Get shot of under performing contracts

Let us assume that you have five separate contracts each week and that four of them are accurate when it comes to the charge out rate.

The fifth one however only covers one fifth (20%) of your yearly cost (assuming it is a day a week for the year).

In your mind, you do not feel that you can let the client down by walking away, however, you need to boost your income because you need to make some extra profit.

What do you do next?

Experience tells me that you should never do the work at anything below what you need to charge and regardless of how loyal you feel to the client the decision should be, walk away or up the charge.

You are effectively working for nothing because there is no profit going into your account and although one fifth of your costs are being met, it is not a situation that you should have to endure.

Be strong, if your client is able to afford £15.00 then chances are they can stretch to £18 or £20 and if they can't, it is in your interest to seek a client that can.

Talk to the existing client before you doing anything drastic, you will be surprised how many people will be sympathetic to your needs, after all, any arrangement should be 'mutually' beneficial.

I cannot advise on exactly what you should charge. You need to accurately work out what it costs you to supply one hour of your time and add the appropriate profit - calculate your hourly rate.

Please read this post in conjunction with: Landscapers - be prepared to walk away.

Replies

PRO

Phil Voice September 23, 2008 at 9:10pm

You may be interested in this post: Landscapers - be prepared to walk away.
Lawncare-4u.co.uk November 8, 2009 at 12:59am

agreed
Colin Hunt July 3, 2011 at 8:52pm

I suppose it depends what you want out of your business........................and life. I have continued jobs at a lower rate, but they have been there for years.......I know the client, I know what they can afford. Every job is a potential spin-off.

A flexible approach has kept me + 3 going for 30odd years, so much depends on your location and catchment - there are no hard and fast rules and I think we should all remember that.
Richard Gregory July 3, 2011 at 9:12pm

I have a few contracts which only just make it worth while / break even, but have always had spin off work from these clients and unless theres something new on the way its better to be working if costs are covered instead of sitting at home IMO.
Fenlandphil July 4, 2011 at 5:55am

It is always worth considering the actual costs involved in aquiring new work.

With existing customers there are often little or no sales costs, the customer asks you to do the work you do it. New customers come with an aquisition cost that when measured in terms of time spent, finding them preparing quotes, pricing and establishing a relationship can be quite significant. If you need a good number of smaller clients to replace one larger one the costs can quickly mount up.
Andy Lawrence July 4, 2011 at 7:54pm

Spot on Phil,

I've dropped two contracts this year and it's definitely benefited the business. One was too far away and underpriced. The client would not agree to a price increase so the end. The other I had major problems gaining access and the residents were not prepared to give me a key, so I dropped it.

I've since gained three contracts to replace them.

Slightly different to a lot of guys on here in that I live in a city and I have no employees so I can be a bit picky but if you can do it, it's definitely the right move.
Cesare Harradine July 5, 2011 at 9:27pm

I was faced with this problem this year.

I had two unprofitable sites, lets call them A and B. I enjoyed working on both of them and the clients were good. Site a was in a prestigeouse residentual area. However, in this neck of the woods Big House = No Money. Sure enough, when I said I would have to put my prices up, they decided to let me go. I have no regrets. Site B is on a corner, opposite a small parade of shops in a less than affluent residentual area. Although I'm not making anything from the actual site, I get so much profitable, work off it, I would do it for nothing(don't tell the client!).

Sometimes a site has less tangable assets.
PRO

Gary RK July 6, 2011 at 5:59pm

We've just dropped a site that would not entertain a price increase even though we had kept prices flat for the last two years.

Two days later, we get an opportunity to quote on a large one off blitz, replant and regular maintenance for another commercial client.

For the maintenance aspect, we are now taking in the same money for 60% of the time allocated to the dropped client, ie we have more time available to do the blitz etc, while still maintaining same income level for that service slot.

Worked out nice, that one....
Jen@A&J Owenwindows&gardens July 6, 2011 at 6:50pm

We've let one go today. Wrong area and we've had another client increase our hours (more profitable/closer to home) so it was an easy decision. Very little chance of any cross referrals due to clients circumstances. Felt a bit sad because she's a lovely lady but business is business. We did refer the work onto another gardener who was struggling a bit though and he will do a lovely job for her for less than we charged so everyone is happy!
Ian Parkes July 15, 2011 at 5:43pm

What if you u have no contracts, everyone seems to have them excepct me... this is the year I have knuckled down, grown and now got a helper with me and things are going good, but no contracts , do they really pay a lot more... what's the going hourly rate of a contract then £25 per hour per man a guess??? no idea as I have none , I got a block of faults to quote next week and I'm sure they don't want no contract and be hourly rate so still no contracts, kinda getting to me as residential I am turning away now... I put my rates up this yr on residential not by much a pound and everyone seemed to stay.. but did loss a lot jobs last year as people moved but to replaces with better jobs now.