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In this case, how much should I pay a sub...

Discussion in 'Commercial Snow Removal' started by mister_snowplow, Nov 10, 2004.

  1. mister_snowplow

    mister_snowplow Senior Member
    Messages: 173

    He will be plowing two driveways for me (10 minutes apart). One driveway I priced at $40 and the other at $35. Just plowing, no salt, no snowblowing.

    I've read here that subs are paid anywhere from $45 per hour and up? The two driveways combined should take him around 30 minutes (I think).

    How would you handle this?

    Any help is greatly appreciated. :waving:
     
  2. DJL

    DJL Senior Member
    Messages: 343

    Sorry if it seems like I'm picking on you but...

    How did you come up with the prices for the driveways in the first place? If you knew you were going to be use a sub then why not price the driveways with that in mind? Doing it after the fact seems like, well, stupid :confused:

    I dunno, to me it seems as if the answer is simple enough. You need to pay your sub enough for them to want to do the job but not enough so that you don't make your profit. Yes, no? Am I missing something here?
     
  3. mister_snowplow

    mister_snowplow Senior Member
    Messages: 173


    DJL,
    I'm new to plowing...just starting this year. I went out and got myself more accounts than I can handle...rookie mistake. I'm not going to drop the accounts, so I figured I'd hire a sub or two to help out. Look, I didn't think I was going to use a sub till I realized I was in over my head. As far as pricing, I measured the driveways (square feet) and then based off of the pricing I've seen here on Plowsite I came up with the prices. Is my pricing wrong?
     
  4. SteveVB

    SteveVB Member
    Messages: 66

    You are working backwards it seems, but your taking in $75, lets say you mark your sub work up 50% so the sub should be getting $50.

    sub cost ($50) x your markup of 50% (x 1.5) =$75 billed ($35+$40) so at a minimum I would suggest $50. Are these the only jobs for this sub? If so you may need to pay more- few will start the truck for $50.
     
  5. mister_snowplow

    mister_snowplow Senior Member
    Messages: 173

    Thanks for the advice SteveVB,
    You say that I am working backwards, but how would you do it differently? I would greatly appreciate if you walked me through your process. I've never done this before, so I really don't know the best way. :help:
     
  6. SteveVB

    SteveVB Member
    Messages: 66

    Well, what I meant by working backwards is knowing your costs ahead of time. You priced the jobs and now your going out to figure the costs.
    Im not a plow contractor, and havent priced a plowing job in my life. Im just an hourly sub when it comes to plowing, but its all business. In my other businesses I know my costs and I mark them up according to the work. If it costs me x dollars in materials,subs and labor then I charge a customer X plus my O&P (overhead and profit) percentage. You need to look back over your books and see what you need to charge. Pricing is always hard and there are few hard and fast rules other than you cover all of your fixed and variable costs and you make a profit. Local markets are important- overhead costs and profit margins can vary greatly depending on a huge amount of variables. market, competition, experience,salesmanship, service, reputation, etc.
     
    Last edited: Nov 11, 2004
  7. mister_snowplow

    mister_snowplow Senior Member
    Messages: 173

    SteveVB,
    You're right I am working backwards, but like I said...I bit off more than I could chew. I can't raise the price now. Next year I will know to markup in advance. Thanks for the explanation and thanks for the patience. Without people like you helping us rookies we'd really be lost. I appreciate it. :waving:
     
  8. mister_snowplow

    mister_snowplow Senior Member
    Messages: 173


    This makes sense now. Next time I won't make this mistake. Thank you SteveVB! :waving:
     
  9. 1996Ram2500

    1996Ram2500 Junior Member
    Messages: 5

    I think you have enough knowledge to figure this out on your own. I've never plowed before, but I do own a business.

    Some factors:

    Do you have other jobs the Sub has to drive to? I hope you can keep this guy busy for about 10 hours.

    What size plow does the sub have?

    Where I live, I see signs for plow trucks that say "earn $65 a hour", I believe that is for a 8' plow.

    So, your Sub has to drive to Job 1 (10 mins) plow (+15 mins), then go to Job 2 (+10 mins) plow (+15 mins) then onward to Job 3 or back to help you at your site (guess +10 mins driving).

    So, that's an hour, based on your pricing, I would pay him $55 an hour (7.5' plow I'd pay $50, 7' plow I'd pay $45). You still make money. Sometimes I find you have to take a hit to keep your employees happy, but in this case you make a little. That's good.

    I hope I've helped a bit.
     
  10. mister_snowplow

    mister_snowplow Senior Member
    Messages: 173

    1996Ram2500,
    Thank you, this does make sense now. :waving:
     
  11. DJL

    DJL Senior Member
    Messages: 343

    Mister Snowplow,

    In my opinion (..and realize this is MY opinion), yes, you are pricing the job wrong. Some people may agree with it, I don't. I believe your price should be directly dependent on your expenses and your desired profit. Try and look at it like this...

    Let's say my expenses are $1200/mo. Expenses would include anything from fuel, truck/plow maintenance, & materials all the way to phone calls, your hours performing maintenance, stamps, etc. Knowing this you should have a basic idea of what your business needs to generate a month for your business to just break even (theoretically). Now, say you plan on three plowable events per month. Next, say you plan on having 10 accounts. For simplicities sake I'm going to assume they are all identical driveways. Performing some simple calculations...I figuring I need to charge a minimum of 40 bucks per driveway for my expenses. That way at 3 events that would give me 120 bucks times 10 account would yield my 1200. However, I want to add in my profit. I want to clear say 15 dollars per driveway per push. So, I'm going to charge 55 bucks. That way at the end of the month, assuming I do get my three storms (among other things) I will be billing the ten accounts for 165 a piece. I'll then receive 1650 dollars...less my 1200 in expenses that's 450 dollars I've just made( assuming your expenses are still 1200). Let's say it takes you 10 minutes per driveway, including travel time from your shop/house and back. That's 300 minutes of work and 450 dollars or approximately $90/hr for your time. Then I need to report that at the end of the year to Uncle Sam, so maybe I'm really taking in $55-65/hr after taxes.

    Now, this example has holes all over the place in it. My advice would be to go down to the local book store or library and pick up a book on writing a business plan. This would get you a start on learning about budgeting, pricing, etc.

    IMO, and I'll get a ration of crap from people on this site, but oh well...you shouldn't price your accounts according to what "market value is" or to what "I saw on plowsite" because they don't mean SH!T to your business. Plowsite is a place to ask and receive advice. But who is saying the advice is always sound advice. You need to take it all in and evaluate it for your business.
     
  12. mister_snowplow

    mister_snowplow Senior Member
    Messages: 173

    DJL,
    This message was very helpful, thanks. I did price the job wrong and I realize this now. I agree, my price should be directly dependent on my expenses and I didn't take any of this into account, from now on I will. I will go out and get a book on how to run a business...thanks for the advice. :waving: