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Large Com.account wants $$ Back

Discussion in 'Commercial Snow Removal' started by KCAPXIS, Dec 10, 2008.


    KCAPXIS Senior Member
    from NE PA.
    Messages: 143

    I have a large commercial customer, This will be the 5th year I have serviced them... and this is year #3 of a 3year contract.. last summer all of the upper management was replaced.. and the new managers asked me if I could drop my prices 10 to 15% for this year??

    When I entered the 3 year Seasonal contract back in 2006 They beat me up on the prices, the first year every thing went good, the 2ed year 2007/2008 was a little hard on me,, we used 2.5 times the amount of salt, and this year we are off to using a little more salt than i would like, and I have no way of forecasting the balance of the winter ? But they are still asking for a discount up front,

    I hope no one else has problems like this,, But if you do / did, let me know what might work !!

    at this point I dint care if this is my last season with them or not, I turn down plenty of good work to service this customer, but the timing is not good to back out now??
  2. Rc2505

    Rc2505 PlowSite.com Addict
    Messages: 1,245

    I would not back out of the contract. I would tell them that next year we can discuss price, but as of now I have a contract with you for specified amounts. If you would like to buy me out of my current contract then feel free to at XXX amount of dollars, and you can find someone else to do it for the price you want to pay. Take the average number of pushes, and salt you apply, and discount it by 50%, make that your buyout number, and forget it. This will save you the money of salt, and hourly wages, and in the mean time your sitting back collecting money. My guess is they will never go for that, but I don't think you should lower your prices with a signed contract either.
  3. LoneCowboy

    LoneCowboy PlowSite.com Addict
    Messages: 1,760

    I agree, they signed it, make them hold to it.
  4. JDiepstra

    JDiepstra PlowSite.com Addict
    Messages: 1,780

    The new managers come in and are trying to do a super dooper job and be all that to show how efficient they are. I am sure they are doing this to everyone and every service they have. Just professionally explain that you are already working at a very small margin and will be happy to work with them to find out how you can help them cut expenses next year.
  5. Burkartsplow

    Burkartsplow PlowSite Veteran
    Messages: 3,246

    NO WAY! They are already getting a deal with a three year contract especially if the rates stayed the same over the three years. Tell them they signed the contract and at the end of the year you can discuss next years contract if you want to. I mean it is a business and obviously money is tight, not just for them, but for us also. Stick to your guns and tell them you cant. And make sure you do a good job so they cant try and get out of the contract with a performance clause. good luck
  6. big acres

    big acres Senior Member
    Messages: 653

    I generally agree with this stance, but in this market you should be cautious. It is easier to retain a customer with a small price consession than to replace a customer -especially a large one.

    I assume you've explained that you compromised in the original negotiation, and that you used 2.5 times the amount of salt in year two, right? Can you gather weather data to support your postion that they received much more salt and service than what was bid for an average winter... maybe explain your bidding process to them a bit?

    Then, as someone above mentioned, you need to give these new managers a reason to walk into their bosses office and "beat their chests" and show how savvy they are by renegotiating with you. Why not propose a compromise of a slight discount of 5-7% thereabouts, but propose a cap on salting equal to the average of years one and two. They should see that this is fair, and if you salt more than year one you will make up some of this concession.

    It may be hard to stomach a price concession, so for your pride's sake, you need to get something in return. How about making this offer contingent upon a two-year contract extension, putting you in year one of another 3-year contract? If you already have a clause for fuel and market rate for salt, this may be the way to go... and you might make allies of these new managers. Good luck.
  7. Sno4U

    Sno4U Senior Member
    Messages: 480

    If the costs of doing business went up WAY up (which they have done in regards to salt) you WOULD certainly hold to the contract wouldn't U? I mean, would U try to renegotiate 1/2 way thru for a higher salt price, etc? I doubt it, why? b/c your an honest proffessional service provider. I think you should expect them to honor their contract for now and rethink your numbers when the opportunity avails itself.
  8. elite1msmith

    elite1msmith 2000 Club Member
    from chicago
    Messages: 2,762

    well i would counter there offer.....

    i would figure out the cost, and estimated profit that you want to make... can you cut your cost by 10% ? how about using liquid? some ppl are having good luck with it. If you can figure a way for the job to be profitable

    Then , i would counter, and say well ill drop it 10% how ever you sign up for an additional 3 more years, and a 3% increase per year, or possibly a fuel/material surcharge
  9. Little Jon

    Little Jon Senior Member
    from Buffalo
    Messages: 139

    I know of a contractor around here that was doing a large property. Last year when salt prices & what not sky rocketed, he went to the property and asked for a small consesion in price due to salt being so much more. The property said no, and now we would like to look for someone else next year. Ok, so they put it out to bid...ha! Same guy got it with a substacial price increase over last year (even when you add the consesion he wanted).

    Its always nice when the managers loose. Im sure these people will do the same thing, next year they will go out & try 2 find a new guy and find out that your price is a bargan compared to now.
  10. QuadPlower

    QuadPlower PlowSite.com Addict
    Messages: 1,056

    You want him to drop his price by 10% and then in 3 years be 1% below where he is now.

    Stick to your contract. You mentioned you gave up contracts to service this one. Next year those contracts will be avalible too.

    Most of us wouldn't ask for an increase on a multi year contract, they shouldn't ask for a decrease.

    Good Luck
  11. turfmasters

    turfmasters Member
    Messages: 96

    Sorry to hear that Carl.I know just who you are talking about.

    Hope your doing better!
  12. Runner

    Runner Senior Member
    Messages: 957

    Don't budge - Stick by your guns. Next year they are going to want you to do the place cheaper than you were doing it 3 years ago, anyway. sadly, they'll probably find someone to do just that. Our economy will still be in a slump at this time (this will take about 2 years to start to come out).
  13. procut1

    procut1 Senior Member
    Messages: 380

    Thats the nature of this business.

    Every year costs go up.

    And every year the properties expect a price reduction.

    I love when i get the phone call asking what their price reduction this year is going to be. Im expecting to increase the price and they want it lowered.

    They have the mindset its like computers or TVs or something. The price goes down every year.

    Yet there is always a contractor willing to do that.
  14. Superior L & L

    Superior L & L PlowSite Veteran
    from MI
    Messages: 3,041

    Switch to liquid,state in the contract that sometime you will use salt sometimes liquid, cap the amount of applications, drop the price by some percentage and make them sign a new 3 year contract.

    As long as this is done right it is a great opportunity to rewrite a contract before its up and stops everyone and there brother from bidding on it
  15. big acres

    big acres Senior Member
    Messages: 653

    That last part is dead on. Whenever I get an opportunity to sign a contract for a non-typical term, I do... when it is up no one is chasing them.
  16. BlackIrish

    BlackIrish Senior Member
    Messages: 902

    I've found that 3 yrs at the same rate also effictively puts you 15+% below value at the end of contract. At the end of the 3 yrs the natural tendency is to add 10% and resign for another 3 yr fixed. Repeat many times and after 12 yrs your getting $6k for a $11K job.
    Dig deeper and discover you're doing thousands in shoveling for $150 :eek: stupid ex office mgr.
    Stick with normal 5-10%? yrly increases. You need to be able to afford updated equipment to maintain their site.
    This is a chance to blend existing contract into another 3 yr, at the very least try to maintain current pricing, all depending on your economy situation.
  17. Brian Young

    Brian Young PlowSite Veteran
    Messages: 3,394

    AAAAAAAAAAAAA can you say contract
  18. JD Dave

    JD Dave PlowSite Fanatic
    Messages: 11,194

    Throw them a bone of some kind and try to resign for 3 years if the profits there. The economy is in the gutter and new jobs are going to be going cheap also. Switching to liquid isn't going to save you much except for anti-icing and from my expeirence that is very minimal, when time and equipment is taken into the mix. You guys are paying alot more for salt them us, so that helps but don't think using liquid is going to make or break a contract. JMO
  19. REAPER

    REAPER 2000 Club Member
    from 60050
    Messages: 2,230

    Ask them what 10% of the lot they want un-touched.
  20. JohnnyRoyale

    JohnnyRoyale 2000 Club Member
    Messages: 2,935

    I hate property managers.