The first rule you should learn when it comes to running your lawn care or landscaping business is never lose money. The second rule is to not forget the first rule. With that said, many lawn care and landscaping business at some time, lose money on a job and some times it is big money. Sure they can underbid on a job and lose money, but the biggest way to lose money, is to not have a system in place that guarantees you will be paid by the customer after the work is complete. If you think this could never happen to you, think again. It is of the utmost importance on large jobs, that you use some sort of contract and get paid in steps as you complete the work. Otherwise you might find yourself out of tens of thousands of dollars.
A lawn care business owner talked to us about his experiences of getting paid for his landscape work on the Gopher Lawn Care Business Forum and I felt it was a very good learning lesson.
He wrote “most builders and developers in my 30 years of experience are in the business for the quick cash. When they are building new homes, their goal is to, get it up, make it look pretty, sell and let the buyer worry about the problems
The number one issue starts many new homeowners in my area find themselves dealing with is drainage and excavation issues. When it comes to excavation, very few excavation companies can read grades and even less do the job right. They slope properties in all sorts of ways that funnel rain water right into a homes basement. Or slope driveways in such a manner that they quickly erode. This is why I am making a killing.
I recently picked up a new driveway landscape project from a homeowner who saw a driveway I built, two streets over. He saw my gear at the site, stopped and asked if I would look at his place which I did. I gave him a very rough estimate as this kind of work I bill by the hour. He hired us on the spot with a $15,000 down payment and billed every three days, pro rata.
My down payment calculations depend on a few variables. These are the issues I take into account when creating a down payment value. I consider the job I will be working on, how my conversation goes with the customer and my feeling of how well we will work together. In general though it usually comes out to 25% of the total job cost. I bill labor and machines at $5,000 every three days. That is to cover 6 guys and three machines, plus profit.
Being paid pro rata means if you give me a $15,000 job deposit, after 3 days of work I will give you a bill for $5,000. If the job is 10% done at that time, you owe me $5,000 less $1,500 ( the $1,500 is 10% of the full deposit ) so I require a check for $3,500.00 before any further work is completed. The customer and I agree to all this up front. I have no receivables, never have, never will. I don’t want to waste my time tracking down old customers to collect payment. My invoices are presented via email from my software and I will wait for the check or credit card in the morning before work is continued. The customer will also already know where to leave the check so I can find it. I have never had an issue yet using this payment policy.
Any job over $5,000 needs a deposit. I learned a long time ago that things can happen on the payment side and my costs run high when I have that much gear and that many people on a job site.
In short I have to protect myself and this is a perfect way to do it. I am very up front with the client at the start and not one has ever said anything about it to complain. If they did, I would walk. This is a red flag to me and I am in a position where I have so many big jobs available and signed that I don’t need to put up with any nonsense. When a customer puts up a red flag, I just go to the next one.
In the past, when I was hungry for money, I tended to take higher risks jobs and generally still got paid but there have been a few times when I haven’t. If I am already hungry and I do work and don’t get paid, I will be starving. In such situations if you don’t be careful you will could find yourself out of business.
So make sure you protect yourself and your business by implementing a payment plan that both you and your customer can agree upon before you start working.”