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How do you calculate your fuel surcharge?

Discussion in 'Bidding & Estimating' started by Plowin in VT, May 28, 2008.

  1. Plowin in VT

    Plowin in VT Senior Member
    Messages: 233

    To those of you who charge a fuel surcharge to your customers, how do you calculate it?

    Do you quote with fuel @ today's rate
    Calculate fuel used going to/from site & used at the site
    Difference in fuel price x number of gallons used

    Also, do you add it onto your seasonal contracts, or only on your per push ones?

    As much as I do not want to charge a fuel surcharge, I might not have a choice but to start charging one this winter.


  2. Jbowe

    Jbowe Senior Member
    Messages: 167

    Evan, people are only going to pay so much to have a drive plowed so your best bet would be a fuel surcharge. Personally I think the best way is to use the price of fuel right before the surge then tack on the surcharge. For instance lets say you were paying 2.30 a gallon 4 months ago and today your paying 4.07. Thats a 1.77 difference in four months. I would charge a surcharge of about 16% of what the plow job is. So if you get 50.00 for a drive the surcharge would be 8.00. That should cover you for your fuel expense above what is normal. People will be less to balk at a surcharge of 8 dollars then they would if you tried to charge 60 dollars for a 50 dollar drive. Make sure on your invoice that you show the increase as a fuel surcharge because everyone is aware of whats going on and I think most will understand. This is just my opinion but I think its sound.

    Messages: 47

    $3.99=12% $4.99=15% 3% for every $1.00 a gallon increase
  4. Flipper

    Flipper PlowSite.com Addict
    from CT
    Messages: 1,180

    That doesn't make sense and that is why people get upset.

    First you need to calaculate how much fuel you used per drive or account. To do this divide the gallons used in a storm by the number of accounts. Then calculate the percentage fuel has increased and apply to the account. I calaculate all drives the same, but commercial accounts I watch the odometer and fuel guage to help calculate.

    So to make it simple say you have 100 driveways and use 50 gallons of fuel in a storm. That's 1/2 gallon per account. If fuel went up $1.00/ gallon since your bid then you would surcharge .50 per visit to the account.

    Where I am fuel has gone up 1.20 since April when my contracts are signed. So for mowing I have a calculation and when winter comes I will calculate for that.

    One thing to remember, fuel surcharges really need to be in the contract to have validity. They should be spelled out how they are calculated etc. Otherwise you will have trouble collecting and not have legal means to back you up.
  5. Jbowe

    Jbowe Senior Member
    Messages: 167

    Flipper a 50 cent per visit surcharge is not even worth doing if your trying to spread the surcharge out over the total amount of accounts you have. Each drive has to be taken as if its a stand alone or it makes no sense to even charge it. I will try to explain it this way. Everthing right now from the gas at the pump to the food your putting on your table is being affected by the high fuel charges. If you have to go to the mechanic to have work done on your truck or plow the parts you use also have fuel surcharges now. To try and prorate is not an effective way to do this. Lets say you pull into someones drive prior to the increase and you drop your blade. Right out of the gate you blow a hydralic line. Do you charge the line off to the job your at or do you spread the cost out over all of your accounts? When your plowing and if a neighbor where you are plowing asks you to plow do you charge the same as you do the one your doing or do you give them a break because your already there? Personally I do not discount because I might break something while doing the job and how do you justify spreading a break down over 50 accounts for a one time plow? Just some of my thoughts and if your happy the way your doing it then thats all thats important. But I am in this game to make money, not give away everything because I am afraid I might lose an account.
  6. mullis56

    mullis56 Senior Member
    from Indiana
    Messages: 824

    I wouldn't even charge it why piss someone off? Just bid accordingly....then if it jumps you can maybe, I stress maybe, consider it!
  7. Flipper

    Flipper PlowSite.com Addict
    from CT
    Messages: 1,180

    Well I stopped using UPS cause they were charging $5.00 per shipment surcharge. That means each delivary truck was making an extra $1000-1500 a day. Now I understand that is the end truck and that they have bigger trucks and planes but do they math.

    You shouldn't be making money on a fuel surcharge, if you do its taxable income. You should just be offsetting the increased pump costs from when you estimated. That's what I do, I am making the same money I made at the start of the year on each job while having my increased fuel costs covered. Finally my example was just simple math, I am charging more then that, plus it is per trip. So for lawns it 4 trips a month, for plowing its every trip in a storm.

    That's the correct and more importantly fair way to do it.
    Last edited: Jun 27, 2008
  8. T-MAN

    T-MAN PlowSite.com Addict
    Messages: 1,363

    Thats fine and dandy, but don't mislead your customers by telling them the fuel surcharge is a fuel surcharge. Your method would be called raising your rates and pretending its a fuel surcharge.
    Flippers method is correct for a "fuel surcharge". The hydraulic line would fall under "cost of doing business", not a "fuel surcharge".
    Last time I checked a fuel surcharge was to cover the increased cost of "fuel" ?
    If your charging exuberant percentages and pawning them off as fuel surcharges it sounds like you need to raise your rates.
    I plan to raise my rates this year as well. Salt will be increasing heavily, theres no way I can add 30-40% to those rates and pawn it off as a 'fuel surcharge".
  9. Jbowe

    Jbowe Senior Member
    Messages: 167

    Todd, no one is saying to charge 30 to 40% and then pawn it off as a fuel surcharge. One the other hand a surcharge should be enough to cover the increases we have all been experiencing. Right now here in Alaska regular unleaded is 4.49999 per gallon and deisel is puching the 5 dollar mark. Thats almost double what it was at this time last year. I just heard today that oil broke the 140.00 per barrel mark and the are projecting 200 by the end of the year. Well with that in mind we all need to rethink how we are going to be chargeing for these increases.
  10. Plowin in VT

    Plowin in VT Senior Member
    Messages: 233

    That's exactly why I started this thread. I hate it when companies charge me a fuel surcharge, however with the price of fuel being as unstable as it is, I have no idea what I'll be paying tomorrow, no less come Feb or March. I need to cover myself, and not charge too much based on "what if's".

    Has anyone done a salt surcharge due to the price fluctuations on bulk salt, or do you usually build enough profit in to cover it?

    Thanks for everyone's input!

  11. Flipper

    Flipper PlowSite.com Addict
    from CT
    Messages: 1,180

    My fuel prices are almost the same. I think I can get regular for 4.40 and diesel is around 4.90

    If you use my method you can adjust with the fuel costs throughout your whole year, still make the same profit percentage that you did when you made the contract and then adjust the price the next year. I know my snow only contracts, which I am a doing now through Nov, will see price increases, salt increases and by the time I am plowing a fuel surcharge.
  12. elite1msmith

    elite1msmith 2000 Club Member
    from chicago
    Messages: 2,762

    here is the formula

    take ur rate of R and multiple it by 6 then divide by 12 multipy again by = x

    then take R mutiply it by 2 then times X = and that will tell you what you should be charging last season
  13. Chevy03dump

    Chevy03dump Member
    Messages: 97

    Don't forget, that if you place a $ amount that your surcharge is based on, if fuel drops below that price (lol), you should pass on the reduction, just as you would pass on the increase.

    I think this is a positive to make sure the customer understands this. It reinforces that you will only pass on what you have no control over.
  14. Snowpower

    Snowpower Senior Member
    Messages: 636

    Lol. Yeah. Sure they will.

    Fuel surcharges are a scam from the get go, you dont think these gypsies are gonna give back do you? Comon.
  15. QuadPlower

    QuadPlower PlowSite.com Addict
    Messages: 1,056

    As I post this it is mid July. Diesel is at $4.79 and Regular bounces between $4.05 & $4.15 daily.

    IF a fuel surcharge is going to be used by your company, then 1 it has to be in the contract and to figure it has to be just like FLIPPER said above.

    Know how much fuel you use from the end of one site through the end of the next. Most residential drives should use no more than 1/2 gallon of fuel. When I bid the job fuel was $4.05 and as I plow it is $5.05. I now pass on a fuel surcharge of $.50 to that customer.

    Commercial accounts would use more fuel, therefore the charge would be higher.

    I used one residential customer as an example. If you have 100 then I would hope that they are closer together so you don't burn the 1/2 gallon used in my example every time.

    Here's one for you.
    Lets say last year you were running a '90 Chevy truck that got 8 mpg pushing snow. Now this year you are running a '08 Chevy truck that gets 16 mph pushing snow. You are now using half the fuel then last year but the price has doubled so you should be breaking even. You should still increase your rates due to the truck payment, but not a fuel surcharge.

    If you break a hydraulic line dropping the plow you have problems. I would think that it would break raising the plow. Anyways, if you break something on your truck that is your fault. Charging the customer because something broke on their property is criminal.

    It is July. Bids will be going out in the next couple of months. Take the time, figure everything in to what it cost YOU to do the bid and adjust your rates accordingly. You should make enough money so you don't have to worry about charging a fuel surcharge. What we should worry about is how much its going to snow, but that’s another discussion.