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Fuel surcharge

Discussion in 'Commercial Snow Removal' started by nsmilligan, Mar 7, 2003.

  1. nsmilligan

    nsmilligan PlowSite.com Veteran
    Messages: 704

    Fuel prices have gone crazy, and I was wondering if anyone has a fuel surcharge built into their contracts, I've already told my largest customer to expect a fuel surcharge in next years contract.
    What I'm looking at is a fixed percentage of the original contract price for each cent fuel goes up over a certain (normal) amount. Here I buy in cents/liter so you guys who buy in dollars/gal, may use bigger increments.
    The trucking companies have done this for a while, as well as the airlines, and right now it costing me 50% more for fuel then in November.
    I'd be interested in hearing how everyone else is handling these increases.

    Bill
    I posted this with out doing a search first:eek:
    I see there was a short discussion in 2000, are you charging a fuel surcharge now, Aspen Snow, and Plowking 35??
     
    Last edited: Mar 7, 2003
  2. wyldman

    wyldman Member
    Messages: 3,265

    Do a search,there have been recent discussions.

    We don't,but will probably raises prices slightly to compensate for fuel,insurance,etc next year.

    Fuel only accounts for 2-4% of our costs anyways.
     
  3. Big Nate's Plowing

    Big Nate's Plowing PlowSite.com Addict
    Messages: 1,266

    I sent out a letter notifying customers that there will be a 15% surcharge if fuel goes above $1.90 a gallon. Everyone agred to it.
     
  4. Pelican

    Pelican 2000 Club Member
    Messages: 2,075

    Milligan, we talked about this last month, I can't remember the thread title.

    Found it!
     
  5. Daryl

    Daryl Junior Member
    Messages: 22

    I found it interesting what one of the commercial companies did in our city. They wrote into their contracts that for every 5 cent increase per liter their hourly rate would increase by $2.00. Easy way to keep your profits the same and blame the higher costs directly on the fuel companies.
     
  6. drobson

    drobson Senior Member
    Messages: 112

    I think I will just include any increase in my renewals and new contracts for next year. I want to keep the customers happy, and I know that if I had a signed contract for a specific price I would not want the contractor asking for a price increase because of fuel prices. But it would be perfectly acceptable to get the increase when the contract is being renewed. By not getting it because of fuel price increases, it would also eliminate the customer asking for a decrease if fuel prices take a big drop ( I know, wishfull thinking).
     
  7. Sno

    Sno Senior Member
    Messages: 320

    I've been putting some thought into it lately... I'll probably raise the prices some next year if it gets any higher.

    It will probably depend on how many customers I have on my route next year to cover expenses. If I get enough new customers, I may just absorb it on the small lots due to competition.

    I'm thinking the big one will go up though. I run almost half a tank out on it per push. That one I notice.
     
  8. digger242j

    digger242j Senior Member
    Messages: 672

    If you're burning half a tank per push you must be getting paid several hundred bucks, or better. A 40 cent per gallon price difference times a 15 gallon fuel burn still only adds up to $6 extra. Sure, it eats away at the bottom line but I don't think, by itself, it's worth getting alarmed about.

    Where it'll start messing everything up is when it causes a 15% increase in the price of a bag of groceries because the farmer, and the food processing company, and the trucking company, and the bag boy, and the grocery store's snowplow guy all want a 15% increase because of the price of gas....
     
  9. Mick

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

  10. 4 Saisons

    4 Saisons Senior Member
    Messages: 260


    Talk about inflation....

    We already hit 4.5% last January, not including home energy( winter was very cold, so we got some very nice bill this years), Bank of Canada raise the prime rate to 4.5% last week to stabilize the situation.


    Now I see everydays at the news trucking company, and other complaining about how much more they per month, so you can read between the line " sorry be ready to pay more, everything involve burning some fuel"

    I have nothing against this, but where i get mad is when everyone " increase the increase", gas price is over 50% than it was few ago, but like a lot said this only on the percentage of your gas expense ( At worst if you have a 10% of your expense in gas, that turn to be a direct 5% of increase over the year , ) now everybody knows, material and part will be also higher but then again not 15%. Same about insurance.

    If you need a bigger increase than the inflation to keep it up, you may be already not charging enough.
     
  11. 4 Saisons

    4 Saisons Senior Member
    Messages: 260

  12. Sno

    Sno Senior Member
    Messages: 320

    Digger, thats true, and I see no reason to raise them now and risk ticking off customers.

    I was just thinking about the possibility of 2.40 per gallon or something like that.

    I already notice a hit on gas expense from last year. It adds up.

    And yes, it's a 500.00 lot at 3+". (Hourly based)
     
    Last edited: Mar 9, 2003
  13. GeeMC

    GeeMC Member
    Messages: 51

    Interesting Thread!

    We were thinking of a fuel surcharge for next year also, but only for commercial accounts. We didn’t think a surcharge would go over very well with the residential accounts and we would just end up with more headaches. Most people would understand, but there always that few who wouldn’t and when you are trying to grow a business, you don’t want to be losing customers, period. When we are subbing, a surcharge doesn’t matter because the contractors pick up the fuel bill.

    We currently charge per push in our pricing for residential customers and are not under pricing the market area at all. Looking for more flexibility, we tried coming up with a new pricing model based on a per storm basis, but it doesn’t look like it would work. One per storm example we were thinking of is going to a range pricing schedule similar to 6” - 9” = $xx, but we feel we would be losing money with this model so we are trying to create a new per push structure.

    Our residential customers get one price schedule this year regardless of distance. We are now considering two separate pricing structures to help combat the rising costs of fuel and other expenses for next year. One structure would be to give better pricing or “quantity discounts” to the customers in dense areas and the other structure would have standard pricing for the secluded areas. Of course this is all relative to lot size and complexity etc. so technically there is already more than one pricing schedule in place but you would be using two different basis’s when quoting.

    We have found that if you have one customer in a secluded area and have to drive across town or multiple towns to do it, the cost goes up in fuel and you get killed in travel time. When quoting a job to the customer in that secluded area, we would mention that the price would come down x number of dollars if they had three or more neighbors that would be interested. If not, then the price would shift to the “other basis” and have to stay at that structure.

    Doing it in this way allows us to price for fuel increases and other related expenses without actually stating a “fuel surcharge” in the agreement or contract and allows us to grow our business in new areas. Heck, we are already adding another truck for next year and could actually use two more.

    Good Luck!

    Bruce :waving:
     
  14. Sno

    Sno Senior Member
    Messages: 320

    That is interesting Gee,

    I have been working on that same exact idea.

    I've been milling around a flat fee and a surcharge per mile out of my route after that.

    Interesting thought about adding customers in the same area and a discount...

    I actually tried that wth two large comercial accounts, offered a discount on any months that I had both accounts...

    By themselves I knew I could not compete but with two, I thought I could be very competitive.

    I Did'nt win the bid though.

    :rolleyes:

    One of the lots hired a buddy of thiers.

    I'm still perfecting it also. Trying to not get complicated with it as I want to be able to have a quote available on a chart so my phone help can toss out good quotes on the spot from call in customers.

    I hope to have it perfected for next year.
     
  15. plowking35

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

    I added fuel charges to all the invoices for the blizzard, and for the last storm last thrusday. I added up all the fuel costs, and divided it equal among all the commercial customers. Worked out to an extra 20.00 per customer for the blizzard, and 5.00 for last weeks storm. I certainly didnt plan on spending 30% more for fuel when I wrote the contract last fall, some seasonals are 2 yrs old and i ahve a provision for fuel charges above 1.50 a gallon, so I used it.
    No one has complained.
    Dino
     
  16. Pennies from Heaven

    Pennies from Heaven Junior Member
    Messages: 5

    You bet I am going to add a fuel surcharge to my contracts next year! Diesel went from $1.40 to $1.92. I cant eat that any more, not running 2 trucks, 2 salt spreaders, and 2 blowers. I am going to add a surcharge for salt also. It went from $65.00 a ton to $110.00 a ton. Over the years I have slowly built up a stockpile of salt that I keep at my yard for "emergencies". In case the salt yard was closed, ran out of salt, etc. This was a great idea since the price went upso high during a 24" blizzard. They had us by the snowflakes if you know what I mean.
    I will probably add $10.00-$25.00 to each accounts bill to cover the surge in fuel prices, and add the added cost of salt to each bill. You should think about doing it, it won't cost you anything
     
  17. rainair

    rainair Senior Member
    Messages: 153

    Gas price spike surcharge

    I put in my contract, a "gas price spike" clause... at any such time the price of gas tops over the $2.00 a gal range there will be a 10% surcharge added

    if I fly to fla, and the fuel prices go up you can bet your bippy the airline put in a surcharge. my 10% is only added if the price of gas is up that day of snow.
     
  18. sbrennan007

    sbrennan007 Senior Member
    Messages: 350

    To me it's not worth the chance in loosing a customer over a few cents. Figure what the increase is actually costing you per account, and it's not worth it.

    Remember, our customers have to pay more for fuel also, and this is kinda like adding insult to injury.

    Doesn't hurt to let them know that your not going to increase their prices due to the increase in fuel either. Trust me, a happy customer is a long time, long lasting customer, and this in the long run will be worth alot more than a few extra cents a lot or driveway.

    :drinkup: