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2008 Price Increase

Discussion in 'Business Fundamentals' started by GL&M, Jul 20, 2008.

  1. GL&M

    GL&M Senior Member
    from PA
    Messages: 223

    Anybody running any %'s thru their heads for this years price increase?. I have some numbers in mind for a bid that needs to be submitted by 7/31/08, but I'd like to hear what some of you guys are thinking.

    Last price increase I bid for a 3 year contract was increased by 15% and it held out OK for the full 3 years. I'm a little concerned if 15% will be enough for the next 3 years with fuel being predicted at $5-7.00 in the out years. Whether or not that happens who knows, but I don't want to get locked in at a lower price and have to eat it in years 2 and 3.

    Any thoughts?
     
  2. grandview

    grandview PlowSite Fanatic
    Messages: 14,609

    What about 15% the 1st yr,10% the 2nd yr ,5% the 3rd yr.
     
  3. GL&M

    GL&M Senior Member
    from PA
    Messages: 223

    They don't give me the option to bid it that way. They want one price per push, for different amounts of snow, (2-6" 6-12", etc) but they want the same price to hold for all 3 years. Makes it difficult to forecast the future.
     
  4. Gicon

    Gicon Senior Member
    from MA
    Messages: 989

    In today's economy, thats asking a lot. The only thing you can do is anticipate your cost of living, and fuel costs into 2010 and bid it based on those numbers. You bid it based on cost of living and fuel now and you will be loosing money.....
     
  5. GL&M

    GL&M Senior Member
    from PA
    Messages: 223

    That's true. Problem is, if I bid it correctly for a higher percentage and someone else doesn't consider what may happen in the future they may bid it way to low and then we both lose. They lose money and I lose the contract. Good thing is that I have been doing the work for years with no competition so far. Hopefully this year will be the same and I can get away with bidding it high enough to cover the costs, even if it is only an educated guess for the most part. I would like to get another 3 year contract for the account. After that, I may consider retiring and getting out of the snow business all together.
     
  6. Gicon

    Gicon Senior Member
    from MA
    Messages: 989

    Dont worry about the other guy coming in lower. Let him loose money, and probably the account. Stick to your prices and remember, the replacement costs of your trucks and plows have been on the rise for the last two years, and are only going to keep going up.
     
  7. GL&M

    GL&M Senior Member
    from PA
    Messages: 223

    I don't worry about the competition to much. I've seen them come and go over the years. I guess I'm just trying to get some sort of feel from the industry to make sure I'm not out in left field with the bid. These fuel prices are really messing with everybody in the business.
     
  8. plowman4life

    plowman4life Senior Member
    Messages: 557

    we just renewed our contract with the hospital for another 5 years. with a 35% price increase. so that worked out really nice. contract went from 650k for the season to over 850k

    that price includes everything besides salt. they pay us to have 1 crew there for an entire storm plus equipment and operators.

    4 pickups, 2 midsize dumps, 2 full size dumps, 2 loaders, 2 skidsteers and 10 shovelers.

    then my uncle, my cousin, my dad and myself will usually end up there for the better part of the storm.

    so we're talking 12 fulltime trucks and machines plus 4 others at any given time.

    and ill tell you what the day after a storm that lot is bone dry and white from the salt.

    but dont be afraid to increase your prices. just give them a heads up and explaination. say we as a company are experiencing difficulties staying afloat due to the rising cost of fuel and supplies and we are forced to raise are prices by XX% in order to raise our overhead and stay in business.

    and you have my permission to use that ver batum if you want.
     
  9. GL&M

    GL&M Senior Member
    from PA
    Messages: 223

    I'm glad to see you asked for 35% and got it with no trouble. This is what I was concerned about, How much the industry is willing to accept due to the ever increasing expenses. I am kicking around 25-30% increase to cover fuel and all other supply increases that are directly related to fuel.
     
  10. fordboy

    fordboy Senior Member
    Messages: 300

    better to not do it then to do it for free! If they do it too cheap they lose the money and go out of business not you. As stated if you have been doing it for 3 years already go talk to them about the increase before bidding it.
     
  11. Flipper

    Flipper PlowSite.com Addict
    from CT
    Messages: 1,180

    GL&M

    Is this a government account? Reason I ask is that the Post Offices here made me bid like that, locked in price for three years. Kind of hard and in a way unfair for both. I make more money in the first year and then it trails off to a lower percentage in the last year. Benefit for me was exposure. Free advertising, of seeing the trucks (and mowers in the summer) working the property was a big factor in going with a slightly lower price. Over the years I have probably picked up 25-30 customers who come up to us at the job.

    As to your questions I am going 20% with a stupulation on materials (salt, mulch, fertilizer etc.) and for fuel, (they keep rasing postage) I am putting the costs of materials including fuel in the contract the date it is sent and then I give them steps at which they will see an increase.
     
  12. GL&M

    GL&M Senior Member
    from PA
    Messages: 223

    No, it's a Bank chain that uses a property management company to contract for their services. I also provide the lawn service end of the deal for them. It has provided a lot of exposure for me, but it also provides a decent amount of income which is why I want to keep it for another 3 years. So far it looks like I'm in the ballpark with the %'s that you and Plowman4life have provided.