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Fuel Sur charge??

Discussion in 'Commercial Snow Removal' started by SteveR, Oct 5, 2007.

  1. SteveR

    SteveR Senior Member
    Messages: 252

    What do you guys think is better raising prices or adding a fuel sur charge if the price jumps up like they say. I am hearing $4.00 bucks a gallon for diesel this winter..

    Thanks for your input
     
  2. Mick

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

    It's possible, but I don't believe it'll get that high. For plowing, I really think raising prices would be better. The average person can understand prices being raised for gas prices, they have a harder time understanding true fuel surcharge which is calculated off some base price. So, when do you calculate the surcharge and what is the base price? Based on the price the day you plow or the day you send the bill? Are you going to base it on local price or national average? If local price - what station? Are you going to keep daily records of prices for review? You can get into some argument as to why didn't you buy on a certain day instead of another? Are you going to give discounts if prices go down past a certain point? Customers do not like the uncertainity of the fuel surcharge.

    Now, if you raise prices across the board to all customers, you will have some built-in flexibility if prices actually go up more than anticipated. Really, guys worry more about fuel costs than is warranted. Fuel should start as equal to approx 5% of income. In other words, you should be spending $5 worth of gas to generate $100 of income (or $1 per $20 of income). So, let's say gas is $3/gal now and you allow for a 25% increase in fuel costs - to $3.75 - which you allowed for by charging a $5 increase per customer. In fact, fuel actually goes up 50% to $5.50/gal. Now, you are really "crying the blues" to every one how you aren't making anything because gas went up so much. But, in fact, you are only losing about $1.75 per $100 of income (and you have a bargaining chip for an increase next winter). Is $1.75 per $100 of income really worth sweating over?
     
    Last edited: Oct 5, 2007
  3. SnoFarmer

    SnoFarmer PlowSite Fanatic
    from N,E. MN
    Messages: 8,614


    If Fuel is $4
    How Much Would Gas be?

    At that point I think we will have bigger fish to fry.
    As a lot of home owners will just do it them selves as the price for plowing will be to much for them.

    jmo
     
  4. Jay brown

    Jay brown PlowSite.com Addict
    Messages: 1,783

    how much fuel do you burn plowing? i don't really see how fuel prices could affect profit from plowing. should only cost $100 or so more if it jumps to $4 per truck. our problem is insurance........we spend about $3-4k per year in fuel and about $40k in insurance...... i think an insurance surcharge would be nice..... add about $100 per drive per time:)
     
  5. Mick

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

    Insurance surcharge? If we did that, I'd have to lower my rates. I just got my Commercial Vehicle policy today. Premium went down by 8%. Now I'm waiting for the GL Last year it went down by about the same percentage, too.
     
  6. JD Dave

    JD Dave PlowSite Fanatic
    Messages: 11,046

    I agree fuel really isn't a big % of our expenses. Insurance and labour is mine.
     
  7. mayhem

    mayhem PlowSite.com Addict
    from Peru MA
    Messages: 1,016

    Unless you're planning on dropping your prices if fuel goes down, don't raise your prices because of fuel.

    Raise your prices...its your company and your contracts...but I wouldn't use fuel costs as justification.
     
  8. CNY Plow

    CNY Plow Senior Member
    Messages: 145

    here's my solution

    COST OF FUEL PRICE ADJUSTMENTS THROUGHOUT THE SEASON:
    OUR VEHICLES USE PREMIMUM GASOLENE.
    At the time of this printing the cost of fuel was $3.00 per gallon Plowing rates will increase by 1/3 the % increase of the fuel.
    FOR EXAMPLE:
    If the cost of fuel goes up .30 cents that is an increase of 9.37% and 1/3 of that is 3.13% so that a fee of $45 will increase to $46.45.
    WE REQUIRE THESE INCREASES TO MAINTAIN OUR RESERVE FUEL ACCOUNT
    DOES NOT APPLY TO SEASONAL CONTRACTS
     
  9. Mick

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


    Do you really think the average person can readily understand that and how it applies to thier plowing rate? I got lost somewhere between 1/3 and 3.13%.
     
  10. LwnmwrMan22

    LwnmwrMan22 PlowSite Fanatic
    Messages: 28,014

    As Mick said, just raise the price by $5, either per push, per time, per inch, per hour, whatever.

    Use multiple reasons as fuel, insurance, ink for invoicing, whatever..... In reality, you shouldn't have to justify raisning your prices a minimal amount anyways.

    No one complains to McD's or your favorite restaurant when they have a new menu with increased prices.
     
  11. powerjoke

    powerjoke PlowSite.com Addict
    Messages: 1,341


    JAY YOUR RIGHT

    as far as i am concerned anyway, I as you might or might not know own and excavation company and we buy fuel by the semi load 9000gal and dempending on amount of work will refill several times and we havent added a "FUEL SURCHARGE" we have raised our rates just a little i think a surcharge looks tacky like you didn't know how to bid a job or expect the materials NO DISRESPECT directed because everybody does it.

    Fuel around here has come down in price but nobody has lifted the SURCHARGE most shipping CO. that charge surcharge is trying to get 1one clinent to pay for the fuel for the entire trip for the entire load.

    For instance the concrete company here in town has raised concrete prices $20yd in the last year but also added a $5yd fuel surcharge and charges you if you take to long to unload the truck so if a truck holds
    7ydX$5=$35
    $35 will buy 10gal of fuel
    10 gal of fuel will travel that truck 60 miles
    What happened to the fuel money they had figured in to start with?:dizzy:

    do the math for your truck, oh and by the way dont forget to figure in the fuel price last year which around here it was more last year than right now

    so in conclusion i don't charge a surcharge i agree with JAY BROWN if any we need tocharge a insurance surchargLOL
     
  12. Mark Oomkes

    Mark Oomkes PlowSite Fanatic
    Messages: 10,923

    OK, I'll bite, I'm your average customer, what is your reserve fuel account? You telling me that the gas station saves X amount of gallons just for you in case it snows?

    Just playing devil's advocate.

    I'm with Mick on the rest, you put in all those numbers and most customers are going to think you're trying to BS them.
     
  13. grandview

    grandview PlowSite Fanatic
    Messages: 14,609

    When I did residential driveways you give the a price,take it or leave it.
     
  14. LoneCowboy

    LoneCowboy PlowSite.com Addict
    Messages: 1,760

    I agree, if you have a contract (agreement, handshake, whatever) for the season, if gas jumps, well, you eat that for this season. Next year though (or next agreement) you raise it and it's obvious why and you explain it.

    Sorry, if someone tried to add on a charge to a price we already agreed upon, I would fire them, on the spot. It's the cost of doing business. I don't pay for your truck breaking down either, it's not my (the customer's) problem, it's yours. You should bid enough to make enough money to cover your costs and any risks that may entail. (and fuel should be a pretty small part of it).
     
  15. Plowfast9957

    Plowfast9957 Senior Member
    Messages: 280

    I agree with the other posts. If you have to add a fuel charge obviously you are working for to cheap. If i bid an excavation job at $20,000 and get the job 30 days after. Then the company I buy dirt, pipe, concrete products etc. etc from adds a fuel surcharge how can I make any money? All I am trying to say these fluxuations should already be "built in" to your price. I guess what I am saying is just notify your customers you will have to raise your prices.
     
  16. JUSTIMAGINE

    JUSTIMAGINE Junior Member
    Messages: 4

    To jay brown how many acres are you plowing? $40,000 doing over 300 and no where close to that.
     
  17. powerjoke

    powerjoke PlowSite.com Addict
    Messages: 1,341

    whereyou at, i logged over 850 machine hours last year X$45hr=38250 plus 1.5mi walkes and solt 50 ton salt and i didn't do 300 acres like you maybe you aint chargeing enough

    i see you have 1 post and the first one you are already trying to pick a fight
    you might ought to wait till you been a member awhile and have some freinds first

    so somebody will take up for you (like i am jay) so if i misunderstood i am sorry if i did not i am still sorry
     
  18. Jay brown

    Jay brown PlowSite.com Addict
    Messages: 1,783

    nice to hear from you, thanks for joining PS. were a fairly small snow contractor and only plow around 25-30 acres. not really sure what the rest of your ? is but if it's about the insurance here you go........Work comp (roofing) payroll is $65-$70k @ 39 per hundred= $25k..... GL is just a smidge over $10k and 12 vehicals, shop fire coverage, and health/life is just a bit over $10k also. total= $45k (guess i figured low)..... we have six plows and one sub, and get about 12" of snow on a good year. we gross about $20k per year plowing snow so i really don't consider this a job it's more of a hobbie BTW powerjoke.....thanks buddy
     
  19. Mark Oomkes

    Mark Oomkes PlowSite Fanatic
    Messages: 10,923

    Powerjoke and Jay, I'm just impressed that you have any idea what he's asking. I haven't got a clue what the question is.

    Take a look at his profile, I'm making a SWAG here, but TROLL is coming to mind.
     
  20. LwnmwrMan22

    LwnmwrMan22 PlowSite Fanatic
    Messages: 28,014

    I THINK what he's saying is that he grosses $40k / season doing either 300 acres, 300 drives, or something along those lines, and that Jay doesn't seem to do anything close to that.