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yearly or multiple year contract question.

Discussion in 'Business Fundamentals' started by Loni1113, Jan 22, 2009.

  1. Loni1113

    Loni1113 Senior Member
    from Utah
    Messages: 100

    I am looking at getting all of my accounts that signed seasonal contract last year to sign either 1 year or multiple year contracts this year. My first question is, do you discount a property if they sign a year contract (lawn and snow), and if so how much on average is the discount? Second, how many of you have your customers sign multi year contracts? And are you discounting them more than you would a 1 year contract?

    Thanks in advance everyone
  2. redman6565

    redman6565 PlowSite.com Addict
    Messages: 1,411

    i gave a certain percentage if they signed a 3 or more year deal. 2 year deals isn't much of a guarantee, so you might as well stick to single year contracts, but if you can get 3, 4 or 5 year deals, then ya, it's worth a little discount for job security.
  3. Ipushsnow

    Ipushsnow Senior Member
    Messages: 314

    I don't discount multi-year contracts, but sell them on keeping the costs the same. For example if a property is $10,000 this year I will offer to "lock them in" at $10,000 for 3 years. Most owners are happy to know what their costs are going to be for the duration. Then we provide outstanding service for those 3 years and then hit them with a 10% increase for the next 3. They are usually happy with the service and realize its the first price increase in 3 years and don't bat an eye at the increase.
  4. JDiepstra

    JDiepstra PlowSite.com Addict
    Messages: 1,780

    I was going to say the same thing. I don't discount for multiple years. I keep price the same, rather than the normal raise pretty much every year.
  5. Kunker

    Kunker Member
    Messages: 96

    X3...they get a guaranteed price and save inflation costs over the life of the contract. And you're less like to see resistance to an increase after the contract is up.
  6. heather lawn spray

    heather lawn spray PlowSite.com Addict
    Messages: 1,206

    You build inflation into the quote; X first year, X plus 1 year inflation 2nd year, X plus 2 year inflation 3rd year. Add 'em all up and divide by 3. Don't discount yourself short don't forget they get a guaranteed price for 3 years for their budgeting
  7. augerandblade

    augerandblade PlowSite.com Addict
    Messages: 1,054

    Now the economy is in the tank would you price in deflation. I think not. Multi term contracts being renewed I arrive at the price by putting in actual inflation figures over the term.Yes your playing catchup and yes it may add up to 10%. Here were getting a break now on fuel prices compared to our prices paid in the summmer or 08
  8. snowguys

    snowguys Senior Member
    Messages: 708

    i just got this good size lot they love me couse i have a skid steer there and the outher guys in the past they just used trucks so snow would be all over they want to sign a 3 year so i lock in the same price next year and went up 7% for the outher 2 years
  9. Neige

    Neige Sponsor
    Messages: 2,215

    We often lock in for 3 years, and its so sweet not having to worry about that account. The only change I have made from last year, is to put in a fuel surcharge. I learned that the price of fuel is to volatile to lock in for 3 years.:drinkup:
  10. Loni1113

    Loni1113 Senior Member
    from Utah
    Messages: 100

    This is great info guys. Thanks very much. I think I have one place willing to sign a 2 or 3 year deal. Now I just have to get my others to do so. It will be very nice knowing I have got these properties for multiple years. What a stress reliever.
  11. QuadPlower

    QuadPlower PlowSite.com Addict
    Messages: 1,056

    Having muli year contracts is like having a "real job" Knowing that if you do the work, the money is there year after year. I am finally in a position where I have several contracts with the City for 4 more years. Mowing, stick pick up, and snow.

    I would go with a 2 year contract. People move, people loose their job, etc.

    As for prices, you have to have enough profit in there to handle inflation.

    At the end of each contract I would increase my rates by a comfortable percentage. I would contact them and ask if they are happy and then tell them you need to raise your prices by XX%. If they agree great. If they baluk then drop the %.

    Are these commercial or residential properties you are talking about?

    Commercial I would maybe go 3 or 4 years.
  12. Loni1113

    Loni1113 Senior Member
    from Utah
    Messages: 100

    All of them are commercial. I have a couple of friends lawns I have my guys mow but I make minimal money on the 2 of them. I pitched the idea yesterday to one of my commercial accounts and I haven't gotten a yes or no yet but she sounded very interested. Now to get the rest of them to jump on board