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Contract Plowing

Discussion in 'Commercial Snow Removal' started by Pelican, Feb 17, 2002.

  1. Pelican

    Pelican 2000 Club Member
    Messages: 2,075

    This season has got me seriously considering converting my accounts to contract plowing, they are currently by the push. I've read about this here before, but couldn't find the threads on search.

    My idea is to charge a two event per month minimum, whether they occur or not, the first two plows would be included in this charge. Then every event in addition would be charged at the regular rate. This would allow me to keep up with the expenses involved with maintaining and insuring my equipment.

    The trouble is, no one else in my area is doing business in this manner, except large commercial bids, everyone else does by the push. I anticipate I would lose 25% of my accounts to the change, but this area is growing rapidly and I have a solid reputation for reliability.

    My question is, how do you guys that sell contracts market them? One service I can compare this to is insurance, but everyone hates insurance companies. Are there any other examples you can give of a similar type situation that would help the customer understand? Thanks!
     
  2. Mick

    Mick PlowSite.com Veteran
    from Maine
    Messages: 5,546

    Gambling!! which everybody loves (some secretly). They're betting we have a larger than average snowfall next year. That wouldn't be hard to sell after this year. Only base your charge on the average number of pushes per season times the charge per push. No need to charge for more than two pushes/mo. I've already started talking to a couple of people about this for next year. Even though it's not common around here, they're both being very receptive. The other selling point is them being able to budget for snowplowing. (For a search, try keyword- "seasonal").

    Really no need to lose that 25% that want to stay with "per push". You should keep a mix of seasonal and per push to hedge your bet.
     
    Last edited: Feb 18, 2002
  3. digger242j

    digger242j Senior Member
    Messages: 672

    Health Care coverage? Like an HMO?
     
  4. fireball

    fireball PlowSite.com Veteran
    Messages: 536

    yeah, but it is called a SMO. Snow maintenance organization
     
  5. SLC1

    SLC1 Senior Member
    Messages: 242

    We have no problem around here selling contract plowing, as long as they are multi-year contract I would much rather have contracts. Last year everyone around here made out great that were doing per-plowing and we did just good, But now everyone this year is crying poverty and we are doing great so I think that as long as the contract is for a minium 3 years it is a win-win situation in our contracts all the stacking, relocating and hauling the snow is above and beyond the contract so in big snow years we make our money on moving the snow. I know that one reason we have no problem selling our snow contracts is because we incorperate them into a complete sesonal contract that includes everything from plowing, salting, mowing, sweeping, and cleanups and that makes it a little easier sale but we even do a few places that we only do the plowing and have not had a problem selling the seasonal contracts because I think that most property or facility managers are smart enough to know that if it is a multi-year contract that it all is going to average out in the end. Last year we worked our butts off and did good this year we are sitting back and doing nothing except scatching our butts and doing good so I think it is a good deal. I would say that almost 80% of our work is seasonal contracts and the rest is per plow which is a little bit on the high side for seasonals but the way a few of them are worded is that we get paid after 12 storms per plow on couple of them, so if it gets snowy they are really per plow at the end of the season. Just My two cents. Sorry this post was so long.
     
  6. Pelican

    Pelican 2000 Club Member
    Messages: 2,075

    No need for apologies, I'm looking for all the info I can get. I didn't mention in my original post that 98% of my accounts are single family residentials, if this makes any difference.

    Until 5 years ago, my snowplowing was supplemental income, but a career change has made it a vital part of my business. Up until this season, we've had decent snow events, but this year is TIGHT!
     
  7. PINEISLAND1

    PINEISLAND1 PlowSite.com Veteran
    Messages: 664

    Here is a comparison which I think is more accurate. My gas company bill to heat my home has a history of 6 years since I moved in. Using those records, I can easily come up with the monthly average, and go on their budget plan. Now this is not a matter of paying more or less, but a matter of long term averaging. I pay one price monthly year around. It makes it easy on my budget , and spreads out the large payments of winter over the entire year.

    You have the same long term data from you local weather. If your average is 20 plows per year, take your per plow price and multipy by 20 for a seasonal. This is not to give them a "chance" at getting a good deal, or you for that matter, but just to average out a snow removal budget over a matter of years. Some years it may be 38 plows, and some 12, but as a long term plan they dont need to worry about it, they just pay the budgeted amount. This spreads out the cost of those "38" plow years and the sticker shock that goes with them, to years when the snow is a little lighter. Just point out to them that it only makes sense over a muli-year plan, and doesnt make sense to switch back and forth.
     
  8. PINEISLAND1

    PINEISLAND1 PlowSite.com Veteran
    Messages: 664

    One more thing, its nice to have enough seasonals (fixed income) to cover your fixed expenses for the year. Then if never snows you still have covered your costs and will not fold. However, having too many can also put you out of business. You will need enough per plow accounts that pay well every snow, that you will make you targeted gross revenues when it snows and when it doesnt snow. As your cost go up with additional snowfalls, so will your per plow income, with built in profit margins, so you cant be hurt by a "38" snow plow year either.
     
  9. c_maint

    c_maint Member
    Messages: 46

    I had to raise my rate $5 this year and had 6 customers drop me for that. the funny thing is that i'm still cheaper with the increase around me. I guess everyone wants to be buried with the cash!!
    but, just like you, it's getting crowded around here. so, i'm not worried. I think that's a very good idea. i'm going to concider it. I say, next year, if we get a good snow, then i'll do that after the season.