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Money Up Front for Contracts?

Discussion in 'Introduce Yourself to the Community' started by coreyod21, Dec 3, 2011.

  1. coreyod21

    coreyod21 Member
    Messages: 44

    Hey this is my first year and im going to be signing some of my landscaping customers to snow contracts. I was wondering if you guys make them give all the money up front for the season or maybe just like 2/3 of the contract till the end of the season. What works best for you guys? Most of these drives are in a area that isnt full of money if that matters. Hope someone can let me pick their brain a little thanks !!
     
  2. White Gardens

    White Gardens 2000 Club Member
    Messages: 2,665

    It's called a retainer.

    The retainer is harder and harder to get these days around our area. There is enough people plowing that don't request them, that it's hard to compete.

    We also can have winters with no snow at all, and those winter leave people scratching their heads on why they paid a retainer in the first place.

    So, as a good business practice, you should be saving up as much money as possible during the off season to get you through the winter.

    .....
     
  3. 7_below

    7_below Senior Member
    Messages: 245

    I give my clients the option to pay all up front or half now to activate the agreement. If they pay half, I invoice them by January 15th to pay the balance to continue service thru April 1st. Plus it can go on the following years tax's (2013). Per plow I bill monthly. Make sure you have your billing schedule very clear in your agreement. Don't be wishy washy about it.
     
  4. White Gardens

    White Gardens 2000 Club Member
    Messages: 2,665


    You guys get lake effect snow though don't you? Only reason I say is because I'm sure you guys are guaranteed a certain amount of snow each year.

    Here we can get 42" like last year (record) and then there are those seasons where it might not snow at all.

    ...
     
  5. jklawn&Plow

    jklawn&Plow Senior Member
    Messages: 469

    Its probably tough without snow guaratee like we have in NY to get money up front. Basically to do it you generally have to charge less than the per plow prices so they will see it as a possible bargain with descent odds. So if I just throw a number out, say you plow 15 events and charge 75% of the per plow prices for 15 events. In our area for 100-120" per year and 40 events seasonal prices range from $215-$315 for a typical driveway 3-5min job. My guess for you having 0-40" you contract price might be $150-225 for the season.
     
  6. coreyod21

    coreyod21 Member
    Messages: 44

    wow thanks ya'll all the replies have been helpful! My price average is roughly $250 and thats what I been hearing is the average in my area. I really like the idea of getting half up front til Jan 15 for taxes. I might find it hard to get people in this economy to cough up $250. My contracts state that its $250 for the season should I modify it to say half front then half later or give them a receipt for the for $125 and wait for the remainder? As far as a retainer should I say if we get only a certain amount of pushes I can discount X amount?
     
  7. Burkartsplow

    Burkartsplow PlowSite Veteran
    Messages: 3,245

    What part of Cleveland are you located? I have been plowing here for 16 years and if I was charging $250 for a seasonal residential client I would be out of business. Our cheapest seasonal residential is $450 to $500 plus tax and that is for just clearing the drive with no walks. We split up our seasonals over 5 months and they make there first payment on November 15th and the 15th the following months. They have a budgeted amount and dont have to worry about giving a large sum at the beginning, and there are always the story you hear each year about the low life plow company that takes a ton of accounts and money up front and does not show up. By splitting it up the client feels very secure about service.
     
  8. snow patrol

    snow patrol Senior Member
    Messages: 163

    Coryod21,

    Every geographic area will have different customary methods, a "norm" if you will. But keep in mind that they are customary, not a requirement. It will depend greatly on you and how you want to set up your business. Personally speaking, I have seen a major down shift on commercial accounts here in my area and I have made a decision to diversify my accounts and go after resi's too. The norm here seems to be per push/visit, but I have marketed my service as a prepay and all but one have prepaid for the year with out issue. The one that did not prepay is paying over 3 equal installments. Anyway, Here are a few guidelines that may help you:

    1) if you charge per push, meaning only when you plow/remove snow, then typically you bill after each event. Alternatively you can bill for a few visits (3, maybe 4) in advance as a retainer if you will (as mentioned by White Gardens), and then invoice every time the customers gets down to 1 or 2 remaining prepaid visits. Not my preferred method

    2) if you you charge a flat rate for the season, you can require prepayment for said service. You can also structure it so they are getting a discount for the prepayment. for instance, normal rate is $300.00 less 10% prepayment discount = $270, a $30 savings.

    3) Another method for the flat rate is to bill in installment payments, say 1, 2, 3 or 4 installments. I would say not to go more than 3 installments, and the 1st installment is due upon acceptance.

    4) If you do a flat rate service for the year, it may behoove you to have a cap on total cumulative snow accumulation. Meaning if you get more snow than your specified cap for the year, then there is a sure charge of $xyz. Of course it may also be a good idea to do the opposite so the customer feels like he/she is getting a fair shake. A minimum for instance where you say if it snows less than 20" (as an example only) you credit the customer zyz% towards next years plowing service.

    A couple of more things to consider. There are significant differences between the 2 types of contracts, flat rate verse per push. With flat rate you dont always make as much money, and you do take a bit of a gamble on heavy snow fall years (hence the cap) however you do have a guaranteed income. On the flip side on the per push contracts you typically make more on moderate to heavy snow fall years because you can structure your rates based on how much snow you're plowing, IE, 2" to 4" + $xyz, 4" to 6" =$zyx, etc., etc., but on lite winters, you dont make much of anything.

    Hope the info is helpful. Best of luck to you!!!
     
  9. 7_below

    7_below Senior Member
    Messages: 245

    Oh yeah! We get tons of lake effect off Lake Ontario. We average about 125" a year. Last year we got 180"!! I mean, we can get 42" in a three day storm!! So with that said, you bring up a good point. It's a garauntee we'll have at least 100" each year so people have no problem paying at least half up front.
     
  10. coreyod21

    coreyod21 Member
    Messages: 44

    Most of my accounts are in the Euclid area. Seeing your from around you now they are normally really small driveways and the area is pretty isnt wealthy. I figured $250 just from a guy in the area showed me his prices and they average $250. I havent seen anyone elses so i'm clueless to be honest. He uses snowblowers and has roughly 60 accounts in Euclid alone. This year ( my first) im using a ariens commercal blower. I sure dont want to be a low baller. Being a landscaper I know how low ballers can ruin the industry. About how many pushes do you average in this area?
     
  11. Burkartsplow

    Burkartsplow PlowSite Veteran
    Messages: 3,245

    I never understood the guys who put a cap on a seasonal contract. Might as well charge per push and the customer pays for the work done and you get paid for your labor. The whole part of a seasonal is a flat rate for the season and the customer knows exactly what they are paying. As a contractor you should know your average snowfall for your area and your average number of pushes per season which helps you create a competitive seasonal contract. Plus if you explain to the client that if they stick with one form of contract either per push or seasonal each year then it all equals out in the end ( over a period of a few years). Its the ones that change every year that usually get screwed since they think they can predict a light or heavy winter. They always ask me and I just tell them we always get our good amount of snow here and it is up to you. Some years you hit your mark, some years you have a light winter and make more money, and some years are higher snowfall and you lose a little. It is a gamble for the client or yourself. But know your facts, dont lowball yourself and you should be fine.
     
  12. Burkartsplow

    Burkartsplow PlowSite Veteran
    Messages: 3,245

    The east side is cheaper then the westside for seasonals I know that, but we average 17-20 pushes a year on residentials. If you are using a snowblower you should be able to get more since they do a better job then plows, but I am not making the decision on your prices. Good luck this year and be safe.
     
  13. coreyod21

    coreyod21 Member
    Messages: 44

    ok thanks. I wouldnt ask you to make my prices since clearly im doing the work. Its nice to have info from the area so I now have some ballpark range. Seeing what your recieving on the west side I now can clearly see that at that price im low balling people and thats not how I want to operate. Eventhough its my first year in the snow industry I know lowballers go outta business quick.Good luck to yourself also its nice seeing people helping others in the industry
     
  14. snow patrol

    snow patrol Senior Member
    Messages: 163

    A cap, or a stop loss is used for 2 reasons. 1 to mitigate losses from way above normal winters. And 2 to allow you to give the best price possible. For instance, if I'm pricing a site where I know the worse case scenario is limited by the cap I can charge X. On the same site, if there is no cap, even taking into consideration historical winter stats, I would have to assume for the worse and price accordingly. I look at it kind of like insurance. You purchase coverage and there is a limit on what they pay out (a cap). If you want to increase your policy coverage say up to $1million or $2 million, your premiums will go up accordingly. Its just based on the amount of exposure. Another way to look at it is this way. If you have a 2" trigger, you may service the account X times, based on historical stats. But if you have a 1" trigger, you'll likely service the account many more times. Do you charge accordingly or do you price it the same? Hope that makes sense.
     
  15. Burkartsplow

    Burkartsplow PlowSite Veteran
    Messages: 3,245

    I charge accordingly to the amount of service the site is looking for. But I know for my area when a client wants a seasonal price that is what they want. If I tried to put a cap in they would say forget it. I guess the insurance for me is that we price correctly, do quality work and keep the client happy. We then keep them on a seasonal for years to come and in the end we both win. I make money no matter what and the client does not have to worry about the job getting done correctly.
     
  16. Burkartsplow

    Burkartsplow PlowSite Veteran
    Messages: 3,245

    That might just be the difference from 20 miles east to west in regards to pricing.
     
  17. grandview

    grandview PlowSite Fanatic
    Messages: 14,609

    Originally Posted by Burkartsplow
    I never understood the guys who put a cap on a seasonal contract.

    Agreed.No cap,plus it all goes back to your not going to ask for more money if it snows a lot.,just as your not going to refund money for a lite season.
     
  18. Weenuk

    Weenuk Senior Member
    Messages: 207

    For snow clearing, I offer a 10% discount for payment in full before Oct 20, 5% discount for post dated cheques. 35% of my clients chose the bigger discount and paid in full. If you do a great job this winter, the clients that return to you next winter who did not pay in full up front might. Just remember the payment in full money has to last the entire season so budget wisely....
     
  19. jklawn&Plow

    jklawn&Plow Senior Member
    Messages: 469

    This is the key to the business.
     
  20. jklawn&Plow

    jklawn&Plow Senior Member
    Messages: 469

    In NY if you use word "discount" you still need to charge sales tax for the Full sum. I stop using this word. Same price for everyone. No discounts. I merely asked that they pay by a certain date. For the ones that appreciate the good service, they sign up early.