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Going from flat rate to tiered pricing?

Discussion in 'Bidding & Estimating' started by starspangled6.0, Dec 11, 2013.

  1. starspangled6.0

    starspangled6.0 Senior Member
    Messages: 270

    Hey guys-



    I've been running this business for 4 years now. I've always used a per-time pricing system, and obviously on the big (6"+) storms we go out 2 or 3 times, and charge per-time. One of my advisers who also does snow plowing is telling me I should charge a flat rate per time, and then use a tiered system as the snow piles up. For example, we charge someone $30 for their standard 2" snowfall, then $10 every 2" above that. Is it worth it to switch? Sure, we can make more money, but isn't the headache of measuring each storm and explaining to the little old ladies who depend on you that you're going to triple their cost on a large storm?
     
  2. maxwellp

    maxwellp PlowSite.com Addict
    Messages: 1,112

    I do it that way, .5 to 3 is a Base price. 3.1 to 6 is Base X 1.35 ish. 6.1 to 9 is Middle price X 1.25 ish.
    Over 9 inches is Base price + xx Per hr.

    I go as many times as it takes, the other day we had 5 inches of power and I just let it finish. If it was very wet snow I would have done some of them 2x.
     
  3. starspangled6.0

    starspangled6.0 Senior Member
    Messages: 270

    OK. I truly love the simpler way of just staying per time, but the money sure is tempting. Next year, how would you notify your clients that you're changing? A couple of them pay in October for the whole year, so I'll leave them alone.
     
  4. maxwellp

    maxwellp PlowSite.com Addict
    Messages: 1,112

    I do not know, you may just start new clients with the new system. Old ones could end up with a big rate increase. This is just how it is done around here for the most part. I changed it up by taking out the 9-12 one because it was just to much snow for a nailed down price and the number would scare people. We do not see many over 9 inches anyway. When the snow is about 4-5 is the best for me charge more but does not take that much longer to do.
    But this system will save you in a big storm. Last year we had a 21 inch very wet storm with High wind and monster drifts. I took me 80 hours to clean my 8 hour route. But I could charge for it, some of the really bad country driveways It took me 4-5 hours to dig them out from the road with a skid loader.
     
  5. Buswell Forest

    Buswell Forest PlowSite.com Addict
    from NH
    Messages: 1,668

    K I S S. If you need more money to make a profit, charge more. But don't make it more complicated for yourself or the customers. That's just crazy.
     
  6. Dogplow Dodge

    Dogplow Dodge 2000 Club Member
    from NJ
    Messages: 2,995

    KISS.... Yeah ! I loved them as a kid. ACE, GENE, PAUL & PETER.... I wanted to be the cat man drumming....:dizzy:But then I got older and realized they weren't really good musicians, but more of an "entertainment" group.... and moved on..

    Back on topic:

    Can someone please
    explain to me why I would make more on a "tiered rate"? I currently charge per visit, and throw in a clean up, or two now. How does lowering my price for returned visits make me more money ? Maybe I just don't understand exactly how you guys are doing this.

    Maxwellp says he's charging this way...

    I do it that way, .5 to 3 is a Base price. 3.1 to 6 is Base X 1.35 ish. 6.1 to 9 is Middle price X 1.25 ish.
    Over 9 inches is Base price + xx Per hr.


    So, let's make it simple and say that the job is $100 for base price. So he goes there, and it's 4" deep. He charges $135 ($100 x 1.35). if it's 8" deep, he charges $168.75 ($135 x 1.25ish), and if it's over 9" deep, then he gets the $100 plus XX per hour?

    So how does this make him more money ? Not bashing, I'm just trying to understand ?????

    Me, with the same job...

    Base price is $100 up to 6". I show up at 6" deep and I charge $100 then I leave. It continues to snow. 3 more inches falls, and I have to come back where I charge $100 more. Now I've got 2 pushes @ $100 =$200

    Problem with my way is that sometimes I lose, as I'm pushing 6" of snow and it takes me longer to do, yet other times, I'm pushing 2"-3" and I'm out of there in no time, so essentially it's a wash, time wise.

    Now if I show up, and there's 12" on the ground, I get 2 pushes, as my rate is up to 6" for one push, 6" to 12" two pushes, and >than 12" is customized pricing based upon actual time spent there.

    Am I doing something wrong ? Am I not making enough money doing it this way?:confused:
     
    Last edited: Dec 12, 2013
  7. maxwellp

    maxwellp PlowSite.com Addict
    Messages: 1,112

    If you are at per push with a 6 inch limit you should have plowed it at 6 not waited until 12. If I came in to a driveway and charged for 2 pushes for 12 inches but only did it one time I would hear about it. Now with my way I am not saying that I will be there at 6 and 12. It is up to me and I can do whatever I have to to get it clean.

    I would have problems with charging for 2 pushes but only doing it once. What you are really saying it you have tiered pricing also because you are not really doing it per push.
    Your tiered pricing it just different .1 - 6 $100 6.1 - 12 $200.

    With that pricing I would lose allot as we get a lot of 4 inch snow falls. So it really depends on how it snows in your area and what you can do to make it easy and maximize your income for the snow you get. There really is no right answer here.

    I would like to have triggers, but that is just not done here. I 2 inch trigger with a final clean up charge would make it very simple for me. And make a lot more.
     
  8. starspangled6.0

    starspangled6.0 Senior Member
    Messages: 270

    So is the general consensus that I can make roughly the same money, as long as I come out twice or three times on the 6+" storms? I really do prefer the simplicity of per-time, and it saves me and my clients the headaches of a new pricing system. I'm not in it for pure profit; I want to offer the best service to my clients and get the best return for myself and my employees.
     
  9. maxwellp

    maxwellp PlowSite.com Addict
    Messages: 1,112

    It all depends if you can charge every time you go plow it. If you have one price to up to 6 inches, I don't think it will go over well if you charged 3 times for 10 inches. So you really have tiers already .1-6 one price and 6.1 and above you may do it 2 or 3 times and charge for that.
    I think we are just looking at a corn field from the different sides.

    So what really makes the difference to me is that I break it off at 3 inches because I think it becomes more work and I should get paid more.
     
  10. starspangled6.0

    starspangled6.0 Senior Member
    Messages: 270

    OK. I think I'm pretty confident in sticking with our system, seeing as it's been established and has a successful track record with our current clients, albeit a small track record. Thanks so much for the advice guys!
     
  11. Buswell Forest

    Buswell Forest PlowSite.com Addict
    from NH
    Messages: 1,668

    IMO, pure profit and excellent service come directly on the heels of keeping the employees happy.
    They all 3 go hand in hand.
     
  12. Dogplow Dodge

    Dogplow Dodge 2000 Club Member
    from NJ
    Messages: 2,995

    You're right in the sense that I'm tiered, although I never looked at it that way, but how do you make more $$ than my per push, in the same scenario. Again, I must be dense as I just don't see how it makes more $$ by percentage increases. If it does, then I'm switching now !Thumbs Up

    In all fairness, if you move twice as much snow, shouldn't you be paid twice the rate ? In extra fairness to your clients, you're charging them less because you've been there already, which makes you more valuable as a provider of services, as you're discounting the job for taking on more work. I don't charge for two full pushes, although I can if that's the agreement with the customer, but I normally lower the second push cost by a percentage as a "discount" on their invoice, for being there longer, and providing twice as much work.

    When you mentioned that you lose money at 4" snowfalls, as that's what you get a lot of. IS that because when you clear a event say at 4", and it snows again at 4", you get to charge twice the imaginary $100 rate we're discussing ? If you did it my way, (which I'm not suggesting you do) during a 6" snowfall, you would only get paid for one push, whereas in your scenario, you get paid for your 4" plus your percentage extra from 4.1 to 6".

    Am I following this right, or am I out in right field scratching myself ?:confused:
     
  13. starspangled6.0

    starspangled6.0 Senior Member
    Messages: 270

    We might be starting to split hairs here. What the goal is: customers that are getting a fair deal; companies that are getting paid a fair rate; and employees that are earning enough income, while not being pushed too hard. My take on all this is: if you're getting paid what you consider fair, and your clients are happy, then you're doing alright.

    We also have to consider what the regional pricing systems are. It's rare that you'll find a small-to-midsize company here in MN that does a tiered system (that I know of), so it would be out of the norm for us to switch.
     
  14. maxwellp

    maxwellp PlowSite.com Addict
    Messages: 1,112

    :dizzy: "what regional pricing systems are " / Bingo
    We are all right. I like to about what others are doing to see if there is a better way.
     
  15. Chineau

    Chineau Senior Member
    Messages: 447

    The majority of my driveways are pre-payed for the winter one price plowed each time there is a storm 2 or more inches. I have a price range for small to large driveways and folks seem to like it as well i have a number of customers who are with me year round for a complete property service program. The commercial work is mostly by the hour or fixed monthly contract, doing it blended seems to be working for me at least that is what bookkeeper and monthly balance sheet says.
     
  16. Alaskaforby4

    Alaskaforby4 Member
    from Alaska
    Messages: 74

    Lots of ways to collect on those Pennies from Heaven. We are mainly residential and the way we make out money is from our minimum charge. Which is $30 bucks. Customers always ask about your hourly rate but in reality you are only in their driveway for a few minutes. So it can be tricky, one competitor here only charges $60 pr hr, but has a $45 min minimum. Now I like making money but I'm not going to rape the customer if it only takes me 7 minutes to do a bunch of their little driveways. I do not need to charge as high and still make a couple hundred an hour. Another competitor charges a strait $120 per hour ($2pr min. $30 min.) This is great but scares potential customers with a high hourly and very rarely am I plowing ONE customer for an hr. So anyway what I have come up with and is working great for my area is
    $30 minimum
    $2 per min less than 30 min.
    $1 per greater than 30 min.
    $90 per hr.
    This keeps me right in the middle of my competitors and is working great. I have read a million ways to charge and its just whatever you're comfortable with, makes you money and keeps your customers happy and coming back!
     
  17. MajorDave

    MajorDave Senior Member
    Messages: 947

    Amazing - as I am reading this, I get a text from a customer reviewing their pricing (7:33am)…I am so confused now with the above, I'm goin to sell the plow! Guess I am doing what DogPlow does, but as StarSpangled said - it really is tiered - just looking at it differently.

    This one is 4 houses on a shared driveway about 50 yards long - straight - 4-6in - $100, 6-10" - $150, 10+ $200. They're happy - me too…pretty simple for me. Guess as long as all are happy, it works.
     
  18. Chineau

    Chineau Senior Member
    Messages: 447

    That is the trick, are the customers happy? I have some that have been with me for the five years I have been at this and that is my benchmark if they don't come back I have done something wrong,figure it out and correct. If you are trying to build a business you have to look at the long game anyone with a shovel can make a buck, can they do it repeatedly that is the question.
     
  19. Dogplow Dodge

    Dogplow Dodge 2000 Club Member
    from NJ
    Messages: 2,995

    OKAY,

    Experimentation time here.

    Got several calls for the upcoming storm. Tried the "tiered thing" and so far, it's been well received.

    For example.

    $45 to do a driveway with a short sidewalk to the front door. This is 0" to 3" as he wants a 2" trigger... no matter what I'm there if it snows 2" or more.

    So.

    $45 up to 3"
    $60.75 from 3.1" to 6" ($45 x 1.35)
    $82.01 from 6.1" to 9" (60.75 x 1.35)
    $110.72 from 9.1" to 12" (82.01 x 1.35)
    Anything over 12" is $30 per inch extra... (wild ass guess there)


    Is this fair ? Is this how you guys are doing it?

    When I told him the price, I basically said....that it was $45 up to 3" and then 3-6 it was 35% higher, then 6-9 it was 35% higher than the previous cost and so on...

    I don't know. Never did it this way before, as it just seems complicated because the numbers never come out even.


    All of these figures are "Pre tax" subject to a .07 tax addition to the guvener:D


    Feedback would be appreciated, either positive or not. Again, treading unknown waters with pricing here.
     
  20. MajorDave

    MajorDave Senior Member
    Messages: 947

    So.

    $45 up to 3"
    $60.75 from 3.1" to 6" ($45 x 1.35)
    $82.01 from 6.1" to 9" (60.75 x 1.35)
    $110.72 from 9.1" to 12" (82.01 x 1.35)
    Anything over 12" is $30 per inch extra... (wild ass guess there)


    So, the price is for each time you show up?

    Meaning:
    -You show up and it is 7" --- That is $82.01
    -You come back later and there is 4 more inches - add $60.75
    TOTAL for that storm and that contract = $142.76

    And is it also try that: (Same storm as above which was 11")
    -You show up once with 11" on ground and…
    TOTAL = $110.42

    So is that what we are saying (Do it either way it works out above depending on your day or night) or are you saying I will come out however many times it takes to get the 11" off the deck for a total one time charge (for this 11" storm) at $110.72?