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Fitting the Pieces Together: A Guide to Office Operations for the Liquid Waste, Portable Toilet & Septic Pumping Industries |
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Different companies have included different terms for the contact. Some common groupings we have seen are:
Inspect tank yearly and pump every three years.
Inspect tank yearly, pump every two years and guarantee that the system will not fail.
Inspect tank year, pump every three years and offer a 20% discount of all material and labor incurred for any tank/field repairs.
Pump tank every three years and spread payments over three years
Billing for service is a definite challenge. Several alternatives are:
Bill Monthly: This is an expensive alternative, in that it requires postage, stationery, office time to generate invoices, and time to post payments. Benefits are that the customer receives monthly reminders that their septic system is being looked after. Most people pay utility type bills monthly, so one additional bill fits right in. The monthly payment is small allowing for a larger overall payment to you company.
Billing Quarterly or Yearly: This is a savings on postage and office costs over monthly billing and still keeps your customer aware that they are receiving a service. Many customers understand this billing concept in that it is aligned with real estate tax payments and insurance.
Dispatching people to inspect and pump the tank is definitely a challenge. The objective is to send a person out so that they spend as little time as possible between locations so the per site cost is kept to a minimum.
Inspections: Need to schedule a person to visit the septic installation and visually inspect the location for any potential problems and leave written notification.
Tank pumping: Usually this is a pumping and an inspection at the same time.
Sales contacts for contract renewal: When the contract is expired, a contact with the owner has to be made to renew the contract.
To offer this service, you can keep track of the billing and dispatch manually. Once the number of customers starts to grow, you will realize that any manual method becomes very complex and time intensive. Just look at the case of billing for service. You would have to look through all your customers, pick out everyone who is due to be billed, bill them for the period, i.e., monthly , quarterly or yearly, and you may have all three, and send reminders for payment. This could take a person a long, long time doing it manually and this does not take into consideration generating a dispatch schedule for inspections and/or tank pumping. For the office that is committed to manual office practices, service contracts will generate significant additional work.
Whenever you sign a contract, you have risks. A person could assume that if a field fails you will dig up the old field, get rid of the sludge and rebuild a new field as part of the contract. Even if this is not the case, it will take time and expensive lawyers to reach closure. You would not believe it, but there are people out there who do not read all the print in a contract and argue that the reconstruction of the field was implied verbally. Get a lawyer and clearly and carefully state in the contract what services you are providing. Once you get into court, only the lawyer wins.
This is important in that if you do not get enough customers in an area, it will not be possible to schedule work to provide the service economically. Some ways to determine this is to send out flyers offering the service and seeing what kind of response you get. Some possible reasons why your customers should buy this service are:
Proof of septic tank maintenance when selling home
No large single payment
If a problem, you have someone who knows your septic system
Avoidance of septic tank/field failure and expensive repair
If the response is high, then your area may support this type of offering, it not, maybe it is better left alone.
A good method which can be used to determine your contract service rate is to charge what is your cost plus your expected profit margin. So how much does it cost? This is a good question! The most common way to approach this is to
Calculate your current costs on a per-job and per-hour basis,
Estimate that a drive will go from an average of 5 jobs per day to 9 jobs per day,
Add in the time for visual inspections.
This will give you a rough idea of the profitability. In any case, most likely you can charge more than you are now, because of the higher risk and service level.
You can see that managing contract services for residential septic pumping is a little more complex than buying a truck and placing an ad in the yellow pages. It will require office staff, computers, lawyers and sales -- all the stuff of "larger companies". Or is it that companies grow into large successful companies because they offer "service contracts"? Which came first, the chicken or the egg?