There are upsides and downsides to using lawn care contracts as we will see in this discussion. The more you know about the up and downsides, the better informed choice you will be able to make about if you should be using them in your lawn care business. Let’s now review a discussion from the Gopher Lawn Care Business Forum.
Luke: “I’ve been in the lawn care business for several years but never have gone real big. For the past 10 years I have been at my new location and my lawn care business is growing. I think I’m at a point where I want to start using lawn care contracts with my customers but I am not sure how to break them in.
I’m thinking month to month lawn care contracts, but I’m not sure if I should do 12 months and figure in leaf removal, spring cleaning, gutters, mulch, etc. I want to continue to offer all services. Any suggestions would be greatly appreciated.”
Steve: “Why not scale it in by having your new customers sign annual contracts at first. Get the hang of selling the usage of lawn care contracts and then maybe next year, get your other lawn care customers on board with the lawn care contracts too?”
Luke: “I’m looking for a set monthly income, if their is such a thing. If this works like I’m thinking, the lawn care customer would pay a lower amount per month for more services across a 12 month period. Is this a good idea, yes or no? Easier billing, I think? What’s your view on that?”
Chuck: “Annual lawn care contracts can be very good, but like everything else it will have a downside as well. It seems there is no “standard” way to run your lawn care 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 a lot of per cut lawn care clients. Going into winter I only had 12 annual lawn care customers 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 a lot of labor, maintenance, & 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.”
Steve: “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?”
Chuck: “I think every lawn care 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 on a per lawn care 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 with 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 lawn care accout that’s up for sale in say June. You could work all summer for the lesser rate, & if the house 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 most lawn care 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 man’s 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, you need to budget & know what to expect. My issue was most of my lawn care customers came on board during the spring & summer this past year. So I wasn’t receiving 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 and a lesson learned. I think having a good mix is best & I’ll continue to grow my business as such.”
Steve: “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.”
Luke: “Thanks guys you’ve both been a big help and have given me some things to think about. I was leaning towards charging per cut only but I think a good point was made in saying that there might be a balance to the both. I think I’ll do as Steve had said and keep our per cut lawn care clients the same and any new ones try and push the lawn care contracts. We’ll see how it works.”
If you would like to join in on this discussion further, visit the post at the Gopher Lawn Care Business Forum.