Should You Do Mowing Contracts? Or Per-Service Pricing?

Hey everyone, it's Mike Andes and you're listening to the landscape business course podcast. Today we're talking about whether or not you should have contracts when it comes to recurring mowing services. We're going to go over the pros and the cons of having contracts versus not having contracts. There is no right or wrong answer. The question is, how fast do you want to grow the business? What are the goals? Where do you want the business to be in 10 years and why did you start this lawn care business? All right, so first off, pros of contracts. Why would you want to have contracts? Number one is for cash flow. There's a 12 month contract, 12 monthly payments over the course of a year. You have consistent cash flow 12 months out of the year. If you have winter season, they still pay you. If you have a slow season, during the summer, they still pay you the same amount all the time. The degree and the amount of which you work on the property changes. But, but your cash flow does not. So the best thing about contracts is that your cash flow stays steady. Number two is predictability. It's a very positive thing about contracts. You know exactly what your revenues are gonna be and so you can predictably forecast exactly what your revenues are gonna be and know exactly how much you're gonna grow your business based upon the contracts that you sell in the spring. You can predict, you can forecast the revenue you're gonna make for the rest of the year. Another pro about contracts is that it is usually full service customers that you're serving. Usually these are people who want not just mowing, they also want weeding, they want weed control, they want bush trimming, they want their gutters cleaned out, they want all these other services, leaf removal. They package all of those things in with their monthly recurring payment for 12 month contract. So now some of the cons of a contract. Number one, hard to sell. It's harder to sell someone a contract where they have to sign for something and it's for the whole year. It's much more difficult to sell. The speed and scalability of having a contract for your mowing customers is much. It's a con, it's a negative because in order to sell over the phone, in order to be able to sell without having to talk to the customer, have them sign a contract, send them something that they have to sell, sign. It's another step in the process. The goal if you're gonna try to focus just on speed and scalability is how do you take the friction out of the sales process and having to have someone sign a document, whether it be electronically or in person, is just another additional friction point. Another thing to get that cumbersome's the sale. Especially if you have to have that all of your terms and your agreement, it's like a two, three page document and a bunch of fine print. Again, that's just another thing that is to reduce your closing ratio and reduce the speed in which you can actually sell these jobs. Another con is really.

The contract is not going to be relevant. It has no weight whatsoever unless you're actually going to uphold it in court. Like if you're, unless you're going to actually take someone to court over their contract, it's not really worth signing. Like if someone's going to cancel in the fall after you've performed all these services, really the most profitable months for a 12 month contract is when you're slow, whether it be the winter or summer, depending on your market. When you're actually not performing the work, the services on the property, that's when you're actually generating the profit of that contract. And if the person cancels right before that time and right after you've just done all the work and you're really, actually operating in the red in terms of profitability on that contract, are you really going to take them to court? Because if you don't, there's really no value to having the contract if you do, do you really want to have to go to court? Do you want to have to go sue or try to legally go after a customer who could then spread that all over online. And before you know it, people who are considering going with you are seeing that you go after your customers, you go, you know, you take them to court. And all of this, if you're in a small town, news travels fast. That sort of thing might not fly. The other thing is if they do, if they, if they do buy out or they do finish their contract early, are you going to actually make them pay for the remaining months? Because if you don't and you just let them out again, you're going to be at a loss on that contract. And so those are some of the cons of a contract. Okay, now a la carte, this is, you know, you don't have a contract, you have per service basis pricing. In other words, when you come to mo, you're charging X amount per mow. When you come to weed the beds, you charge X amount per service. When you come to do leaf cleanup, you charge X amount. Some of the pros of a la carte Number one, it's very easy to sell. You can sell this over the phone. You can sell this after doing a drive by estimate. It does not require signature. It reduces the friction it takes away. It's very, very easy to sell. And the scalability of companies that grow very quickly are usually centered around these. Okay. And we're talking about residential service mostly here, but even in commercial, they, this is. These things can come into play because usually contracts are going to be necessary with commercial. So pros of a la carte. It's a gateway service. It's very easy to sell something like mowing on a per service basis. Very simple, 30, $40 per cut. Very easy to sell a gateway service and then upsell the customer down the road. But again, this is a disadvantage in comparison to a contract that has all of those other services already baked in. Pros of an a la carte service system. No legal binding contract or agreement. And you know you're not going to have to go to court with your customers. Again, just the pros of having a la carte or per service pricing. The cons of having a la carte pricing is that there's bad cash flow. You're going to have, you know, if you have, if you mow lawns for eight or nine months out of the year, you're going to have three or four months out of the year where you're going to struggle to get work for your guys. You're going to get creative with other services. You are going to have dips in cash flow. You're going to figure out how to be profitable during the winter months. These are things that you can add services like winter services or snow plowing. But you know, if you don't have snow, you're going to have to get creative with those winter months if you're doing this per service based pricing or a la carte. Another con of a la carte is usually you're going to have a lower value per customer on an annual basis because they're not going to be as full service. They're not going to usually have the amount of services that a contracted client would. Where you have leaf cleanups and you have all these other services baked into a contract. Usually per service customers are going to be less value per year because they might just have mowing or they might just have mowing and weeding. They might not have all the other cleanups and all the other services that you offer. So those are some of the pros and the cons. Now you're asking which one's better. There is no right or wrong answer here. If you're wanting to start a business and you're wanting to stay in the business and you're not wanting to scale it very quickly, contracts is a great way to go. Very dependable cash flow, much less risk. As you grow the business, you'll grow it slower because you won't be able to sell as quickly in comparison to a per service pricing model. But it's very, very consistent cash flow. You're gonna be steady growth, you're not gonna have fluctuations in number of customers cause they can't cancel. So lots of positives there in terms of cash flow, the negatives, you know, Augusta Lawn Care, we really push per service pricing. It's much easier to sell, much easier to scale. And the question really becomes, am I really going to take someone to court over a contract? Am I really going to make them pay out four months worth of services because they canceled right before winter? These are questions that I had to ask myself getting into it. We've played with a little bit of both and at the end of the day it's easier to scale the business if you are trying to do pricing based upon the service. Again, there is no right or wrong answer if you're not wanting to scale the business to multi million dollar levels. If you want to grow a 3, $400,000 business and you want to be out in the field working with one or two crews, contracts might be the way to go for you. You'll get some great cash flow throughout the winter months and then still be able to go on vacation for a week or two knowing that you're still got good cash flow and yet you don't need to be out on the properties yet. If you're wanting to scale quickly. If you want to grow a million dollar business in a couple of years, it's very rare, I should say that contracts are going to be the route you go. And so it really comes down to what type of business do you want to build and do you want to just offer 1, 2, 3 services or do you want to be full service and offer a whole bunch of services? And so that's kind of some of the things that you should be thinking about when it comes to contracts versus per service or ala carte pricing. I hope that helps a little bit. If you have questions, comment below. Do you do contracts or or do you do the per service based pricing? I'd love to hear from you in the comments. Thank you so much.