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In bad economy, low-ballers rule.

Discussion in 'Commercial Snow Removal' started by cjasonbr, Dec 10, 2008.

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  1. cjasonbr

    cjasonbr Senior Member
    from Mass
    Messages: 635

    I think i've received close to 8 calls from people apologetically canceling me. They say they found a better rate and usually it blows mine away. I lost a commercial lot that someone bid $40 on. I'm losing my $35 driveways, which is our minimum, to people who bid $20.

    I call the people back and tell them that the only reason that person can beat my rates that badly is because they probably don't have commercial insurance and don't pay taxes. I could charge $20 a driveway too if I didn't have any overhead i tell them. They're apologetic and pretty much tell me that they don't care.

    My commercial car ins premium increased this year too for some reason. What the hell, i'd need 60 driveways to break even at $20 a pop. :rolleyes:

    I think it's a combination of people not wanting to spend money in hard times, and others trying to make a few extra bucks in hard times.
  2. ABES

    ABES PlowSite.com Addict
    from MN
    Messages: 1,322

    Weve taken a hit this year too. The guys with just 1 truck and plow that work out of there house without insurance can do it so much cheaper without rent on a shop and insurance payments.
  3. ColliganLands

    ColliganLands PlowSite.com Addict
    Messages: 1,854

    i had problems signing contracts for my first year my minimumis also 35 dollars and people were telling me its too high. but my insurance is close to 2 grand and other expenses etc. so i wound up with 4 driveways and then signed on with a town.
    times are tough i guess but i still cant justify 20 bucks a drive no fing way
  4. LoneCowboy

    LoneCowboy PlowSite.com Addict
    Messages: 1,760

    I told you that last year and everyone here (except people in michigan) poo-poohed me saying it wasn't about price.

    You either need to find a better way to do things (more driveways same time)


    Find out how to get the insurance police after them. (maybe they need to be registered as a business. Tractors & SS's here (colorado) need plates (really expensive plates). I have the number on speed dial for the DMV investigator when I find one without them.

    Write a letter to the editor to the newspaper, etc, etc, etc
  5. cjasonbr

    cjasonbr Senior Member
    from Mass
    Messages: 635

    Great Lone Cowboy. So all i need to do is start doing driveways for $20, but have them be all next to each other. Why didn't i think of that?

    Seriously though, there's just nothing you can do to compete with people operating illegally. It's up to the consumer to differentiate, and unfortunately most aren't knowledgeable enough to tell the difference, or know there is a difference.

    Does homeowners insurance even cover uninsured contractors? I think that if an uninsured plow-truck you've contracted slides through your garage door then it's your own fault for hiring a contractor without insurance and i don't think that homeowners ins. covers it.

    Edit: I found this tidbit about homeowners ins:

    When you as a homeowner have an un-licensed and/or un-insured contractor/handyman doing work on your property, you put yourself at tremendous financial risk. You run the risk of being subject to anyone, or even all of the following if the contractor is injured while working on your home:

    * Medical bills for injured contractor/handyman
    * Lawsuit by contractor/handyman
    * Increase in insurance policy cost or cancelation of policy by insurance company

    No coverage under homeowner's policy. Some homeowners believe it is safe to use an uninsured contractor, assuming that any damages incurred would be covered under their own insurance policies. However, this isn't the case. Most homeowner policies require that any work to the property be done by licensed contractors; coverage is often specifically excluded for damages caused by "bootleg" contractors.
    Last edited: Dec 10, 2008
  6. grandview

    grandview PlowSite Fanatic
    Messages: 14,609

    Actually this happens in good and bad times. You need to be thick skin in this business. Just thank them and tell them if they need your services in the future you'll be available
  7. Sydenstricker Landscaping

    Sydenstricker Landscaping PlowSite Veteran
    Messages: 3,882

    Whats wrong with a one truck guy working out of his house?? That is what I do and have plenty of insurance and pay taxes. I got 2mill GL and 500K commercial auto on the truck and the trailer. My GL is 600 for the year and 1400 is for the auto. So dont go kicking in us one truck no shop guys doors in!!!!!! Just cause you got a shop and 2 trucks, doesnt mean you are the best thing since sliced bread. I like having everything here, cuts down on wasted time driving to a shop, and I for sure dont have to worry about theft as much. And I bet my garage is just as nice as some people's shops are set up, granted I cant fit an enclosed trailer in there. Around here, anyway, seems like all the big guys with the big shops and fancy shmancy trucks are the ones driving the prices into the dirt!!!!!!!!!! I think it is more of a I need a ton of work to keep my guys busy and trucks paid for, so lets bid low and get a bunch of work. I see it happen around here all the time. Some of the prices those guys give out, I wouldnt even put my boots on for. So it isnt always about the big flashy crap
  8. cjasonbr

    cjasonbr Senior Member
    from Mass
    Messages: 635

    Yea It happens every year. But this is the first year that good customers apologetically leave for a lowball price. I think they know im right about it not being a good idea, but they just chance it anyways. I think in some ways they don't want me to tell them what they already might suspect that the guy probably doesn't have insurance etc etc.

    I think the economy has a lot to do with it this year. More people lookin for extra money and more people lookin to save money.
  9. grandview

    grandview PlowSite Fanatic
    Messages: 14,609

    I think if gas prices had gone up to 5.00 a gallon it would of weeded out a lot of guys this yr and a few from starting next yr. It may of brought the prices up for us that survived.
  10. BSDeality

    BSDeality Senior Member
    Messages: 736

    you're dead nuts on that. In the fall I was cherry picking accounts cause the guys who do this for supplemental income didn't find it lucrative enough. Now that gas is down under $2/gal again they're all back. Lost an account the other day 'cause the old guy came back and wants to plow again'. I wouldn't budge on my price, because I told her that 'thats the price no matter what gas does this winter.' she couldn't understand that and went with the cheaper guy for $6 less. Our excellent reputation, honest wage and professionalism didn't out weigh saving $6. I told her to call if she needed anything in the future if it didn't work out with the other guy and we would be happy to help. I can't wait to see how long it takes for her to get plowed out this winter.
  11. RLM

    RLM PlowSite.com Addict
    Messages: 1,270

    Just because some of us work from home doesn't make us legit contractors. I have 3 million liability coverage 5 trucks, a wheelloader, & 2 skidsteers all commercially insured. I bought this place so I could work from home. We looked at commercial properties, we ended up moving & buying a portion of a farm (house & barn). I can work from the shop I have (36 X 80), & not have neighbors to complain (apple trees & corn don't have phones yet). This is a seasonal business to justify paying rent on a commercial property year round would be VERY tough & would make it very tough to compete. BTW with a $ 35 min here people would laugh at you, there are guys doing it Residentials for $ 150/season.
  12. mksuwndr

    mksuwndr Junior Member
    Messages: 20

    Ive seen the low ballers come in and under bid alot. I also see you getting alot of your accounts back because these guys take on too many accounts and dont have the equipment or manpower to complete the job correctly and on time. It happened here last year and low baller was up to a week behind on accounts. Sometimes it takes time for people to see you get what you pay for.

    just my .02:salute:

    MIDTOWNPC PlowSite Veteran
    Messages: 4,425

    If you are doing ok its hard to see how bad it might be for the $20 guy. Remember he is trying to "survive" you are trying to run a business. Its not the same really.
    There are all different levels of them, some are using the snowblower they have, some are throwing the last $2000 at the truck to get a plow, so they dont miss a payment.

    We are noticing it on our residentials, someone in the neighborhood got a snowblower and does the whole court. They probably have no idea they made us mad.
    I was thinking about getting in contact with him and hireing him.... even at his rates that he charges, I can still make $15 a drive and not have to work... pretty easy

    Everyone wants to try to be a business owner, be your own boss, come on its the greatest, no sometimes it SUCKS.
    Wait till my new guy has a christmas party to go to, or his blower pukes.

    Just try and make it easy for them to come back to you if they need you, other then that not much you can do.

    You have to think sometimes, if you feel you have it bad, think about the other guys.
    I own a computer store and its cut throat and even worst now that gas is cheap, people will drive 400kms for a door crasher. I have 3 other computer guys in town, that all buy their parts from me, now isnt that stupid? 1 is store!!! we say "others will come and go we are here to stay" and "some of our best customers, get their friends friends, neighbor whos a computer IT guy to fix it"

    MIDTOWNPC PlowSite Veteran
    Messages: 4,425

    YES - and they wouldnt all be able to now think, well im use to spending whatever on gas so now I have an extra $20 to save on my commute, so I can buy a plow/blower.

    Wait till it spikes up again, they will have to install puke buckets at the pump
  15. DCSpecial

    DCSpecial Senior Member
    from IL
    Messages: 408

    Yep, a friend of one of our customers had some work done by someone who wasn't insured and his employee either cut his leg/foot really bad or partially off with a string trimmer with a brush disc on it......homeowner got sued by the injured employee.

    Another customer hand an employee of a carpenter cut all but his thumb off his hand while building a library in his house.
    Very important to make sure the contractors have the proper coverage to protect yourself.

    Not snow plow related, but a lot of towns around here are getting strict on allowing construction work or any work for that matter (even lawn mowing). You have to get a license to work in the town, require a copy of your coverage, bonded for 250k-500k+, refundable deposit of 2-5k to ensure you don't mess up the street or right of way, etc..
    That definitely weeds out a lot of smaller people doing it themselves w/o the proper insurance, etc..
  16. cjasonbr

    cjasonbr Senior Member
    from Mass
    Messages: 635

    LOL. Now that i've done something pro-active can i go back to complaining? haha. Sent this to the local paper. I probably just wasted 20 minutes of my life writing it.

    To whom it may concern:
    I am a snow plowing contractor working in western MA and i just wanted to send you a quick story idea. In this line of business the pricing is very much varied, and upon working in the business it is very apparent that there are two types of snow plow contractor: Insured and not insured.

    Snow Plowing is an unlicensed profession, so nobody is overseeing anybody to make sure they have the proper insurance like is required for Plumbers, Electricians.. etc to be licensed. The additional insurance to carry a 800 lb steel blade on the front of a vehicle, and commercially plow driveways is very significant. Liability insurance is an additional expense. Just as an example my commercial insurance for my 2 trucks is close to $500 a month and my liability ins. is $800 a year.

    Many, many plow-contractors simply insure their truck just like anyone else would insure their car with basic insurance, attach a plow to their truck and call themselves a plow company. Obviously any damages they may cause would not be covered under a basic auto policy. The result though is a very minimum overhead,and their pricing is significantly lower than companies with the proper insurance. I've seen many people charging $20 for driveways on signs on the side of the road and wonder how they break even if they have proper insurance.

    I've done a very limited amount of research into the consequences of using an uninsured contractor and from what i can ascertain most homeowners policy's classify them as "boot-leg" contractors and specifically exclude coverage if one is hired. Accidents do happen, especially when you throw in snow, ice and poor working conditions that are typical to this kind of job. If a boot-leg contractor is who caused the damage, then it is insured by nobody. If he hits the gas instead of the break and puts a whole through the garage, who's going to fix it? The guy that charges $20 a driveway? I doubt it. hes out of business now because he just smashed his truck through your garage and insurance wont cover it because he wasn't insured to plow snow! Homeowners wont cover it either.

    I've been getting slammed this year. My former customers are apologetic when they canceled their service, they had been customer for many years and praised my work, but said they had found a lower price, often times so low that i can't believe it. I don't think they realize what they are getting for that lower price. Often times i try to explain to them what kind of overhead a properly insured plow company, but i don't want to look like i'm just scrambling to keep their business.

    There are all kind of other aspects to this topic too:
    - The homeowner is actually liable for any damages. So the boot-leg contractor could actually sue the homeowner for any damages they caused. Even if the homeowner wins they're homeowners insurance premium goes up.

    - There are a number of factors that have made uninsured, boot-leg contractors more rampant than usual this year.
    1) Bad economy and people looking to make an extra few bucks so they throw a plow on the front of their truck and start a plow company
    2) Bad economy and homeowners more willing to accept the lowest offer to save money.
    3) The recent drop in gas prices is a BIG reason. For boot-leg contractors fuel is their biggest expense, so now that fuel is so low they're coming out of the woodwork.

    I wish people were more informed. I have a minimum charge of $35 for any driveway. Often times people will switch to a guy that will plow it for $20, but they don't realize that $15 just cost them millions in insurance coverage and left them with none. It happens very, very often.

    I genuinely hope you find this story intriguing. I think it would be a tremendous service to inform people of these happenings. I don't believe most people would jump at the lowest price anymore if they knew what they were really buying.
  17. Advantage

    Advantage Senior Member
    Messages: 766

    Great job. It will take a lot of effort on our part to educate our clients and the public on this issue but it is important that we do so.
  18. Hunter9

    Hunter9 Member
    Messages: 64

    Stick to your guns, driveways here run between $25-35 for the most part. I just picked up 2 from lowballers that were doing them for $15. Both customers were not happy with the shoddy plowing. When I asked how long they had used them; both were first year using their respective guy. Both told me that I was high, I said that the cost to plow snow is much more than people think. Fuel, maint, ins, time, etc all cost money. I told them I would not short change myself and more importantly my customers. I perform a service to my best ability and try to excel at exceeding customer expectations. I cater to a specific type customer, I plow, shovel, spread salt (sometimes the customers) and communicate with them often to address any questions/concerns they may have. I let the low ballers fight over customers that lower the value of a the service we provide to $10-$20. Work less make more money, profit and success is almost never measured my the amount of driveways you plow. I do a 3 hr route and make more profit than most running double that.

    Last night I had a customer (2nd year) tell me that in 10 years (and 5 other plowers) of having their large driveway done that I was by far the best they have ever had and take better care of them then they expect. BTW, their price will go up again next year.
    Last edited: Dec 10, 2008
  19. Dirtboy953B

    Dirtboy953B Senior Member
    Messages: 204

    I lost several bids this year for salt to people putting it down for $100.00 a/ton.....I can;t even buy it for that.
  20. RLM

    RLM PlowSite.com Addict
    Messages: 1,270

    They aren't putting down a ton, there putting down 500 lbs. Don't you know the pickup v boxes can hold 10 ton. It is an industry problem, not just localized either.
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