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Minimum Billing On Per Time accounts

Discussion in 'Business Fundamentals' started by PlowGuyDoug, Aug 24, 2003.

  1. PlowGuyDoug

    PlowGuyDoug Junior Member
    from 55346
    Messages: 2

    Up here in Minnesota, a lot of the commercial plowing is done on a "per-time" basis. When we get an average winter of 50 to 60 inches, life is good. When it snows alot, life is great. When it doesn't snow, life sucks. Actually, when it doesn't snow much, there really isn't much life!

    Here's what's happening - we have had 6 out of 7 below average years, and last year no plowing until late January. Usually, a bad year is cancelled out the next year. That hasn't happened for several years.

    I'm trying to talk the commercial accounts into a guaranteed minimum of one plow per month, because I can't afford another winter with no snow, or no snow until January.

    Has/does anyone else out there add a "minimum billing amount and/or minimum one-plow charge" for their "Per Time" commercial work?

    Thanks for any and all advice/suggestions,

    PlowGuy Doug, a new member!
     
  2. wyldman

    wyldman Member
    Messages: 3,265

    Seasonal pricing is the way to go,but it will take some work to sell it.It benefits both sides,as they get a fixed price for the season,and you have a guaranteed income to cover you expenses.Sell it like an insurance policy.They are paying to have you on standby all winter,and it is a great way for them to fix costs and budget for the snow season.


    You can also try to sell them on paying for a few pushes a month in advance (non-refundable),but it does not work as well as seasonal pricing.It's hard to actually bill for something you didn't do.
     
  3. PlowGuyDoug

    PlowGuyDoug Junior Member
    from 55346
    Messages: 2

    Thanks for the reply!

    I, too, like seasonal pricing; I use that for residential work - apartments, townhomes, and driveways.

    I'm asking about the commercial work - strip malls, office buildings, etc - which traditionally and to my knowledge, has always been "by the time."

    We usually average 16 to 20 pushes a year; but the last several years have been way below average.

    Thanks again for your reply; I'm all ears if you have any more advice!
     
  4. Mick

    Mick PlowSite.com Veteran
    from Maine
    Messages: 5,546

    A minimum pushes per month might be a hard sell, especially since they will see this as only benefitting to you. I think I would have a hard time selling that around here, too. I have had better luck with seasonal as it sets a certain amount they will pay regardless of how much it snows. You might try selling seasonal along these lines - Figure out how many pushes you want per month to meet expenses based on an average snowfall season. Add 10%, then multiple by the per push charge. Sell this as a seasonal. Put in a clause for excessive snowfall - ie: exceeding 25% over average. Show them how high your setting the amount for that clause to kick in. They are impressed with how you're looking out for them. Also, they remember that they've been below average for years so it won't happen. Either way, you're covered. Don't make all your accounts seasonals. Either way, you win.

    Just sell the seasonals as insurance and a way for them to budget expenses - you could even talk about how the odds are against having another below average year.

    For seasonals, I get one payment in November. Not everyone will work that way but for my clients that do, it's a way to get it over and not worry about snow for another year.
     
  5. Mick

    Mick PlowSite.com Veteran
    from Maine
    Messages: 5,546

    Your second post was put up while I was typing. Mine are mostly residential.
     
  6. wyldman

    wyldman Member
    Messages: 3,265

    I've always found commercial stuff liked the seasonal stuff better,as it gives them a fixed snow removal budget for the season.
     
  7. EZSnow

    EZSnow Senior Member
    Messages: 205

    a good mix

    I only have a half-dozen accounts of my own, but I sub quite a bit, and I get to hear him whine about this frequently. As I go out more on my own, This is the model I plan to use:

    When it snows, we incur expenses- fuel, wear and tear, labor for shovelers, and subs. Lets say it'll cost $500 to cover those expenses for all of the seasonal contracts on the list.

    In order to cover those expenses, there should be enough per-push accounts to cover these expenses plus the expenses incurred on the per-push accounts, preferably a touch more.

    In this model, we aren't scared of snow because a snowfall is still profitable, but no snowfall is a loss. If you have to plow everything twice, you incur all the expenses twice, but you also get to double-bill (music to a plowguys ears) the per-push accounts, and your still covered. Gone is the disincentive for snow!

    It works in my head- how does it sound out loud?

    10-4 on the crummy MN winters!!
     
    Last edited: Aug 26, 2003
  8. Lawn Lad

    Lawn Lad Senior Member
    Messages: 407

    EZ Snow, I believe your logic is sound.

    On the per push contracts, there is nothing wrong with asking for a "Snow Ready" fee. You provide an emergency service and you incur expenses regardless of the snow. You might then charge 1 plowing at the beginning of each month. If it snows and you plow, they've already paid in advance. If it doesn't snow, you keep it. This assures that you are stable and ready to perform the service when Mother Nature dictates.

    I would think that this is an easier sell if you have less snow in a market.

    Ultimately I think seasonal is the way to go. Try selling seasonal contracts on the long term, rather than for just one season. Either you or the customer could get burned. You could offer two types of seasonal contracts, one that has a limit of plowings included before pricing reverts to a per push price and then a price for unlimited plows. Make the 3 year price more attractive than the 1 year price. The contract with a limit doesn't really matter since you're protected on the high side.
     
  9. wyldman

    wyldman Member
    Messages: 3,265

    Like Lawn Lad said,selling them a smaller contract with a limit can be a good starting point,as they don't have to fork out as much money for an unlimited one,and you at least have some guaranteed income to cover your expenses.

    Take an average of how many pushes you do a year,and then go a little less.It should still work out to more than you would make in a slow winter.
     
  10. wyldman

    wyldman Member
    Messages: 3,265

    Re: a good mix

    It doesn't give you any guaranteed income,as your still counting on it to snow.No snow,no income.
     
  11. EZSnow

    EZSnow Senior Member
    Messages: 205

    I base this theory on the idea of steady, consistent income being the goal.

    In my example...
    you still enjoy the guaranteed income of your seasonals, but the drawback of a seasonal account is that a snowfall causes reduced profitability. If the reduction in profit for each snowfall is recovered by an equal increase of revenues through per-push accounts, it doesn't matter if I'm sitting on the couch or in the plow truck, the money is the same. I have a job, when it snows, I work, when it doesn't, I'm lazy. I make the same $$ either way.

    The only downside is the idea that "I'm out here because this is what I do, I'm not making any more money, I wish it hadn't snowed"

    Basically, as it has been said, a balance is best... I'm just trying to systematically find the BEST balance!
     
  12. Lawn Lad

    Lawn Lad Senior Member
    Messages: 407

    You may not necessarily achieve this balance on each account, but rather on a spread of accounts. Some per push to cover your variable trip costs and your seasonals which let you think about sitting on the couch.

    The other way to cover your variable costs per customer would be to add salting, only charge on a per app basis or add sidewalks, on a per occurrence basis.

    Therefore, your seasonal plow contract with or without limits gives you fixed income while everytime you go out you're making a couple of bucks on shoveling/de-icing.
     
  13. wyldman

    wyldman Member
    Messages: 3,265

    I apologize,I misread your post,and thought you were talking about per push accounts only.Sorry for any confusion.
     
  14. EZSnow

    EZSnow Senior Member
    Messages: 205

    No problem, wyld- it's sometimes difficult to understand everything in a world of charachters.

    After reading Lawn Lad's post, I feel I may have not been totally clear, either. I don't mean mixing billing within one account, but having a certain ratio of per-push to seasonal accounts that allows an even stream of profit. With straight per-push, it sucks if it doesn't snow... with straight seasonal, it sucks if it does!

    BUT- with some thought, the perfect mix might be attainable

    :alien: I don't know what this guy means, but he's kinda cool and I've never seen him used!
     
  15. wyldman

    wyldman Member
    Messages: 3,265

    I know.Sometimes I'm cooped up in the office all day,doing work on one PC,phone on one ear,and Plowsite on the laptop :D It's easy to misread,or misunderstand something every now and then. :dizzy:
     
  16. BRL

    BRL PlowSite.com - Veteran
    Messages: 1,277

    LOL It is funny when that happens. I'm reading the thread and trying to figure out what wyldman means with his no guaranteed income post, because guaranteed income is what I read.

    PlowGuyDoug, I agree with wyldman's comments that seasonal or minimum charges are easier to sell to commercial accounts, because they like to have a budget to work with, instead of unknown costs popping up.
     
  17. cutntrim

    cutntrim PlowSite.com - Veteran
    Messages: 248

    What I've been doing is seasonal contracts for plowing and per application for salting. Hopefully the salting makes up for the added expenses of having to go out a lot in a heavy winter. I also give a flat seasonal price for residentials, which I collect in advance in full.

    My problem is that my snow customers have been converting over to annual property maintenance contracts, which eliminates the per application salting since it's part of the overall annual contract. So, recently I'm definately in the crowd that does NOT want a lot of snow/ice over the winter.

    Time to quote some new properties on per push/per hour and per salt app.