How do full snow companies make it?

[merrimacmill]

Originally Posted by JD Dave

He was giving fictitious numbers I think but yes I can generally use my own equipment for pretty close to half what a sub costs. The key factor to all this is finding good reliable operators. Per push or by the hour are basically non existent around here and to be honest I don't want those types of jobs. I want to know what I'm going to make before the winter even begins. We pay our guys a seasonal wage and our subs, they make out really well in a light winter but they work hard for their money in a hard winter. It's all about averages.

Yes, fictitious numbers, using 50 and 100 just to make the example easy. But I also agree with you, I can operate at about half the cost of a sub. The other thing to keep in mind is that I was comparing the direct hourly cost of running a truck owned by your company, not the billable hourly rate that the customer would get, to the billable hourly rate of a subcontractor.

Paying seasonally seems to be a popular thing in Canada. Down here, it is unheard of unless its a supervisor, or year round support staff. I like the idea though, and have tossed it around quite a bit. And it is how we pay for our residential snow blowing service, to help control costs. My only variable cost associated with that service is fuel, any potential breakdowns, and of course tire wear which is extremely minimal with well under 100 hours a year. When I've presented the idea to the commercial operators of being salary, they hate it around here and kind of laugh at the concept. I bet they won't laugh at the idea after this year... I think they just assume that I would start having them work non stop, with less employees, and would abuse the system to save money. This because I have so many new hires each year due to the large increase in employment each winter over my summer work, and they don't usually know me at all upon hiring. I think I would need a way to predefine what they will be doing, and what they're specific responsibilities would be for the year.

[JD Dave]

Originally Posted by merrimacmill

Yes, fictitious numbers, using 50 and 100 just to make the example easy. But I also agree with you, I can operate at about half the cost of a sub. The other thing to keep in mind is that I was comparing the direct hourly cost of running a truck owned by your company, not the billable hourly rate that the customer would get, to the billable hourly rate of a subcontractor.

Paying seasonally seems to be a popular thing in Canada. Down here, it is unheard of unless its a supervisor, or year round support staff. I like the idea though, and have tossed it around quite a bit. And it is how we pay for our residential snow blowing service, to help control costs. My only variable cost associated with that service is fuel, any potential breakdowns, and of course tire wear which is extremely minimal with well under 100 hours a year. When I've presented the idea to the commercial operators of being salary, they hate it around here and kind of laugh at the concept. I bet they won't laugh at the idea after this year... I think they just assume that I would start having them work non stop, with less employees, and would abuse the system to save money. This because I have so many new hires each year due to the large increase in employment each winter over my summer work, and they don't usually know me at all upon hiring. I think I would need a way to predefine what they will be doing, and what they're specific responsibilities would be for the year.

You could also try giving them a monthy standy and an hourly wage on top of that when they work. IMO guys need an incentive to be dedicated. We have a few new guys every year but the core of them come back every year. Everyone thinks we pay our guys to much but our equipment repairs and productivity tell a different story.

[snowman4]

Between Collin and Paul I'm getting a little emotional with all the love in the air

[merrimacmill]

Originally Posted by snowman4

Between Collin and Paul I'm getting a little emotional with all the love in the air

I don't think anyone can blame you for that

[RLM]

Lots of good information being shared awesome thread. After this winter I have already been approached by my top sub about a minimum, last season we had 30%more snow than normal, he had 270 hrs, this year 70hrs, he was only asking for 100 hrs min. I told him we would see how things shape up for next season, but I would seriously consider it I understood completely where he is coming from. I find it very interesting the way things are done north if the boarder, we are only across the pond (Lake Ontario) but thing are done very different.

[thelettuceman]

Merrimacmill: Those people that criticize you do not have the brains that you do and are jealous of your intelligence. I won't criticize and I am jealous of your intelligence.

[merrimacmill]

Originally Posted by Stowe

Merrimacmill,

Do you find it hard to compete with companies that use most of their equipment all year.

Sometimes. The reason I say that is because yes if they have a loader they run all year on a construction site, and could afford (and generally plan on) letting it sit in the winter, they are able to be much more competitive than me who owns a piece of equipment for the sole purpose of pushing snow. For example I've owned and plowed with one of my tractors for 3 seasons now and it currently has under 250 hours on it, and another has around 150 on it which has been run 2 seasons. Its billed so many less hours than someone who uses equip all year. But at the same time, I don't care that it hasn't billed any hours this year because like a said in an earlier post cover your overhead with your seasonal accounts and service the seasonal accounts first with your own equipment. Its easier to sub per push and event contracts. The tractor was not used more than 15 hours so far this year, and has made more money by doing less work.

Remaining competitive with snow only equipment has a lot to do with equipment choice. I weigh out production rate vs. cost of purchase and ownership. You notice I don't own any $200,000 front end loaders... I just don't know a way to buy one in that range and only use it for snow. I know a lot of guys do it, but I haven't figured it out with staying competitive. Now, spending 40-80K on a used loader is very reasonable, and very possible to stay competitive.

As far as leasing goes, I can lease a backhoe that could push a 14' pusher and plow an average of 2.1 acres per hour for $1900 a month, or I could rent a loader that could push a 16' pusher and could plow an average of 2.7 (maybe 3) acres per hour for $3,500 a month. Is the extra $1,600 ($6,400 per season) worth .6 acres more per hour production? $6,400..... Thats the whole salt budget, or the whole labor budget, for a good sized lot. This definitely isn't to say that there aren't a lot of situations where a large articulated loader is the only way to go on a lot, but I see a lot of guys leasing huge loaders when its really not needed. Another concept is to group your lots close together and put several backhoes or smaller pieces of equipment across the lots, with one large loader in the middle of it all. Its there to be roaded between accounts for the heavy work, and its there for the 2 foot blizzards, but the cost can be put out across all the accounts so it doesn't kill the profitability of one contract..


Utilizing snow only equipment will definitely never make me 'more competitive' price wise but its still very financially doable if approached correctly, and can also allow you to own more specific snow equipment.

There are a lot of ways to apply the costs of owning snow equipment without having to have some kind of insane hourly rate. When I first started tackling this, I was basing the hourly rate on usage hours per year, which put the rate out of control high. There are a lot of ways around this I've figured out that I could go on about.

[snoworks07]

"Our customers realize that signing a snow-clearing contract for the season is very much like carrying insurance - you hope you never have to use it but are really glad it's there when you need it."

This quote sums it up in a nut shell. I have been selling my snow service as an insurance policy for years. Thats my pitch to the client and most understand and appreciate it. I tell them I sell 5 minute time slots or 50min(5x10 events a year) for which there are real costs that are incured by our company wether it snows or not. Most people get it, the others, you let someone else deal with the headache.

CGB

[m_falafel]

Originally Posted by merrimacmill

I only read through about half the thread, so I'm not sure if anyone gave an answer similar to this already, but I'll go at it anyways.

I am 85%-90% snow. I go from 15-21 people in the winter to 2-4 in the summer. I have several pieces of equipment that are only used for snow. It really all comes down the budgeting, and building your own "insurance program" through your sales process.

First off, you need to know your dollar amount of overhead. How much it costs you to pay your salary and overhead employees, rent, insurance, equipment payments, etc. Even if its not typically in your overhead, if the bill comes in whether it snows or not include it in this figure. Do this for 13 months of expenses. (why 13 months? Well we all know how that income layover when waiting till December 30th or Jan 30th for the seasons first checks can be..) That figure is now your sales goal for seasonal contracts. Cover this number with seasonals, and throw in a 30% cushion to cover as well (you know things always cost more than expected). Now your bills are paid all year if we get zero snow. Here is where per push, per event contracts, and hourly contracts come into play. I price these based on my operating expenses. This is salt, direct labor costs, fuel, additional equipment, subcontracting, etc.. Think about this for all your contracts as well when developing this pricing system. Each time it snows, the revenue generated from per service accounts should cover all operating expenses for that entire event. This is where the balance comes into play. If you can balance your seasonals and per service contracts properly (which isn't always possible, I know), you will win either way (snow or not).

I programmed a spreadsheet to calculate this throughout the bidding season. I breakdown the "potential winter" into inches and cost per inch. It has seasonal income, overhead expense, and per service contracts with they're potential income based on an inch rate. This lets me visually check to see that if we get X amount of snow (for all intervals 0" to 200" per season), will I remain profitable? If done right, you can balance it so that you can theoretically maintain a specific desired profit margin no matter the seasons snow total outcome. I'm currently trying to figure how to get more accurate with this by programming in our areas 5 year average for event types using factors like average duration of an event, snow totals for each event, ice snow or both, etc.. I'm about halfway there, but I haven't completely figured out every part of how to program that extended version of the spreadsheet yet though...

Another thing is subcontracting is always best on per service accounts. I like to use only my own equipment on seasonal's, because the seasonals are paying for your owned equipment, and in the event of a heavy winter, it gives you more room before the contract becomes unprofitable due to excessive snow. For example, to make it easy if you have a 10K seasonal with a subs $100 per hour truck onsite, you only have 100 hours before that contract becomes unprofitable and there is nothing you can do about it but keep paying each time it snows. If you have your truck onsite, which costs YOU $50 an hour, you now have 200 hours working onsite before it becomes unprofitable. Thats double the amount of time available throughout the winter. On the other hand, for a per service account, if you have a sub billing you $100 per hour, lot takes 1 hour to clear, and your getting $200 per service, who cares how many times the lot is serviced in a year, because every service your putting $100 more towards your operating expenses. This model allows me to scale my operating expense income, without increasing my overhead expense.

Someone mentioned earlier, budgeting and saving. This is obviously so key to this system, along with keeping overhead low. For my snow only equipment, I think of it as a rental so to speak. So if I have 12 monthly $1000 payments on it, thats $12,000 in a year that it costs to own. I'm using it and getting paid for it roughly 4 months of the year, so I divide 12K by 4 and get $3,000 dollars per month to "rent" that piece of equipment from myself. Those payments are made into a separate bank account as if they were going to a rental company or something, then automatic withdrawal is set up for it, and at the end of the 4 months, the equipment is covered all year.

I know snow, weather, and operations cannot be completely consistent and scientific like this, and people tell me all the time that I waste a lot of time and effort trying to make it a perfectly consistent and numbers oriented game, due to the fact that snow is one of the most dynamic businesses you can be in. But I strongly disagree when people tell me this, the first step is to get the numbers, and budgeting down as perfectly as possible. The second step is looking at your operations to create enough efficiencies and procedures to make a good budgeting system for a seasonal business actually work, real world. Do these people think Brickman and they're 98 million in snow revenue (or however much it is now) doesn't have it down to a scientific system? I'd be willing to bet they have it down pretty damn good, to the cent.

I'm not snow only, and would like to be, but even though I've put all this thought into it, I still see enough problems that I haven't overcome yet to be completely comfortable giving up the means to create any other type of income in a year. Thats a serious step I'm not yet willing to take.

Also, I know there is a lot of ways to figure all this, and everyone has they're own way. So disagree with this or not, its what works for me.

It may sound weird, but how do you calculate your hourly cost per vehicule?

Can you tell me everything you include in that calculation and how you proceed?

I only started two and a half years ago, and that's the part I have to most difficulty with...

[cold_and_tired]

Originally Posted by m_falafel

It may sound weird, but how do you calculate your hourly cost per vehicule?

Can you tell me everything you include in that calculation and how you proceed?

I only started two and a half years ago, and that's the part I have to most difficulty with...

Things to consider when determining hourly rates:

Operator wages
Vehicle replacement costs
Fuel
Vehicle and plow repairs
Wear items
Profits

Everybody's prices will be different depending on what your costs are and what you want to achieve as far as profits go. It's important to make money while remaining competitive but you don't want to drive down prices in your market.