January 25, 2016
Agreements and Renewals- A Closer Look
Agreements (with their Renewals) are essentially a communication tool. They offer a way to track general information about your arrangement with the customer. At a minimum, they cover the service, price, frequency, and renewal terms. Most importantly, for you, they provide a mechanism for getting your customers to consistently renewal. Look at Agreements, as a promise to your customer of what you will provide. In exchange for this promise, and your quality work, they will renew year after year. This blogpost is about how software can help us maintain high renewal rates.
Before we start, lets look at what Agreements are not. They are NOT contracts. Contracts in pest control (and pest control software) often leave a sour taste. They reek of a ‘forced’ business arrangement against the customer’s will. Software companies that use contracts to trap the user into using their software for years, against their will, will not be appreciated. The same is true with your services. Your customers should feel delighted to use your services, not contractually bound…
And one more tangental issue: To help you uphold your end of the agreement, you will typically create a corresponding PreSched record to create all needed WO’s on an appropriate schedule. The PreSched reminds you with Work Orders, when it is time to provide the next on-site service. So, Agreements and PreScheds work to together. This blogpost will not cover PreScheds and their functions. Just be aware that this other ‘piece’ is there. Now, on to Agreements….
Agreements in any software good package will have three main components: 1) the Agreement record itself, with its core static data, 2) an Agreement Type record which describes the service provided and contains the text of the standard form letters with their intervals and sequences for use, and 3) the set of annual Renewal records which tract the progress of each series of renewal efforts.
The Agreement record is easy to understand as it provides one place for all the core information. Initial start date, customer, location, price, etc. Make sure your software makes it easy for any customer to have multiple unique agreements, with an easy navigational system between each of them. You’ll also want a Change Log that tracts every change made to each Agreement. It will show the ‘who’ and ‘when’ of each change, with the previous value. You will quickly come to love Change Logs in Agreements. (Actually, you will want Change Logs everywhere in your software!)
Next, lets take a brief look at the Agreement Type records. Typically software will let you have any number of Agreement Types. Usually these are accessed as a value list. If your business well-rounded, you will have a half-dozen or more Agreement Type records. For example, you might have Agreement Types for quarterly pest control, termite bait stations, rodent trapping, lawn care, light servicing, and others. So, what is in each Agreement Type records? Primarily, the textual body of each letter(s) used in the renewal process, plus the intervals between them. This is really the core function of Agreement Types. They determine what renewal letter gets printed, its content, and when. Most good software will give you a series of predefined letters that will be printed at the interval you designate. Here is the four step approach that PestaRoo uses: A reminder letter goes out at 60 days (before expiration), a second letter at 30 days, a call sheet at 10 days, and finally, a cancellation letter prints at 5 days after expiration. The letters are obviously sequential, with a successful renewal instantly stopping further letters.
Finally, let’s focus on Agreement Renewals… the focus point of any Agreement system. Renewals use the Agreement record WITH the Agreement Type letters as templates to print each item, on time and in sequence.
Consider the typical four letter system noted above. The first two reminders will actually look like invoices, and are called quasi-invoices. In most cases, the customer will simply pay from one or the other of them as such. (If they pay from the first, they won’t receive the second!) But why not create and just mail a regular invoice? Since we may need multiple letters for some renewing customers, you would not want each reminder letter to actually create an invoice, because you would quickly build up a stack of duplicate invoices to be managed. How do you use a quasi-invoice? It is only when a check actually arrives from your customer, that will you actually create the real invoice. You will then post and pay that invoice like any other. Next you’ll create next years renewal, priming the renewal record with letters ready to print and send out. Also note that the act of creating the next renewal automatically cancels the remaining stream of a reminder notes! Elegant and effective! We understand that some customers will pay from the first letter, but others will pay at the last moment (or later!). So, Quasi-invoices allow us to be flexible with our customers. By creating the actual invoice only when they do pay, your work load is reduced and the system keeps working efficiently.
What happens when a customer doesn’t pay with either of the first two letters? That is why our third ‘step’ is just a call sheet of customers needing a more personal contact or nudge. CAll sheets are typically generated when expiration is imminent. Some people will always need that personal touch to renew. And what of the Cancellation letters? These typically go out a few days after expiration, to catch people who ‘fell through the cracks’ missing both your letters and phone calls. Although the count of these letters is much lower than the others, the positive tone in a cancellation letter will encourage many people to reconsider the service they enjoyed in the last year. Even though they do include verbiage regarding the cancellation, their real intent is one finally effort to get a successful renewal.
Almost any industry that has subscription-based services will have a system of reminders to help the customer stay current. Your pest control software also should. Remember, an agreement system is essentially a ‘remindering’ system designed to keep as many customers current as possible. A good system will have renewal percents in the 90% range.
Should you actually mail these letters, or would an email serve just as well? Perhaps in the future, emailing might be as effective, but the predominance of spam in email means that a substantial number of your reminders will simply be missed. So for now, printed letters actually mailed appear to have the highest success rate. Considering the value of a single renewal, the postage of a couple letters is minor. Having a consistently high rate of renewals of your agreements will easily cover your postage cost and even pay for the annual cost of your software.
Agreements and Renewals come in many forms and variations in software. But any quality software package will have a solid Agreement and Renewal system. The four-step process described above is one that has a proven track record. The key for a successful pest control business is to carefully manage the renewals. Leaving renewals up to chance is a recipe for failure. Agreements have proven to be the single most critical piece behind consistent cash flow in the pest control business. Consistent renewals are absolutely critical to your long-term profits and growth. Indeed, the percent of successful renewals is perhaps the best metric for evaluating a pest control business. Using good software is perhaps the best way to address this metric.
The power of software allows you to do things that would be prohibitive by hand. Imagine trying to keep track of every single agreement every single day and sending out reminders when it’s necessary. It’s nearly impossible without software. The other beauty of software is that it doesn’t forget. Most computer systems will auto-print the renewal letters needed each day on system start. By auto-printing them each day, you can’t forget to ‘run’ them, and never have a giant pile to manage. Lastly, a quick hand-written note or even just signing you name would be very appropriate. Such special touches always pay dividends.