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Fuel Surcharge

Discussion in 'Business Fundamentals' started by dmjr77, Nov 21, 2007.

  1. dmjr77

    dmjr77 Senior Member
    Messages: 225

    Now that gas is getting close to $4.00 a gallon. What do you think a fair fuel surcharge is going to be? I have come up with a formula to help come to a fair number.

    Thank You
  2. Snowpower

    Snowpower Senior Member
    Messages: 636

    Fuel surcharge? Whats that? Where you raise your prices on your customers? Why dont you just.... raise your price on your customers.

    After signing up my customers I realized my truck needs tires. Im thinking of a Tire Surcharge.

    What do you think. Think it will go over well with my customers?

    Bottom line is, is that if you need to raise prices now because you didn't remember that gas prices go up then call your people and raise your price. Dont hide behind some lame surcharge.

    People are tired of fee's and hidden charges. What they are never tired of is an honest direct approach.
    Last edited by a moderator: Nov 21, 2007
  3. dmjr77

    dmjr77 Senior Member
    Messages: 225

    When my customers signed the contract, the price of fuel was somewhat stable. Now that fuel is over 3.10 a gallon, my contract states "a fuel surcharge will be applied id the price goes above $3.00 per gallon for regular" Other plow contractors use similar wording.
  4. Snowpower

    Snowpower Senior Member
    Messages: 636

    So whats your fair surcharge going to be.

    Say I have a resi driveway that you plow. It's 35 dollars now. What can I expect to pay?

    Whats the "New" price.
  5. dmjr77

    dmjr77 Senior Member
    Messages: 225

    The price would be as follows:

    Plowing - 11/21/2007 $35.00
    Fuel Surcharge - $2.00

    I feel that this is a more fair way to bill the customer. If the price drops, I can adjust the rate of the fuel surcharge.
  6. Snowpower

    Snowpower Senior Member
    Messages: 636

    So lets say you have 30 resis. At 2 dollars increase each customer, you get your entire fuel paid for for the night by doing that.

    The problem I see is that your cost went up say 30 cents a gallon, and if you use 20 gallons a night, thats a six dollar increase in your cost per event.

    How do you justify making a "profit" on a supposed additional fuel surcharge because you most certainly are making a profit from the increase.

    If you really wanted to be fair your surcharge would be 20 cents per customer per visit, because thats all it is costing you.

    30 x .20 = 6 dollars.

    Besides that. Is it really that crucial that you increase each clients price so you can make an additional 20 dollars a year off of them?

    To me...making an additional 20 dollars a year isn't worth the risk of irritating a valuable, expensive to obtain client.
    Last edited: Nov 22, 2007
  7. LoneCowboy

    LoneCowboy PlowSite.com Addict
    Messages: 1,760

    So, most trucks use 1 to 2 gallons an hour of fuel
    Your driveway that costs 35 dollars takes you about 15 to 20 minutes (right? should probably be less). Therefore you probably used 1/3 to 2/3 of a gallon of fuel, so 1 to 2 additional dollars to pay for your entire fuel used for that driveway. Which you bid originally when fuel was 2 to 3 dollars. Why are you charging me (the customer) for your fuel? Isn't fuel a price you pay for plowing?

    If I had that driveway and you came up and said "it's 35 dollars plus 2 dollars", I'd give you 35 and tell you to go on your way. We have a deal, that's the deal, don't come back, I'll find someone else
    You should be billing $120 + an hour, what's 5 dollars over the course of an hour? It's the cost of doing business. If you want to raise them, raise them, but up front and honest about it. (as an earlier poster said). Gas has been at about $2.50 a gallon for at least the last 2 years. Why do you need to bill me 2 more dollars because it went up 50cents to a dollar?
    I think you'll lose more customers than you gain in money. JMHO.

    One unsatisfied customer tells 20 people about their bad experience, one satisfied customer tells 2 to 3 people about their good experience. Do you really want that?
  8. Five Star Lawn Care LLC

    Five Star Lawn Care LLC Senior Member
    Messages: 426

    if gas or desil goes over $3.00 i impose a 7% surcharge......its been in my contracts for 2 years now and have never had anyone complain
  9. dmjr77

    dmjr77 Senior Member
    Messages: 225

    I run 3 trucks when it snows, I feel that I am not out of line with my rate.
  10. Snowpower

    Snowpower Senior Member
    Messages: 636

    Why dont you just raise your overall price at the onset. Christ sakes. Diesel hasn't been below 3 dollars a gallon for a long time and never will be again.
  11. dmjr77

    dmjr77 Senior Member
    Messages: 225

    I already did an overall price increase this year, I went up $1.00 over last years rate. How was I supposed to know that fuel was going to break $3.00 a gallon and now possibly $4.00 a gallon, I am not running a charitable business.
  12. Snowpower

    Snowpower Senior Member
    Messages: 636

    When you make a 1000 percent profit from a surcharge increase I should say you certainly aren't running a charitable business.

    And no offense guys. Its just a different way of doing business. If your customers are ok with the way you do it. Then keep doing it.

    Im just saying its not the way I do it, and I felt it necessary to point out just a basic bit of actual mathmatics.

    The numbers are not exact. But a surcharge by its very definition is to recoup additional unplanned for expenses.

    Not to make an additional profit.

    If you want to raise a clients price in mid stride then at least call it what it is.

    A price increase.
  13. dmjr77

    dmjr77 Senior Member
    Messages: 225

    Everyone that I have talked to about this subject is in agreeance that between $1 to $2 dollars is fair as of right now, if it breaks $4 a gallon it will have to be looked at again. Another consideration that should be looked at is price of engine oil, that has gone up alot since last year as well.
  14. Snowpower

    Snowpower Senior Member
    Messages: 636

    List all the things you buy that went down in price since last year.
  15. dmjr77

    dmjr77 Senior Member
    Messages: 225

    What is your point on that question? Everything that I have bought over the past year from my insurance, parts, supplies etc, have gone up quite a bit. My commercial insurance for my trucks and my insurance and bonding for my business went up 35% this year for no reason. I have had to make no claims since I have been business.
  16. Snowpower

    Snowpower Senior Member
    Messages: 636

    My point is with all those increases you choose a to raise prices 1 dollar per visit.

    With a .20 cent per visit increase in your fuel cost you want to raise prices 2 dollars.

    Lets say you visit each site 15 times. Thats a $2.30 increase in your cost per client per year. Yet you want to raise their price 30 dollars.

    The math just doesn't jive.

    My point is that people generally wont complain over 2 dollars here and there, but if you do the math, your surcharge is huge in comparison to what your increased costs are.

    Just pointing out that when you said originally that you wanted a fair increase to charge, 2 dollars isn't it. That might be fair for you, but it's not fair to your client.

    Is it a big deal? Will they freak out? No, but you wanted a fair increase suggestion and I gave it to you.

    Twenty Cents per push.
  17. dmjr77

    dmjr77 Senior Member
    Messages: 225

    I am going to stick to my original plan. Since my driveways are far apart with a driving involved, 20 cents will not cut it up here in this area.

    I got a notice from the lumber yard that I deal with last week. They are charging a flat $15.00 delivery/fuel charge fee if they deliver. Would a good businessman aborob this cost? I dont know of anyone that would.
  18. dmjr77

    dmjr77 Senior Member
    Messages: 225

    Just did the math:

    Driveways 62 x .20 = $12.40
    Driveways 62 x 1.00 =$62.00

    Truck 1 - 26 Gallons
    Truck 2 - 26 Gallons
    Truck 3 - 34 Gallons

    Total 86 Gallons x $3.15 = $270.90

    Can you fill 3 trucks up with $12.40 worth the gas?
  19. Snowpower

    Snowpower Senior Member
    Messages: 636

    What difference does the size of your trucks gas tank have to do with anything?

    And what are you talking about filling a tank for 12.40? That number is your actual increase in fuel costs. The cost you want to "Surcharge" or "Pass Along" to your clients fairly and evenly.

    What you want to do is increase their price. Not apply a surcharge. Because if you applied a surcharge it would be .20 per visit.
  20. stroker79

    stroker79 2000 Club Member
    Messages: 2,802

    Snowpower, It seems like its your personal vendetta to preach against Fuel Surcharges. I am not sure how many Professional services you have hired but if they drove to you chances are pretty good there is a fuel surcharge. You even pay for it on your plane tickets. Its designed that way so that if the fuel goes up, the charge goes up, if the fuel price goes down, then so does the fuel surcharge. Just about every single company that relies on trucks to do thier job charges a fuel surcharge.