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Increase in prices

Discussion in 'Commercial Snow Removal' started by iceicebaby, Oct 22, 2012.

  1. iceicebaby

    iceicebaby Junior Member
    Messages: 5

    I have a large commercial account that I have been doing for 5+ years. I have NEVER increased my prices, until now !! I did the increase by 5%. the company is unhappy with that and i would like your opinions on the situation...too high? not enough? Start up cost is alot, gas is higher and i feel this is a good number....
     
  2. grandview

    grandview PlowSite Fanatic
    Messages: 14,609

    Any more foggy on this post and I'll walk into the wall.
     
  3. iceicebaby

    iceicebaby Junior Member
    Messages: 5

    hows that "foggy" the question is what is a reasonable increase if one was not done in 5 years ?!?!?!
     
  4. SharpBlades

    SharpBlades Senior Member
    Messages: 366

    you are'nt unreasonable with the increase, however from the customer's point of view any increase will be unreasonable after 5 years of no increase. Especially if it is a seasonal with last year's light winter.
     
  5. TCLA

    TCLA 2000 Club Member
    Messages: 2,699


    You're living dangerously increasing your price. Consider yourself lucky keeping the work for the past 5 years without showing them a cost savings.
     
  6. goel

    goel PlowSite.com Addict
    Messages: 1,079

    If you want 5 percent more after 5 years you should have learned efficiency to save more than that.
     
  7. TCLA

    TCLA 2000 Club Member
    Messages: 2,699

    We have a winner! :nod:
     
  8. Raymond S.

    Raymond S. Senior Member
    Messages: 513

    Wait a minute. So you're saying the only way to increase margins is to increase efficiency and never raise revenue? I agree we should all be looking for ways to maximize efficiency by investing in better equipment, training, etc. However, the guy hasn't raised his prices for 5 years! Fuel has doubled. Materials have gone up who knows how much. That new more efficient plow is now $7k and Bob plow driver wants a raise. So if 5 years is too short of a time frame to realize a price increase then what is the appropriate time frame. If everyone keeps preaching efficient efficient efficient, and you guys never raise your prices there's going to be a whole bunch of real efficient snow removal companies going broke.
    We raise our prices every year. We buy the most efficient equipment and pay our guys well. I refuse to go through what we do to maximize efficiency just so I can absorb the rising cost of doing business. We're in this game to make money, not just to see how much money we can save our customers each year. Provide excellent service, stay competitive but demand a premium, and you'll continue to attract the right kind of clients.
     
  9. Herm Witte

    Herm Witte Senior Member
    Messages: 553

    While you may be correct in your thinking a smarter business choice would have been to raise the rate 1% per year, a negligible amount. For now, try to sit down with your client and ask for 1.5 - 2% for the next couple of years and see how that works to get you where you need to be. A 5% increase in one season, right or wrong, is throwing an account away in today's market.
     
  10. potskie

    potskie Senior Member
    from Ontario
    Messages: 769

    I agree, We increase our price every contract renewal to cover just that, The increased cost of doing business.
     
  11. WIPensFan

    WIPensFan PlowSite Veteran
    Messages: 3,498

    This hits the nail on the head. Well said.
     
  12. R.G.PEEL

    R.G.PEEL 2000 Club Member
    from Toronto
    Messages: 2,160

    Increases in efficiency should lead to better margins. Every industry should have a slight consistent raise in prices to keep everything balanced. There is not one part of the industry from equipment to trucks, or fuel that is cheaper than it was 5 years ago. They have all gone up and so should price. I feel that a 5% is a large jump in one shot, but nonetheless it is warranted.

    There is a phrase "race to the bottom" which is exactly what the efficiency argument yields. If I go and put twice the blade width on a truck, and in turn plow twice as fast, I should keep my rates the same and take on twice the customers. If I outfit all of my trucks with twice the blade width and cut my rates in half since it takes me half the time, I'm now doing double the work for the same money which is stupid. I think anyone can agree to this analogy, but when they do it to a smaller degree, they feel like a sneaky business genius because they can get the work done cheaper than the next guy and in turn get more work.

    By taking advantage of state-of-the-art technology in any industry you can provide the customer with a higher grade of product. Then, you should be EXACTLY the price of your next closest competitor even if you could afford to do it for half. At a comparable price, the consumer will choose the higher quality. ANYTHING lower than the next lowest price is money that you leave on the table.
     
  13. TCLA

    TCLA 2000 Club Member
    Messages: 2,699

    If it's true that you're raising your rates every year...you are not in a competitive market. Good for you. Beware...your clients are not savvy yet.

    Most clients around here compare Billy Bobs (and hobbyists with equipment) to the higher end snow and ice service providers. And just because a period of time passes doesn't justify a price increase. Not when there are plenty of others in line just waiting to take that work from you for less.
     
  14. PhilFromErie

    PhilFromErie Senior Member
    Messages: 263

    around here 5 point in up in one year would never fly whether you deserve it or not, lots I plowed 3 years ago for 150 or so are now going for 75...
     
  15. PhilFromErie

    PhilFromErie Senior Member
    Messages: 263

    plus after last year its not east getting any price increase on seasonal accounts, don't matter what happened in the past. People have short memories.
     
  16. BPS#1

    BPS#1 2000 Club Member
    Messages: 2,407



    I raised my plow rates 5% this year.... to cover the cost of fuel.

    You gotta tell your customers WHY the price went up.
    My lawn maint prices went up quite a bit for next season as well..... cost of fuel and the expected volatility in the fertilizer market.
    My supplier told me the prices are going UUUUUUUUUUP, we just don't know how far yet.
     
  17. TCLA

    TCLA 2000 Club Member
    Messages: 2,699

    How here is talking about fert?

    Salt prices are the same if not down depending how you buy.

    And there's no way you can approach your client with "my fuel costs went up 5% on your site from last year Joe, so I need to raise your price by 5%".

    He'll fire you just because you don't know simple math.
     
  18. BPS#1

    BPS#1 2000 Club Member
    Messages: 2,407

    Thanks for your OPINION.



    And I didn't get fired, thanks for asking. Got signed contracts in my hot little hands.
     
  19. grandview

    grandview PlowSite Fanatic
    Messages: 14,609

    If you were just talking %'s then I raise mine about 5% every year. Mine are not as big.,but not sure how big a place your talking about. But ,yes you need to raise prices every year because you will not get that lost money back.
     
  20. goel

    goel PlowSite.com Addict
    Messages: 1,079

    Now, I never said "never raise revenue".

    1) In todays market
    2) after the year that most experienced last year
    3) without any increases for 5 years
    4) to DROP a 5 percent increase
    5) with way to much competition
    6) when price wins 90 percent of the time

    is an risky proposition.

    In an ideal world, costs would never increase and we could raise the prices 2.5 percent every year.

    In a realistic world, you have to work with your customers because you are a team, a partnership. Just like you are a partner with each and everyone of your customers, your employee's, your suppliers.

    Now, I would have probibally done something like (FAKE NUMBERS BELOW):
    1 year contract 6 percent increase
    3 year contract 3.5 percent increase
    5 year contract 1 percent increase per year

    That way they have options and you are working with them to limit your increase, but also tying them into a long term contract (hopefully).

    Customers like being presented options in my opinion