1. Welcome to PlowSite. Notice a fresh look and new features? It’s now easier to share photos and videos, find popular topics fast, and enjoy expanded user profiles. If you have any questions, click HELP at the top or bottom of any page, or send an email to help@plowsite.com. We welcome your feedback.

    Dismiss Notice

Dumb Question

Discussion in 'Business Fundamentals' started by HenkeRep, Aug 26, 2003.

  1. HenkeRep

    HenkeRep Junior Member
    Messages: 10

    Dumb, because I don't know a damn thing about the actual, business side of removing snow.

    I was once told by a very successful contractor (100% snow removal, in business for 20+ years) that charging by the hour was a bad way to run your business.

    Then, I've talked to other contractors who charge by the hour, and, can't imagine doing it any other way.

    So, I'm curious: What is the ideal business model for a contractor?

    What things would determine whether you went one way, or the other, or another?

    Essentially, what is the best way to determine what your rates should be, and how you should negotiate your contracts?

    Just trying to learn. Thanks -
     
  2. wyldman

    wyldman Member
    Messages: 3,265

    When you charge by the hour,there is no benefit from increased productivity.Actually going faster makes you less money.

    Charging per push,or seasonal can make you a lot more money if your fast and efficient.Seasonal pricing guarantees you a set amount for the season,so your always getting paid.A slow winter will not hurt you.A heavy winter will cost you some profit,but at least you can pay the bills.Seasonal pricing is someting you need to ride out,and average over a few years,so the good and bad years will even out.Still a very profitable business if done correctly.

    All the stuff I quote is pretty much seasonal only.If it's per push,then we get a minimum number of pushes per month to cover expenses.I wouldn't touch anything else.
     
  3. HenkeRep

    HenkeRep Junior Member
    Messages: 10

    Is it tough to negotiate those kind of "seasonal" rates?

    And, what would you look at when doing that? Do you check local, climatology records and such, to see what the average snowfall is in your area?

    Also, when you evaluate a customer...say the local shopping mall, with "x" square feet of plowable area...how do you go about determining how much snow that could likely represent, and how long it would take to remove it?

    I'd be nervous as hell giving a seasonal rate, and then get hammered with snow all winter long, much like the eastern U.S. was last year.

    Like you said, I guess you gotta take the profitable years with the not-so-profitable years.
     
  4. wyldman

    wyldman Member
    Messages: 3,265

    Quoting isn't too hard.We start based on square footage,and add extra for obstructions such as islands,curbs,entrances,loading docks,sidewalks,removal,etc.Most of the time I can do a quick drive by,and estimate it pretty close.It's only the big chain store plaza's that need a lot of calculations.This will give you a ballpark idea of how long it should take to clear a snowfall that meets or exceeds your trigger point.

    Next is determining how many 2" (or whatever your trigger is) snowfalls you get a season on average.Climate and meteorological data is a good start.A snowfall larger than 2" would be treated as more than one push.You should then be able to draw up an average number for the season.Around here,it's 18-20 per year.

    So to get the final figure,it's just simple math.Cost per push (hrs required X hourly rate) X number of average pushes per season.

    I usually have a Max snowfall amount per year,so if we go over,it's additional.It also helps to have a blizzard or extreme snowfall clause,to protect yourself .Salt,and removal are also billed additional to the contract price.

    In the slow years,you get paid,and expenses are very low,as the trucks\drivers stay put.You don't make much on salt and removal.When you get a real bad year,your expenses can easily overrun your gross,but all the additional income in salt and removal usually offset a lot of the loss.

    I've been at it for 18+ years,and haven't had a major loss yet.We had some bad years,and some really good,but I'm not complaining. :D
     
  5. HenkeRep

    HenkeRep Junior Member
    Messages: 10

    Oops!

    Just realized this thread would have been more appropriate in the "elements of business" section.

    Sorry :eek:

    (Moderators...feel free to relocate...)
     
  6. nsmilligan

    nsmilligan PlowSite.com Veteran
    Messages: 704

    I agree with Wyldman's post, hourly rates are unfair to both the client and the contractor. I prefer a mix of both seasonal and per push accounts. The per push accounts will generate more income in a heavy snow season, to offset some of the reduced profit margin on the seasonal contracts. Like Wyldman I have a per square ft figure that works well for me in my climate, and add for additional work because of obstructions, service level required for the site, etc.

    Bill
     
  7. Mick

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

    ???

    ???
     
    Last edited: Aug 26, 2003
  8. Mick

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

    Click on this link, then scroll down to "Starting ... Business". There might be something there or on other subjects that might help.

    http://www.snowplowing-contractors.com/plow_site_FAQ.html

    I've never plowed by the hour and don't intend to. Basically, if I tried to charge by the hour what I get per push or on seasonal contract, I'd never get any accounts.
     
  9. Pelican

    Pelican 2000 Club Member
    Messages: 2,075

    Chris, how do you sell the per push minimums?
     
  10. wyldman

    wyldman Member
    Messages: 3,265

    When I quote the property,they are told are trucks don't move unless we meet our "minimum cost" every month.When I explain what all that covers (ie:insurance,maintenance,overhead,equipment cost) they quickly understand what it's all about.Then I figure a minimum number of pushes per month to meet that figure.It's kinda like a non-refundable retainer.I can't be bothered with the one time deals.This is paid up front (VERY important),or they get NO service.It's near impossible to collect at the end of the month for something you didn't actually do.When it's paid in advance,they consider it like insurance.

    Sometimes,all the hassle with pre-paying for a minimum amount,they come around and sign a long term contract.We can offer them better service,at a better price.
     
  11. Pelican

    Pelican 2000 Club Member
    Messages: 2,075

    I've been considering this type of billing, I haven't been able to sell seasonal contracts on my accounts.

    I've got it figured with 2 push per month minimums, I'd at least meet expenses. Is this about where you are?
     
  12. Arc Burn

    Arc Burn PlowSite.com Addict
    Messages: 1,138

    That's a very lucrative business approach,unfortunatly it would never fly in my area.I know we have been thru this a hundred times but seasonal is not an option around here either.Every body prefers per push were they get what they pay for each time.
     
  13. wyldman

    wyldman Member
    Messages: 3,265

    It does depend on your location,and what everybody else does in your area.

    I have been fortunate,and when we started to sell seasonal,everyone else did too.

    You will never sell seasonal if you don't try.You have to try and sell it as a benefit to them,and how it will help control variable costs for snow removal,and again,it's like insurance.If you just whine about not making enough money,or getting payed for standby,they won't care.Explain all the costs involved,show them a few lawsuits againts improperly insured contractors,etc etc.

    Like John Allin says.....If you think you can,or if you think you can't....your right ! or something to that effect.Someone correct me if I'm wrong.
     
  14. Arc Burn

    Arc Burn PlowSite.com Addict
    Messages: 1,138

    I just feel it's a double edged sword,it can cut both ways.It would be wonderfull on a slow year but i would have lost my azz last year.Nobody wants it so i won't push it;)
     
  15. JD PLOWER

    JD PLOWER PlowSite.com Veteran
    Messages: 751

    Arc your right about it being a double edged sword, but thats why we aren't exclusively seasonal or per storm. I personally prefer a mix (our goal is to be 40-60% seasonal- per storm) it just gives you the ability to pay the bills when you get a down year. Seasonal totals around here are too wild for my liking to be exclusively one way ( too much money to be made) and after last year seasonal contracts are a much better sell. If your ever going to be able to sell seasonal, this would be the year. I would try to pick a customer that paid a hefty price last year and give them a quote, you might be surprised when you sell the "fixed cost" idea to them. All they can say is no.
     
  16. wyldman

    wyldman Member
    Messages: 3,265

    The best time to sell seasonal is after a heavy winter.Your seasonal price will look good to them,as it will be less than they paid out last winter,so they save money.

    Adding a limit to the number of pushes,total snowfall amount,late start\early contract ending date,blizzard clauses are all ways to protect yourself against losing big time if we get another heavy winter.Don't forget,salting and removal are usually above and beyond the seasonal price,and gross will increase if we get a lot of snow.

    Raising your per push rates,as well as imposing a minimum service fee,or monthly minimums will help push them towards a seasonal contract,as well as weed out the smaller low paying accounts that we don't need anyways.
     
  17. Mick

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

    In this area, "nobody does seasonal contracts - won't sell - don't even try it". Well, two years ago a camp owner asked me what I'd take to keep a small area of his road open for the winter. On a whim I said "oh, just write me a check for $xxx and I'll take care of it for the season". He agreed and thought it was a good deal. Contrary to others, last year we had a below average snowfall - that account worked out to $500/hr. Far as I know, he and his wife are still happy (they haved "assured access") and will write me another check this year (for a little more due to inflation). Now, can you imagine the response I'd gotten if I'd said "Sure, I'll keep it plowed for $500/hr"? Now, there are even more people expressing interest in seasonal payments (I don't have many contracts).

    So, I agree "if you think you can or you think you can't..." The same thing was said about salt around here instead of sand - last winter I got my first request for straight salt. I'm also getting many requests for Magic Salt this year - something else that "wasn't supposed to work".
     
  18. chas4x4

    chas4x4 Senior Member
    Messages: 101

    price per push

    How do you know how much to charge per push is there a minimum in most regions?
     
  19. SCSIndust

    SCSIndust Senior Member
    Messages: 280

    Doesn't anyone charge by the inch? (0"-4", 4"-8", etc) That is what I do, and some of my associates in the area. It seems to be the most efficient way to make the most money in this area (Central MD). This past year with the big storm, it was snowing so fast, we were pushing 10-12" at a time. So that would mean I would have only pushed about three times. I grossed quite a bit, even though I didn't push that much. Doesn't this seem logical? What am I missing? Just looking to see what all you guys say.

    Jamie
     
  20. wyldman

    wyldman Member
    Messages: 3,265

    Charging per push,or per inch is almost the same.

    One push,would be for 2-4".If you get 12",then you'd bill for 3 pushes.