her lawn cut as often as I most customers do & then at the end of the year felt she didn't see enough value for her money...? go figure I tried to renegotiate but she wasn't interested & now she is back to being a per cut client.

The other was this month, the mans wife past away & he is moving to be with family, He thanked me for all my hard work & gladly paid the early cancellation fee.

Yes Steve, you need to budget & know what to expect, my issue was most of them came on board during the spring & summer this past year. So I wasn't recieving any money from them to budget with during the off season.
So it was a little tough. It is like I said in another post, growing pains & a lesson learned. I think having a good mix is best & I'll continue to grow my business as such.

[Steve]

The other was this month, the mans wife past away & he is moving to be with family, He thanked me for all my hard work & gladly paid the early cancellation fee.

This is another very good point. If a newer lawn care business owner gets his clients on an annual contract and they break it mid season, the lawn care operator can find themselves in a bad spot financially.

How do you suggest a lawn care business owner come up with a early cancellation fee? Should it be a flat fee or a percentage of the entire contract?

[lukescaping]

Thanks guys you've both been a big help, given me some things to think obout. I was leening towards per cut only but I think chuck made a good point in saying that there might be a balance to the both. I think we'll do as steve had said and keep our per cut clients the same and any new ones try and push the contracts. We'll see how it works.

Lukescaping

[justin_time]

Originally Posted by musician/lawnman

Luke,

Annual contracts can be very good, but like everything else it will have a downside aswell. It seems there is no "standard" way to run your business in this industry, I've met guys that are perfectly happy to charge per cut, work all summer & take the winter off so to speak. I've met guys (like myself) that have set the majority of their customers up with the same monthly price year round, and I've met guys that set their customers up annually but charge say $100/month in season & $40/month in the off season. (that didn't make sense to me either?).

For the guy up north where we have snow in the winter, does this mean we should have a 6 month lawn/yard contract and a 6 month snow removal contract (depends on the winters) and maybe get 1 month or 2 of fall cleanups

[EasyPro]

the best advice i can give is not to use the word contract use the word agreement