Contracts and pricing

Hi all. I’ve got a couple of queries that I’m hoping you can share your wisdom on.

I’m sure the answers to these are in the bog somewhere but I can’t subscribe this month as it’s been rather an expensive one for one reason or another. So I will join you all there in August!

Firstly, I want to put my maintenance on 12 month contracts - how should I word the agreement so that cheekier customers don’t just use it to get a cheaper rate through summer then cancel the standing order come winter?

Secondly, I’m on a larger landscaping job and I’ve mucked up the pricing on this one. I priced really cheap to get the job and to get some good marketing pictures as it will be a great transformation (also felt a bit sorry for the chap) but the customer is now nitpicking every tiny detail and trying to bring the price down at every turn. We’ve come across obstacles that were completely unexpected and will mean I’ll be putting in extra days at the end. It will barely be worth it financially but we are where we are. I'll get to the end of and will have learnt some lessons! So I need a bit of general pricing advice. I want to price for business growth - hoping to go ltd fairly soon. After all the costs of the job including my day rate and any other subcontractors I’m paying, what margin should I be adding for growth and to cover contingencies?

Thanks in advance.

Personally, I have never understood the desire for the 12 month contract style of payment. Why would you not want to get paid in full for the tasks as you do them? Why would you prefer to wait until winter to get paid for work done in the summer?

I think it can only be to try and ‘lock in’ and secure the work in some way. I don’t think it works. Members have posted on here that clients have sacked them at the end of the season and then not made the winter payments which make up part of the fee for work done over the season. Some people just don’t understand and you can be left out of pocket. What everybody does understand is that you turn up, mow the grass and then get paid in full.

I have been in this industry since 1985 and self-employed since 1991 and have had most of my clients for many years, without any contract of any kind, other than a verbal agreement. Some have been with me for 29 years, with no contract. I do the work and then send them an invoice for that task on that date and we all know where we are. A small few pay me either by cheque, cash or online with no invoicing. They just pay me on the day I have been and done the work.

Also with the 12 month spread of cost payment scheme, how do you factor in the extra work done now and then if payments are made of a fixed amount each month? How do you explain that the payments now need to increase due to extra tasks carried out, particularly if the client thinks they are buying a service contract which covers everything? What stops them asking for extra tasks to be done imagining the payments they are making will cover everything? Yes, there are ways around these issues, but it needlessly complicates the very simple concept of ‘task’ followed by a quick ‘payment in full’.

I have one client that I only cut the hawthorn hedges for twice a year. The fee is £110 per cut. I would rather have the £110 each time than to get them to pay me 18.33 per month. Later today when it dries up, I will be mowing a Churchyard. It is cut 11 times over the season and the fee is £240. I will email the invoice later today and the money will be in my account tomorrow. I much prefer to get paid as quickly as possible.

I have to pay my assistant and my sub-contractor now, when they have done the work, not in six months’ time, So I need to get paid promptly also. I have to pay for fuel, machinery, breakdowns/parts and consumables etc. now, as they arise. The petrol station don’t do 12 month easy payments. Nor does the machinery dealer.

Of course everyone can operate how they feel is best. This is only my own take on it. But a bird in the hand…… as they say.

Replies

Tim Bucknall July 7, 2020 at 3:56pm

Re the maintenance- something at the end of your quote along the lines of 'due to the averaging of charges over the year, if the contract runs for less than a year a final payment may be due on termination if the payments made do not cover the work done to date. (I generally reckon after a year it all comes out in the wash). Be prepared that they may want it the other way too, if this does happen I would generally hope tp make up the hours rather than give a refund.

Re the job you're on- I would just be completely upfront- tell him that you put in in a very tight quote for the job and have no slack to cover anything above specification. If you've actually priced it below spec- you'll have to take it on the chin, and lesson learnt.
- David Rigby > Tim Bucknall July 8, 2020 at 9:24am
  
  Thanks Tim.
  
  I like that wording, I'll factor that in to my agreements.
  
  We won't lose money on this job but certainly won't make enough for it to have been worth the mither if that makes sense! I'm going back to basics with pricing - any thoughts on margins, etc?
  
  Cheers
Vic 575 July 10, 2020 at 9:38am

Personally, I have never understood the desire for the 12 month contract style of payment. Why would you not want to get paid in full for the tasks as you do them? Why would you prefer to wait until winter to get paid for work done in the summer?

I think it can only be to try and ‘lock in’ and secure the work in some way. I don’t think it works. Members have posted on here that clients have sacked them at the end of the season and then not made the winter payments which make up part of the fee for work done over the season. Some people just don’t understand and you can be left out of pocket. What everybody does understand is that you turn up, mow the grass and then get paid in full.

I have been in this industry since 1985 and self-employed since 1991 and have had most of my clients for many years, without any contract of any kind, other than a verbal agreement. Some have been with me for 29 years, with no contract. I do the work and then send them an invoice for that task on that date and we all know where we are. A small few pay me either by cheque, cash or online with no invoicing. They just pay me on the day I have been and done the work.

Also with the 12 month spread of cost payment scheme, how do you factor in the extra work done now and then if payments are made of a fixed amount each month? How do you explain that the payments now need to increase due to extra tasks carried out, particularly if the client thinks they are buying a service contract which covers everything? What stops them asking for extra tasks to be done imagining the payments they are making will cover everything? Yes, there are ways around these issues, but it needlessly complicates the very simple concept of ‘task’ followed by a quick ‘payment in full’.

I have one client that I only cut the hawthorn hedges for twice a year. The fee is £110 per cut. I would rather have the £110 each time than to get them to pay me 18.33 per month. Later today when it dries up, I will be mowing a Churchyard. It is cut 11 times over the season and the fee is £240. I will email the invoice later today and the money will be in my account tomorrow. I much prefer to get paid as quickly as possible.

I have to pay my assistant and my sub-contractor now, when they have done the work, not in six months’ time, So I need to get paid promptly also. I have to pay for fuel, machinery, breakdowns/parts and consumables etc. now, as they arise. The petrol station don’t do 12 month easy payments. Nor does the machinery dealer.

Of course everyone can operate how they feel is best. This is only my own take on it. But a bird in the hand…… as they say.
- 1st Garden Maintenance > Vic 575 July 12, 2020 at 4:06pm
  
  I think what Tim is referring to is that he does regular recurring visits throughout the year to do maintenance, and gets paid monthly. We have a similar system, and some of our clients pay monthly in advance by DD. If they need extra work they pay online.