Service Agreements, What Do You Think?

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Service Agreements

There are few topics that get a robust conversation going among independent haulers more than opinions on using Service Agreements in their business.  We all have horror stories about cell phone, uniform service or other contracts with vendors that create animosity between contractor and customer.  But it doesn’t have to be that way.

I believe a Service Agreement can be a valuable tool for your business, and a bigger part of a well planned sales strategy.  Many of us believe “my service is so good I don’t need a contract!”  That works great, until a well funded national company marches into your town with a team of sales representatives offering rates 50% of what you are charging.  At that point, it may be too late to save your business.  Once they find your customers are unsecured, they will snatch up as much business as quickly as they can.  However, if they find your customers are under some sort of agreement, they may go on to easier pickings.

A Service Agreement doesn’t need to be a weapon to use against your customers, but can be an effective sales tool to make your service more valuable to both your customers and your company.

 

Some reasons Service Agreements can benefit your business:

  • Its good business practice. Setting the terms up front begins the relationship with your customer in an atmosphere of professionalism.  A Service Agreement brings order to the relationship.

 

  • Sets the customer’s and the company’s expectations in writing.

 

  • Provides understanding what payment terms, late fees and service cancellation procedures will be.

 

  • Protects company from liability for property damage. You can document any damage that was present before you began servicing this location, and you can include a damage waiver in the terms and conditions agreeing the access to the service location is safe and adequate for your equipment.

 

  • A well written Service Agreement will specifically exclude waste materials that are hazardous or not allowed to be legally collected by your company. It will also provide environmental liability protection if your customer knowingly or unknowingly disposes of hazardous material in your containers, and an expensive cleanup or remediation is necessary.

 

  • A Service Agreement can specify what type of materials a customer’s rate is based on and what materials are acceptable or not. If the weight or compaction characteristics of a customer’s material changes through the course of your service, you need to be able to adjust their rate.

 

  • Especially in the case of Homeowner’s Associations, municipalities and many non-profit organizations where officers regularly turnover, a Service Agreement memorializes what was agreed to when the relationship began. Trying to remember what was discussed and agreed years earlier with officers who are no longer around is a position that is hard to defend.

 

  • A Service Agreement can provide protection to your company in the event of unforeseen circumstances, such as fluctuating recycling fees, a disposal site closing, a new governmental tax or surcharge or catastrophic fuel cost increases.

 

  • Provides a level of security to your bank or financing institution.  You are more likely to receive funding for equipment at a better rate when you can show your revenue stream is secured with Service Agreements.

 

  • There comes a time when businesses are sold either intentionally or unintentionally. Retirement and illness are just a couple of reasons businesses close or are sold.  Customers under contract have a higher value to a buyer as it provides a better likelihood customers will stick around for a new owner, assuming customer service has been satisfactory and continues to be after a sale.

 

  • Your business deserves to have a commitment from a customer. You may have invested hundreds or thousands of dollars in equipment for them to use at their facility.  Your company is entitled to a return on this investment.

 

 

Some things to consider as you think about using Service Agreements in your business:

  • Design a Service Agreement that gives a customer benefits, like a service guarantee, or rates and increases committed to upfront. Let them know exactly what they can expect.

 

  • Make the term of the Service Agreement flexible. Perhaps a small commercial account can be a 1 year term, a large customer requiring a higher level of investment on the part of the contractor may dictate a 3 or 5 year (or longer) term contract.

 

  • In a sales presentation, make the signing of a Service Agreement a positive experience. Perhaps a gift of appropriate value would be in order to show your appreciation.

 

  • Give serious thought to including or not including a “Right to Compete” and an automatically renewing clause in your agreement. Both of these clauses can have advantages and disadvantages.  These terms are common in the service agreements of large companies, and this may be a place where an independent local company may be able to differentiate themselves from a national company.

 

  • Identify what items in your Service Agreement are negotiable and which are cast in stone.  Be ready to offer a modification to those items that are less important, and to hold firm on those that are more important.

 

  • If your Service Agreements are not auto renewing, use the time of renewal as a time to thank the customer for his past business, ask how the quality of your service has been, then ask for a renewal to continue the relationship.

 

I hope this discussion has been helpful.  Every market is different, and what is common practice in one market may be unacceptable in another.  Be sensitive to your market, but always watch for ways to raise the bar and be a leader among your peers.

If you need assistance in designing a Service Agreement that will be effective in serving both your customers and your company, please feel free to contact us here at Van Tholen & Associates for help.

If you have any comments, please click the “comments” link at the top of the page!

Find Daily Opportunities to Mentor Junior Employees
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Every business needs a plan of succession, whether in response to a injury or death of the owner or other key individual, or for a business to be handed down to the next generation.  The best place to find those who can lead to the next stage of the life of your business may be already working for you.  Mentoring the next generation of leaders is some of the best investment of time current leadership can make.

This post was sent to me from the Harvard Business Review.

 

Find Daily Opportunities to Mentor Junior Employees

Many companies have formal, hierarchical mentoring programs nested somewhere in their HR department. But evidence shows that these programs alone won’t sufficiently engage or develop junior talent. If you’re interested in mentoring, think about becoming a “mentor of the moment,” by seeking development opportunities in daily interactions. Check in regularly with junior colleagues. See how things are going and offer support or resources as appropriate. Ask questions about their development such as: “In a perfect world, what would you be doing in 10 years? How can I help make it happen?” When you observe a junior employee in action, make time to provide reinforcing feedback about what you found most successful and what you learned. This type of mentoring, while informal, often pays off big for organizations in terms of better retention and more loyalty and commitment among employees.

This tip is adapted from “Real Mentorship Starts with Company Culture, Not Formal Programs,” by W. Brad Johnson and David G. Smith

 

Would you like to make a comment?  click “comments” at the top of the page!

 

 

Should I increase my rates?

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A waste hauling business has four primary responsibilities:

  1. To its customers, to provide a good value in service for the rate that is charged,

 

  1. To its employees, to provide a safe, meaningful and respectful work environment for a level of pay that is fair and equitable,

 

  1. To its vendors and its community, to pay its bills and taxes in a timely fashion and according to agreements the company has made,

 

  1. And to its owners, to provide a reasonable profit and return on their investment, and the ability to reinvest in the business.

 

From time to time, there is a need to adjust rates to reflect the increased cost of providing service to our customers.  Disposal, insurance, wages, equipment and other costs increase over time, and a business needs to cover the costs it can no longer absorb.

 

Here are some thoughts to consider regarding rate increases:

  • Long before you increase rates, make sure your service quality is high. Customers will not want to spend more if your service quality is poor.

 

  • Do not apologize for a rate increase. Many of the reasons for a rate increase are out of your control.

 

  • Prepare your staff by providing talking points to defend your rate increase.  Consider giving “good” customers who complain an extra quarter at the old rate to adjust their budgets accordingly, or offer an alternative such as a smaller cart.   Taking calls about a rate increase is never fun.  The reality is the callers are but a very small fraction of your total customer base.  Break the increase down, instead of saying “$1.00 per month”, say “less than $.25 per week”.

 

  • If you offer a discount for paying annually, now might be a good time to convert some quarterly payers to annual payers.

 

  • When explaining a rate increase, highlight the features of the improvements you have made to your business, for example, new hi visibility uniforms or other safety enhancements for your staff or new trucks that emit less pollution. If the reason for the increase is a landfill rate increase, list the ways the landfill protects the environment.

 

  • Small regular increases may be easier for customers to accept than infrequent, larger increases.

 

  • Remember, a dollar from a rate increase falls right to your bottom line. $100.00 from a rate increase requires no additional investment in equipment, no added hourly cost, disposal or fuel cost.

 

  • Yes, there will be pushback from some customers. Usually, these are customers that came for a low price, and would leave you for the next low price or special deal that comes along.

 

  • Have an automatic escalator in contracts that is tied to a percentage, perhaps 3 – 5 % per year. While customers don’t like to see their costs increase, knowing what to expect is helpful for them to make their plans.

 

  • Many times, companies write long explanations as to why they need to increase their rates. Keep your explanation brief and to the point.  Some even raise the rate with a simple one line statement:  “Due to increased costs of doing business, your next invoice may reflect a small increase in your rate.  Thank you for the opportunity to serve you!”  Sometimes, saying less is best.

 

Increasing rates is a necessity.  Watch your costs, and adjust your rates accordingly.   Don’t end up like the hauler in the letter above.  If you would like to leave a comment, click on “comments” at the top of the post.

 

Thanks!

20200124 Out of business letter.

 

 

 

 

The do’s and don’ts of a new waste hauling business, Part Two

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Here’s Part two of The do’s and don’ts of a new waste hauling business.

 

  1. Get involved in local politics. Meet and get to know those elected officials who have solid waste responsibility in your city, township or county.

 

  1. Be a partner with the staff at your city, township, county and state government, become their “go to” for waste and recycling questions.  Your perspective will be respected as a local business, as opposed to a corporate spokesperson.

 

  1. Get to know the local press, but be careful.  Keep your quotable comments abstract, don’t tell them everything you know.  Make no promises.  Be realistically positive.  Become the waste professional they can go to for objective comments

 

  1. Join your state or regional trade association. Seek opportunity to have a leadership position.

 

  1. Get to know your competitors. Someday, you will need each other.

 

  1. Know your business by knowing your numbers. Identify at least three “Key Performance Indicators” that you can follow religiously.

 

  1. Business is built on the street, not in the office.

 

  1. Be a leader first, a manager second.

The do’s and don’ts of a new waste hauling business

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Good morning!  Starting a waste business, is an exciting time.  Talking to people who have done this before, here are some of the things they would or wouldn’t do or may do differently.  Part one is here, part two will be posted later.  If you have something to share, add it in the comments below.

 

  1. Promote a safety culture.  Hi-visibility clothing, hard hats, cameras, proper footwear, driving conduct, etc.

 

  1. Buy a better truck than you think you can afford. It will pay off in the long run.

 

  1. Protect and promote your brand. Consistency in color, graphics, design.  Buy carts and containers of the same color.

 

  1. Be consistent with your service. Same time, week after week.

 

  1. Don’t buy a $60,000.00 pickup truck to plow the lot.

 

  1. Over service your trucks. Money spent in preventive or predictive maintenance is a wise investment.

 

  1. When hiring team members, value attitude over experience. You can teach skills, you can’t change character.

 

  1. Have a good relationship with a local bank. Take the time to teach them the business.

 

  1. Have a good relationship with a large bank or finance company, just in case your growth outpaces your local bank’s ability to lend.
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Thank you all for visiting the new home of Van Tholen & Associates.  Periodically, I will be posting information here that may be valuable to you in running your business.  Your feedback and requests are encouraged and appreciated!

 

Looking forward to serving you,

 

John