Multi-Year Contracts

November 27, 2018

 By showing that you have multi-year contracts in place, you automatically indicate that you have cash flow in place to repay the loan.  And, it makes you look like a savvy businessperson.

 

Everybody wins in this multi-year contract scenario.  The customer wins because your employees become familiar with the idiosyncrasies of the property and they come to know what is expected.  Your employees win because they realize that there will be work for them next year.  Your sales team wins as they no longer have to concentrate their early spring or fall sales efforts on renewals, and can solicit new business, and hopefully make a commission on the new account.  The company wins because cash flows and profit projections can be solidified.  You also appear (in the eyes of potential lenders) to be a better businessperson.

 

Another important reason for having a multi-year book of business is if you are considering selling the business at some point in the future.  Companies that have multi-year snow management contracts are much more attractive to potential buyers.  What you are selling is cash flows and profits.  Single year contracts carry very little value in the eyes of a potential buyer because of the effort required to renew then each season.  Multi-year contracts bring higher value to your business for all the reasons noted above.  This is one of the most important things potential buyers of your business look for when evaluating the potential for them in your customer mix. 

 

Assuming that you have priced out the work properly, signing snow management customers (and landscape maintenance, irrigation maintenance and snowplowing customers) to multi-year contracts is smart business. 

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John Allin Consulting

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