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Monthly Flat Rate

Discussion in 'Bidding & Estimating' started by whitewash, Nov 27, 2012.

  1. whitewash

    whitewash Junior Member
    from Mn
    Messages: 12

    I do only residential properties. With the last extremely poor season for snow fall in southern Minnesota & this upcoming season not looking to great either. I'm considering asking customers to pay a flat monthly rate for Dec, Jan, Feb & March.

    I know this can be a double edged sword but the way it has been with very minimal snowfall in my area that if I only charge per removal, I simply can't afford to continue doing this service. If I have a monthly, essentially a seasonal rate at least I have X amount of money coming in that I can expect with each of those months to operate with.

    Am I going at this the right way or is this just too much for residential customers to swallow? I'm kind of in a rock & a hard place understandably.

    Any help on this is appreciated!!
     
  2. grandview

    grandview PlowSite Fanatic
    Messages: 14,609

    Another guy out your way is having the same problem. He went seasonal now they're crying because they had to pay for a month and it didn't snow. Your selling an insurance policy to them .If it snows ,you plow.Some give a season price.ex.400.00 or you can try and make the same price seem lower by saying 100.00 per month.
     
  3. sectlandscaping

    sectlandscaping Senior Member
    Messages: 314

    If you go low on a seasonal youll have some problems when you get hit hard. You need some limits in the contract as protection. Such as after so much snowfall x more.
     
  4. whitewash

    whitewash Junior Member
    from Mn
    Messages: 12

    Thanks for the responses fella's!

    How is this example for establishing a monthly rate; If the drive is a $25.00 per removal, monthly rate would be $100.00 which would cover 4 removals. Then anything over the 4 would be an added per incident.

    Then for instance a $35.00 drive would be $105 per month and which would cover 3 removals and anything over would be per incident.


    Am I on the right track?
     
  5. jb1390

    jb1390 Senior Member
    Messages: 710

    If I were a customer, I would ask you-I am paying for 4 events ($100.00) ahead of time. If it snowed only 3 times, I would have paid an extra $25.00 for no service. It it snows 5 times, I would still pay $125.00. What's in it for me? I see where the advantage lies for you........

    Ideally the seasonal rate will be the appropriate per push amount multiplied by the average number of snowfalls (can be a tough number to get..) Some years, the customer wins. Some years, you win. If, over a significant number of years, one party has always had the advantage (compared to per push pricing), then the seasonal rate needs to be adjusted.

    I only do per push because I feel it's fair, and I am only into this part time so I have alternative income to (begrudgingly), pay for my equipment. However, the advantage of seasonal is that it saves the customer money in really harsh years so they don't go broke, and it gives you income in slow years, so you don't go broke. Over the course of say, 10 years, the amount paid for snow removal shouldn't be off very far from what it would have cost per push.

    Perhaps you could have a conversation with them, and agree to adjust pricing and possibly offer free service after XX number of years depending on how average snowfall ends up coming in? Maybe that would help with the initial discussion and the feeling of fairness......
     
  6. whitewash

    whitewash Junior Member
    from Mn
    Messages: 12

    What's in it for them, the peace of mind to know that there is someone that they can rely on is going to take care of their removal in a quality & timely fashion as I always do. As mentioned in a previous response, its essentially an insurance policy. People buy car insurance to cover if/when in incident happens, really no different with snow.

    I'm trying to be fair as possible so I can provide them a service. If I don't have money coming in to be able to operate, there is no operation plain & simple.

    For example; last winter here I only had 3 full days of snow removal. This year it looks like its shaping up the same, can't operate a business on that.
     
  7. jb1390

    jb1390 Senior Member
    Messages: 710

    I wouldn't pay for insurance that would only cover $100 in repairs to my car, and everything in excess of $100 comes out of my pocket. That is not insurance.

    I am not saying that you can operate on 3 days of snow removal. However, the extra charge above 4 events won't fly. You may be able to include something like a blizzard fee, if an event is greater than 12" in 24 hours or something along those lines, but the 5th event costing the same as what they would have paid otherwise is just nuts.

    Do you have records that show the average number of servicable snowfalls per year over the past 10 years? Perhaps someone in your area would be able to provide if you don't.

    If you have that information, you can go to your customers, and explain that you cannot stay in business with only 3 events. If you have the data, and explain that it will average out, and in heavy years they will SAVE money, then you have a starting point.
     
  8. sectlandscaping

    sectlandscaping Senior Member
    Messages: 314

    More like... $400 Seasonal covers 20 events. After 20 events $25 charge per occurrence.

    Therefor if it snows 16xs then the customer gets what they paid for. If it snows 20xs then the customer makes out. If it snows 10xs you make out.

    This way theres risk on both sides.
     
    Last edited: Nov 29, 2012
  9. whitewash

    whitewash Junior Member
    from Mn
    Messages: 12

    That does sound pretty reasonable. Now I just wonder if its too late to approach customers with this if i do decide on a seasonal plan. I held out to see what the season was shaping up to be and hoping it would look more normal, but it's not. Over this coming weekend here its going to be 52-61 degrees to start off December, that's depressing.

    I'm just trying to find a fair/happy medium solution for both sides so I can continue to operate. I love this work and the reason I started my yard maintenance & snow removal business in the first place. I'd hate to have to give up the snow removal portion, but I'm in a real rock & a hard place with these last couple seasons.

    This just shouldn't be the situation that I'm facing in Minnesota but were in a severe drought pattern. Even the lakes around here are 2-3' below normal, a lot or wetlands all but bone dry.
     
  10. gwhalen3

    gwhalen3 Member
    Messages: 99

    The grand dust bowl is back and with avengence...
     
  11. whitewash

    whitewash Junior Member
    from Mn
    Messages: 12

    hows this look so far for my $25, $30 & $35 per drive customers. I added a monthly since its late in the season and also some may just need to pay this way due to individual situations.

    for $25 drives;

    4 months that would include December-March at $400.00 for the season that covers 20 removals with anything over 20x will be assessed per occurrence at the standard rate.

    Paying Monthly would cover 5 removals for $100.00 which averages to $20.00 per occurrence and/or 1 free removal per month. Any removals over 5 would be assessed per occurrence at the set rate.

    $30.00 drives;

    4 months that would include December-March at $480.00 for the season that covers 20 removals with anything over 20x will be assessed per occurrence at the standard rate.

    Paying Monthly would cover 5 removals for $120.00 which averages $24.00 per removal and/or 1 free removal a month. With any removals over 5x would be assessed per occurrence at the set rate.


    $35.00 drives;

    4 months that would include December-March at $560.00 for the season that covers 20 removals with anything over 20x will be assessed per occurrence at the standard rate.

    Paying Monthly would cover 5 removals for $140.00 which averages to $28.00 per occurrence and/or 1 free removal a month. Over 5 removals would be assessed per occurrence at the set rate.


    I also have verbiage for blizzard situations with exceedingly heavy snowfall...
     
    Last edited: Nov 30, 2012
  12. grandview

    grandview PlowSite Fanatic
    Messages: 14,609

    My seasonal states,from Nov1st to Apr 30th ,if it snows. I plow. One price and that's it.
     
  13. JD Dave

    JD Dave PlowSite Fanatic
    Messages: 11,046

    Your not going to like hearing this but the best time to sell seasonals is after a really bad winter. People are not going to switch mid season. You already made the agreement so your going to have to stick with it this season. It's only Nov, my gut is telling me were in for a good one. Hope for a bad winter and then try to sell your seasonal service keeping in mind the lean years like these. It will make it much easier to convert your customer.
     
  14. badgerman

    badgerman Member
    Messages: 32

    If you want to charge seasonal you need to act like it is insurance not pre pay for so many times then its x amount of dollars for added times you plow. If you asked me as a customer to do this no way in hell i would Why pre pay you like that? Now if you had a set rate per month with no added amount to pay if it did snow a lot then i would be inclined to try this route because i may end up saving money in the long run. You will not sell anything like that you have to take the risk also as they will be doing. it may not snow once and you can laugh all the way to the bank but next year when it snows you may loose some.. Its a risk on both parties. How ever if you want steady income then its the way to go but no one will pre pay then pay more if it snows more you have to show that you are risking something also.
     
  15. PushnSnow

    PushnSnow Junior Member
    Messages: 13

    I agree with many of the others that seasonal needs to be sold as insurance. Therefore you lose a little if it snows alot and have operating money if it doesn't. The only thing I want to add to that is that you should have a mix of seasonal and per push accounts. My goal is 40% seasonal, and 60% per push. This set's you up to have some income in winters or months that have no snow. Heavy snow years some of your losses from seasonal can be made up with the profits from the per push contracts. This sets you up to be a little more stable with your cash flow than just being seasonal or per push.
     
  16. Mike N

    Mike N Senior Member
    Messages: 148

    So for any of the monthly agreements, what happens if it snows 19 times in December and only once in January?
     
  17. Mike N

    Mike N Senior Member
    Messages: 148

    I like this.
     
  18. whitewash

    whitewash Junior Member
    from Mn
    Messages: 12

    I like that as well & I also like how you pushnsnow have yours figured with the ratio between the 2.

    I know its too late this year to change anything but I'll just have to suffer through another dire winter, its horribly bad here. But I do appreciate the feedback everyone's given and it definitely gives me different aspects to consider for down the road.