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Hourly vs. Contract?

Discussion in 'Business Fundamentals' started by plowin-fire, Feb 13, 2011.

  1. plowin-fire

    plowin-fire Senior Member
    Messages: 196

    After reading here, its seems that most of you have contracts and charge by them accordingly. Others have hourly rates with a set minimum.

    I personally use the hourly rate with minimums and all my accounts have no problem with it. The more is snows, the longer I am there clearing and charging accordingly. Or if we get 2" or so they usually get charged the minimum because it doesnt take me very long, but we still had to travel there and get the job done. Before I took the accounts on, we talked and discussed rates and the management plan, and thus far havent had a problem.

    Whats the advantages of contracts? Is it better to have things written out and signed so they cant come back and say: "You said you would do this for $xxx and yada yada..." More of a risk and liability management program? Is there more profit in the contracting for x amount for 2-6" and x amount for 6-12"? (just using numbers as example). Or is it for ease of billing purposes? I use excel and just type in start time and stop time, and machine used and it figures out the rate and multiplies by minutes.
     
    Last edited: Feb 13, 2011
  2. grandview

    grandview PlowSite Fanatic
    Messages: 14,609

    Either way you should have it written down as to what is expected.Most guys around he don't do hourly. Businesses like to know the final price before you start.
     
  3. cold_and_tired

    cold_and_tired PlowSite.com Addict
    Messages: 1,246

    I have a signed contract for every customer. It states the trigger depth, hourly rates for machinery and labor, when the lot will be cleared by and another page of CYA and legal mumbo jumbo.

    I find the most important part of any contract is a cancellation clause. It requires 30 days written notice from either party before the contract can be terminated. I have equipment leased and need to know that I have the work.

    As far as hourly work goes, I've been trying to get all of my customers away from it. I keep buying bigger and bigger machinery and my hourly rate keeps going up to make up the difference. They see rate increases year after year but don't realize that their invoices are staying about the same.

    I'm trying to get everyone to go flat rate or seasonal.
     
  4. EliteSnow&Ice

    EliteSnow&Ice Senior Member
    Messages: 129

    IMO an hourly rate is a soft way of saying " I am not sure what I am doing, so if it goes bad I can charge you more money." I have about 75% seasonal and 25% per push rate regardless of the amount of snow falls. Some days you make out good with a 2" snow and some days you take it in the butt when you get 16". Its a law of averages though, some years you do well some years not so good. What makes or breaks a season for us is the amount of, or lack of damage to trucks and property. Take out a light plow or nuke a tranny and the seanon can go down hill fast.
     
  5. cold_and_tired

    cold_and_tired PlowSite.com Addict
    Messages: 1,246

    My thinking exactly! My area is STUCK on hourly pricing. I have one seasonal because they requested it just so they have a hard and fast yearly budget. It's easy for guys to come in and steal my accounts at half my hourly rate and spend twice as much time doing the property.

    Every year, I show my customers pictures of our equipment and explain why it is better and faster than the other guys just so they don't freak out at the higher hourly rates.

    I'm trying to get them all just to envision a plowed lot and a single invoice. I don't want them questioning why I brought in a loader or backhoe (obviously faster than a truck but with a higher rate) to do the job.

    I want to bring in the big iron, get in and get out. One price whether I do the lot with a shovel or a 25' pusher. The equipment I use should be none of their concern, unless it's obviously inadequate.
     
  6. plowin-fire

    plowin-fire Senior Member
    Messages: 196

    So by charging so much per push, that only includes clearing the lot/area? Is stacking or moving piles charged hourly then? As outlined in contract? Might have to re think my billing for next year.
     
  7. grandview

    grandview PlowSite Fanatic
    Messages: 14,609

    Yes:salute:
     
  8. plowin-fire

    plowin-fire Senior Member
    Messages: 196

    Sounds good. Do you offer customers different options of billing like hourly or contract or jsut tell them that you only do contracting?
     
  9. grandview

    grandview PlowSite Fanatic
    Messages: 14,609

    Me? They get only one choice. Seasonal contract.
     
  10. cold_and_tired

    cold_and_tired PlowSite.com Addict
    Messages: 1,246

    I think it would be wise to offer a few different billing types but it can get confusing when it comes time to invoice, especially if you have a lot of accounts.

    I have talked with my customers and they all agree that hourly is bad for everyone. It sounds like I am going to a per push contract next year.
     
  11. jklawn&Plow

    jklawn&Plow Senior Member
    Messages: 469

    One real benefit to contract is in Sept I spend $20 at the printer, $35 on stamps, $2 on labels and only gas is to put in the stakes. No calls all fall/winter just go out and handle the snow. The gas can add up but ($870 last year, at $1400 this year).