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Changing Market Conditions

Discussion in 'Business Fundamentals' started by GeeMC, Feb 12, 2003.

  1. GeeMC

    GeeMC Member
    Messages: 51

    Hi Guy’s,

    I not sure if this question has been brought up before, so I’m sorry for the redundancy if it has.

    For residential customers, do you guy’s adjust your plowing prices seasonally/annually or do you adjust them according to moving market conditions? We currently charge per push and the cost for gas has gone from around $1.30~1.40 per gallon in November to a recent high of $1.78 for my area. I was curious as to what kind of response I could expect from residential customers if the plowing prices were increased now as to the prices of the start of the season.

    For example, If I was charging a customer $30.00 at the beginning of the season and now start to charge him $32.00, is this moderate increase going to be enough to send a customer to look for another contractor? I use this gas situation as only one example, but it could apply to other issues like a salt shortage or even the rate of inflation for that matter.

    Or, on the other hand, do you keep charging the same rate and absorb the extra cost?


    Thanks again to PlowSite for a great place to bounce these things around,

    Bruce
     
  2. chris k

    chris k Senior Member
    Messages: 204

    Personally I don't raise prices mid season. Granted you could justify the raise to the customer but I think that if you are going to raise prices with gas prices they will want it lowered when the gas prices go down. If you plow on Mondays do they get 8 cents off? Just kidding. Seriously though I would wait till next season.
    Good luck.
     
  3. JCurtis

    JCurtis Banned
    Messages: 862

    I agree, wait for next season to raise prices.

    Then send a letter announcing the new pricing schedule is due to.... increased insurance rates, increased fuel costs etc.


    everyone's gas went up as did their insurance due to the recent global terrorist threat and global events...
     
  4. Pelican

    Pelican 2000 Club Member
    Messages: 2,075

    I know everyone is complaining about fuel prices, but just how much is it cutting into your profits? Fuel has increased by about 25% in the past few weeks, but what percentage of your operating expenses is fuel?

    In my case, my fuel cost is 2.5% of my gross income per storm, increasing that by 25% would mean I'd have to increase my rates by .625% to make the same profit. Hardly seems worth the aggravation and paperwork.
     
  5. BRL

    BRL PlowSite.com - Veteran
    Messages: 1,277

    Ditto Pelican's comments. <2% here.
     
  6. shamrock1

    shamrock1 Member
    Messages: 30

    Changing prices in mid-stream is generally a bad idea, especially if you are under a contractual obligation with a specific seasonal number or per-push number.....

    Customers do not take kindly to that kind of change in practice, it can only make you the contractor look like a "small-timer" as well,

    Best thing that I could say is that total up all of your expenses and revenues and segment out your fuel costs to see where your profit margin is in relation to that expense,

    If you need to raise the rates to cover your profit goal, do so The following season....Not Now....

    We are empathetic to the situation as well, Here in Buff, the most inexpensive rate for REG is 1.72 a gallon, Lot of $$$ going into fleet truck tanks during the storms, especially when the V-10's and 460 v-8's are so economical from a fueling perspective....
     
  7. John DiMartino

    John DiMartino PlowSite.com Veteran
    Messages: 2,154

    I agree with Pelican,if you need to raise prices because if fuel,then you are working to cheap,and are cutting yourself short anyway.Bring things in line next yr.
     
  8. Chief Plow

    Chief Plow Senior Member
    Messages: 201

    Ditto here... Don't raise prices midseason. And for next season don't work so cheap. Are fuel cost per storm is about 3%. Not to mention, I know at least in my commercial work, if I were to raise prices midseason, I would hurt my chances of getting that job next year. I don't think they mind a raise in the offseason. But during season forget it

    My 2 cents
    Rick
     
  9. landman

    landman Senior Member
    from NJ
    Messages: 185

    I agree and disagree at the same time with this. Our contract has a clause that states we can change the price of materials due to the rise in supplier cost. We also don't just do this out of the blue, we will send a letter to the customers before hand explaining this. In the past 10 years we have only done this 2 times. If most of you remember about 3 years ago we had a good winter, however halfway through the season salt suppliers raised thier prices by almost $10.00 per ton and at the same time the Diesel fuel was about $2.50 per gallon and the trucking companies we charging a "fuel surcharge" of like $50.00 per load. Now when we bid a job we always incorporate insurance cost, labor, fudge factor etc. but when you have to fuel up you trucks and you have 10 trucks on the road and it cost $10.00- $20.00 more per tank to fill then the cost becomes a big concern. So let's say the average account of ours uses 6 ton of salt:

    additional salt per storm $60.00
    added fuel cost per run/per truck $10.00
    fuel surcharge per ton (from delivery) $ 2.00


    That same account that you bid in the beginning of the season is now costing you $72.00 more per salting, that is a big chunk of change to take out of your pocket. Especially in our case where we have 10 trucks on the road or in our figures ($720.00 per salting) I'm not willing to take that kind of loss.

    We just simply put it to our customers that our supplier prices went up under the circumstances and we need to recover the diffrence. If you tell your customers this ahead of time they understand. We also don't over inflate the price just the diffrence is charged to the customer.
     
  10. Chief Plow

    Chief Plow Senior Member
    Messages: 201

    Landman,
    I agree with you partly. When salt prices rise, we have a clause also, in our contracts, that we send the same type of letter out, stating "Due to x,y,z the price per salting has gone up...." I have done this 1 time only, and it was no issue. The part I don't understand and this is with fuel only... The prices around here change so often, up and down..... It is hard to figure this out constantly. Granted 10 trucks is easy to figure this out . That is alot of out of pocket change to cough up. But what happens when fuel goes down? Is that charge you add in your clause a perstorm thing based on fuel costs or is it once you raise it that is where it stays? Just looking at it differntly I guess, let me know

    Rick