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Contract Bids

Discussion in 'Commercial Snow Removal' started by iowastorm, Aug 19, 2000.

  1. iowastorm

    iowastorm Senior Member
    Messages: 358

    For the past two years, I've been bidding on and servicing several large apartment complexes on an hourly basis (time and materials). After some research, I'm beginning to learn about expanding our bidding process with seasonal contracts. Furthermore, it appears that most commercial accounts like having a firm grasp on their snow removal budget by paying a pre-determined amount each month for their snow removal needs. Here in Cental Iowa, it snows an average of 6-8 times per year with a annual accumulation total of around 24-30". My goal is to offer a fair and competitive contract that will allow us to increase our client base as well as our monthly cash flow. I would welcome comments and suggestions from anyone with past experience and success in bidding of this type.

    Tim Jones
    Iowastorm Lawn Care & Snow Removal Service
     
  2. Alan

    Alan PlowSite.com Addict
    Messages: 1,393

    Well,, if you've been working T & M for two years you already have a good handle on the time it takes and your average cost per year. That's a decent start to setting up a yearly price. And seasonal contracts sure are nice for helping you meet expenses in a dry winter.
     
  3. diggerman

    diggerman Senior Member
    from Ames
    Messages: 700

    I am also in central Iowa and do buildings containing around a thousand units. Half of these I do by the hour and the other half are on a per time basis. I have been doing these diffrent buildings anywhere from 10 to 20 years, and have discussed diffrent options with the owners over the years as to how they want to be charged. What it has seemed to me is that with the varing snow years that we seem to have, paying a lump sum for the year has made them a little nervous that in some way they are paying more than they should, with the hourly and per time they pay for excactly what they get or they know excactly what they will pay when it snows. After spending four years on the east coast I know that the level of service that is required there is much higher than what owners are willing to provide here.It has gratly increased her but it has a long way to go and DesMoines is even better than the rest of central Iowa
     
  4. iowastorm

    iowastorm Senior Member
    Messages: 358

    I know what you mean. Our snowfall varies so much here it is a major negative when wanting to offer a seasonal contract. I agree with you about owners wanting to only pay T&M as it's the fairest way all around. However, the challenge for them, I believe, it to appropriately budget funds for their snow removal needs. I find that they usually under budget when being charged T&M and then figure that they were in some way over-charged. I guess getting them to 'buy' a seasonal contract lies in proper presentation and explanation of the contract.

    Tim
     
  5. diggerman

    diggerman Senior Member
    from Ames
    Messages: 700

    One thing for me is that I have been doing these account so long and they are done pretty much the same way every year and often by the same person, everything seems to average out and at the end of the year the overall charge on a per snow basis is very similar from year to year.I would love to do more yearly rates just from the accounting side. The hourly accounts that I have are a nightmare, trying to provide accurate and fair charges which are derived from over tired, underfed and "over employed" drivers can be a moumental task.
     
  6. plowking35

    plowking35 2000 Club Member
    from SE CT
    Messages: 2,923

    Ok first thing is, hourly rates are for beginners. In order to make serious money get rid of the hourly stuff. If the customer balks, drop them and get people that will pay the money. You are providing a premium service and should get payed as such. Since you are saying T&M I will assume that your rates are around $ 75.00 per hour or less. We average 2x that with our trucks. If you put a sub on, he will make almost as much as you.
    What we did was to wrap everything into a yearly service contract, and that seemed to help hide the snow plowing costs. My customers pay a fixed amount per month for 12 months, and that includes all the grounds and plowing.
    We still include some per plowing/per push accounts in case we get a severe winter and that will even out the cash flow, much like seasonal contracts do in light years.
    So in Iowastorms case here is what I would do. You already know how long it takes to clear say a 4-6" storm, then figure your hourly rate that you want. I strive for at least 125-150 per hour. Then multiply x the avaerage # of plows per season. Then add 30% for profit, and any walks, and deicers.
    Add a blizzard cause, and bucket loader per hour charge.
    If you want to see a sample contract go to
    http://www.thehousedoktor.com
    Dino
     
  7. iowastorm

    iowastorm Senior Member
    Messages: 358

    Dino,

    Thanks for the info. Actually, everything that you suggested is what we've been thinking about implementing into our seasonal contracts. Our only problem is that here in Iowa, we have inconsistent snowfalls and customers are somewhat leery about paying for services that they don't receive. Furthermore, hourly rates here are much lower here than on the East Coast. We all know that the contract is the way to go and must be sold to the customer in a positive and professional manner. One thing I do know is that most of the snow removal 'professionals' here charge by the hour and are usually late and don't provide the service the customers desire. Would you agree that service can outsell price any day of the week??

    Tim
     
  8. diggerman

    diggerman Senior Member
    from Ames
    Messages: 700

    Dropping customers for betters one that will pay the big bucks is a grat idea and really practical where your population and community size is large enough or were a yearly contracts are common enough to be throwing away good customers for ones who will pay more. I already do a majority of the large commercial accounts and have been plowing long enough to have done the rest at some time,and yearly contracts are a new and rare type in our area. I have try to get yearly contracts that include snow, sweeping,and lawncare. The large chains understand the concept but the store managers and district chain property managers know enough that they don't have to pay that here.It's only been in the last 5years that I have been able to get the starting amount down from 2" to "any accumulation" and even at that they are calling and shuting us off on light snows. Level of service and selling the customer on the idea that are getting a better more proffessional product is coming but in the mean time you may just have to sacrifice a little and do some per time and some hourly stuff and try to convert them later. Des Moines may be a little further a long in this process but I do work for Hubbell and it doesnt get much bigger than that in DesMoines and they still only pay by the hour.
     
  9. plowking35

    plowking35 2000 Club Member
    from SE CT
    Messages: 2,923

    Yes service is what you sell not hourly rates. the next thing to attack is accessability, and the dreaded liability issue. Scare the crap out of them. Sell the fact that
    $10,000 seasonal contract is peanuts compared to a slip and fall law suit.
    The bottom line is that if you dont ask, and push for it, your prices will never increase. You will always be plowing for $ 30.00 an hour.
    If you plow for that rate, for 10 hrs you make $ 300.00
    In that same time span the per push or contract people make 10x that. Do the math and be business person and go for it.
    Look at it this way even if you land only one or two, they will make as much money for you as the multitude you are plowing now by the hour.
    I didnt start out with seasonal contracts, but I worked hard at getting them. Do you think it matters to your trucks, plows,loaders, and sanders if it snows or not. NO
    But it still costs you $$$$$ to own/lease all of it. yet the mind set is t wait till it snows and then pay for it. NO WAY, you have a premium service and alot of money invested.
    The first thing all of us need to do is join SIMA
    http://www.sima.org
    And put their logo on all your literature. It will instantly legitmise you being a professional and not a plow jockey. And we all know prefessionals make more money.
    Stop being rookies and join us veterans where the real money is.
    Dont tell me it cant be done, I have done it, so have many others. And I bet I can get the name of at least 100 others that have snow removal as the highest profit center in their company. One firm did 1.5 million with only 6" of total snow fall.
    And yes alot are from the midwest, so dont use that excuse.
    The other thing I show customers is that with our per push rates and the way they are set up, after only 5 plowings they are saving money. Its not entirely true, but it is easy to show on paper, and what they percieve is what counts. In fact I will say that any decent salesperson with the right angle could sell the seasonal contract today, to any of your customers, myself included. Fly me out and I will pay for the flight if I dont sell it. How about you MR Parker, want to join me?
    If you have any? feel free to fire away.
    Dino
     
  10. GeoffD

    GeoffD PlowSite.com Veteran
    Messages: 2,266

    Ok, Dino

    One question. I agree completely that seasonal contracts are the way to go. 95% of my revenue is based on seasonal contracts, these are just people that have been with us for a while, and a few that don't want a seasonal contract.

    Because i only do the snow removel side, i can't hide some of my plowing expeneses in a yearly grounds contract. This is fine with me, i just have to be streight up with people and sell them the service, and have been doing fine.

    Well now that i have written my comment to the thred.

    Dino here is my question. Explain, how you are showing your customers that after 5 storms they are saving money?

    Geoff
     
  11. diggerman

    diggerman Senior Member
    from Ames
    Messages: 700

    I most whole heartedly agree that hourly work is not the top contract choice but when you get to the point where keeping 21 plows and 50snow shovelers busy is hard to do a little hourly work never hurts. Also the middle option which most of my accounts are is a per snow price, which can bring in 150 dollars or more per truck hour So until you become an established snow company with a good customer base that recognize you as there number one option, enjoy what meesly money you can squeeze out of them on a T&M or pertime basis then maybe you can sock them for the big bucks next year. Oh and don't work for 30 dollars an hour most plowers I know in DesMoines are getting from70 to 90 an hour for a pickup.
     
  12. GeoffD

    GeoffD PlowSite.com Veteran
    Messages: 2,266

    If your goal, is to keep the equipment going at all times that is great. Just make sure that you are making enough money to make it worth your while. I know a few guys that only had 2 or 3 trucks, but took on work just to keep the trucks going. Only some of these guys said, that if they didn't have good work for one of the trucks, and it sat all winter than fine. Its better to run a truck, loader, or shoveler in the black, then the red. I had a year back in 93, where a truck sat all winter on snow storms, because it didn't have enough plowing. I wasn't going to pay for the extra maintmance, and the cost of a driver, just to speed up opperations, or take jobs that would cause me to run in the red.

    Geoff
     
  13. diggerman

    diggerman Senior Member
    from Ames
    Messages: 700

    I have been doing this for 20 years and I hope I've just about made all the stupid mistakes I can and done all of the stuff for free that I'm going to,but hey its a new year.
     
  14. iowastorm

    iowastorm Senior Member
    Messages: 358

    Has there ever been discussion in Central Iowa about starting an association of lawn care and snow removal providers? Seems to me if we had something like this it would give us more credibility and help us get and keep business???
     
  15. GroundKprs

    GroundKprs PlowSite.com Veteran
    Messages: 5

    Make exception for large storms

    I have a number of long term customers on 12 month flat rate, but contracts state that "snowfalls exceeding 8 inches in a 24 hour period, or consecutive 24 hour periods of 6 inch accumulations will be billed at hourly rate over and above contract amount". Note the "24 hour period", not "day". This allows one to charge for a "normal" winter, and doesn't stiff you if you get a 20-year blizzard. Around here with lake effect, I have seen 18" overnite, and up to 42" in 2-1/2 days.
    This lets the customer gamble on the big ones, and he knows that he's getting coverage for everything.
    Our average here is 76", and one buddy charges per push, with a 10 push minimum - another variation. He's getting paid for being available and dependable, and makes more if he has to work more. Bills 3 pushes in Dec, 4 in Jan, 3 in Feb, and adds corrections to Feb or Mar bill if necessary.
     
  16. BRL

    BRL PlowSite.com - Veteran
    Messages: 1,277

    Dino,
    I also have a question for you about the liability issue. The fact that you have liability insurance does not shield the property owner from liability in a slip & fall case. (This is from speaking to my insurance agent & from talking to a lawyer) If you have the proper insurance your company & the property owner's company share the payout. If the property owner hires someone without insurance, the property owner will most likely pay the entire payout. I was told the property owner is ultimately responsible for any liabilty issues that happen on their property. Its the same for those of us that also do the ground maintenance & landscaping. If one of my mowers shoots a rock through a window and God forbid hurts someone inside, the property owner is liable. My insurance company will negotiate the payout with the owner's company (same with a slip & fall). The point to all of this is that the reason we carry insurance is to avoid being sued by the property owner (or their insurance company, or other victims)to recover their costs for events that may happen on their property while we're providing a service. This may be just how the law works in my state (NJ). So my question is, do you tell your customers their responsibility is gone from slip & fall cases? If the law works the same in your neck of the woods, this could create a problem with a customer if a claim is made, especially if you implied that your insurance would cover these problems. I'm not sure if this is common knowledge for everyone, but the few customers that I have talked to about this didn't know about it. After 6 years of plowing I had my first slip & fall case this past winter, so I learned about this stuff the hard way. This all also applies to me because I am a homeowner, and I definitely look at how I get things done at my house in a different way now, with our sue happy world.
     
  17. diggerman

    diggerman Senior Member
    from Ames
    Messages: 700

    As far as I know there is no group planned or functioning in central Iowa like that but there is SIMA which is something everyone needs to a member. Then when there are enough members in each area they might start a regional meetings and events. I also have some conections with a couple local city and university guys that have a yearly snow confrence geared toward municipalities. We attend and it is really not geared toward people who plow private stuff,its more for roadways and airports.


    The way we do our per time stuff is that they have the same cost for snows from 0 to 5 inches and the for each additional inch it is prorated. Meaning for 6 inches it is the 5 inch cost plus 1/5 and so on,so 10 inches is double.
     
  18. GeoffD

    GeoffD PlowSite.com Veteran
    Messages: 2,266

    diggerman. Hey i didn't want to make ya feel bad. However i don't care if you have been doing this for 100 years ya can always learn new. I have been plowing for a long long time, even last year i learned something very important that was how good snowpushers could work. Lasty year i bought one mid winter, i bought 2 more this fall. Why because i learned about them on this forum.

    Geoff
     
  19. diggerman

    diggerman Senior Member
    from Ames
    Messages: 700

    Whoa I never take offense and always listen. I live eat and breath this stuff. I don't ski,I don't snowmobile I plow snow, period,I excavate summers so I can plow winters. I was not miffed at all sorry you thought so,its just hard for everybody to see the way my eyes twinkle in the moon light over this keyboard
     
  20. plowking35

    plowking35 2000 Club Member
    from SE CT
    Messages: 2,923

    The last thing I do is tell the customer that I will hold the liability for a slip and fall. In fact I have a hold harmless clause in my contract to keep as far away from liabilty as possible.
    What I do tell them, is that with a seasonal contract we are not limited to the # of times we service an account, better service translates to less chance of slip and falls.
    Geoff,
    What I do is a little smoke and mirror if you will, I am not dishinest by any means, but you would have to understand how I charge per push, then mutiply that by the average # inches we recieve per year.
    So lets say that we charge $ 100.00 to clear a 0-2" snow fall. Then I will x that by 50" for a total amount of
    $ 2500.00 then add the fact that we will de-ice each time we plow, and add another $ 2500.00 for that service.
    We will then sell a seasonal contract for say $ 4600.00 showing them a savings of $ 400.00.
    The other way we may aproach it is to scare them with a scenario of 2 or 3 12" storms that would cost say $ 800-1000 per storm to clear, then add that with only a few of these type storms they will be at or near the contract price, and then poof the seasonal is sold.
    I dont have anything against per push contracts, in fact I have several of those myself. Its always good to have a mix, in case we have a lot of snow.
    But the first post made, and a conversation that I had the other night with a person from the forum, both had an hourly rate of $ 30.00 per hour. So some people are under the impression that is the going rate.
    In fact SIMA is the first peice of advice I give anyone to help you along in this business.
    Dino