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Pricing Strategy for Bulk Salt

Discussion in 'Ice Management' started by Patrick34, Sep 2, 2008.

  1. Patrick34

    Patrick34 Senior Member
    Messages: 101

    We all know the crazy situation with bulk salt. I have tons of proposals I am sitting on as I am not sure how to price my salt applications yet. How are we supposed to price anything when we do not have our cost yet (i.e. what will cost be for bulk salt). OK, we are getting in the middle of the "selling season" so here is my strategy. My vendor at my shop that handles trash removal sends me a bill every month and it is slightly different each month depending on fuel prices. Why can't we do the same with salt. I ran this by a few of my good clients, and they understood the issue and said that would be acceptable.

    I am going to price salt as XX per ton based upon YY cost per ton. Should the price per ton increase or decrease, that cost will be passed on to the customer. I think some customers will be OK with that, some not.

    In my opinion, just too big of a risk now to price salt any other way. How can I quote salt at $150 per ton applied (example) when salt could very well cost over $200 per ton in January if we have another busy year. Just too much of a gamble.

    Any thoughts?
     
  2. elite1msmith

    elite1msmith 2000 Club Member
    from chicago
    Messages: 2,762

    heres the problem with ur statagy.... its a good thought, but

    every person, knows the cost of fuel/gas...they can drive by a gas station and see it go up and down

    how are you going to prove it to them what the cost of your product did? if i showed my customers last year and invoice for salt that i paid 48 per ton, and charged 170 to apply it in 10 mins, they would flip out, telling me i ripped them off

    heres another problem, ur bidding against some other company right? do u think they are going to put it in there bid, as salt goes up ..you pay more? i got news, half the ppl your bidding against are turning in bids with last years numbers , and have no clue that cost has doubled... your potential new customers dont care... they want a low price, ecomonmy is hurting -

    the only thing you can do , is raise it allittle, ride it out, plan on making very little off of salting, and controling your cost, with the type and QTY of material that you use
     
    Last edited: Sep 2, 2008
  3. Snowgeek

    Snowgeek Junior Member
    Messages: 27

    Patrick, I would agree with your pricing strategy. One needs to cover oneself against the apparent volatility of salt prices this coming season. Let those other contractors who are either too ignorant or are endless hopefuls get the unrealistic property owners and/or managers contracts. They'll both, almost certainly, lose. Do not let yourself get caught up in that hype. Communicate with your customers of past. Clip articles from the web, newspapers and even Plowsite. Educate them. You will soon be the hero without having put yourself and your company in jeopardy.
    Just my opinion...
     
  4. bike5200

    bike5200 Senior Member
    from Ky
    Messages: 437

    Can you get salt for the up coming season?
     
  5. elite1msmith

    elite1msmith 2000 Club Member
    from chicago
    Messages: 2,762

    its great in theory , im not trying to be a downer... but i bid against alot of ppl... i can see me not having a set price, for salt, and winning any bids.... as aresult of my compeditors giving a set price, even at little profit. the fact is , salt can still be purcahsed around 100 a ton, and you can chage 200 , there is still profit too be made, just not as much
     
  6. 3311

    3311 Senior Member
    Messages: 332

    I agree. Cover yourself throughout the contract.Let the other contractors use a set price and get it handed to them when salt gos to $ 300.00 a ton. If you can buy a years worth of salt right now that is the only way to set your price for this roller coaster season.
     
  7. TCLA

    TCLA 2000 Club Member
    Messages: 2,699

    It is a big risk, but clients (whether existing or potential) do want to know what they are going to pay throughout the winter for chems. These people live and die with their budgets. Many seem to understand the dilemma, but it's the rare exceptional client that will allow pricing fluctuations into unknown territories. The only way to be confident with your pricing is to purchase your years' supply now if you can find it to assure against shortages and increases.

    If they are receptive and agreeable, you could get creative with an indexing in an attempt to cover unforeseen or expected salt costs. I would use a sampling of current pricing and availability from local supply yards as the reference, as opposed to the BLS index. The concern with this index is the four month delay on information, and as of recent it appears that salt is only +\-4% higher than last year! Remember that this is a local/regional problem only. Most of America does not experience a real winter or the costs involved in snow and ice management.
     
  8. elite1msmith

    elite1msmith 2000 Club Member
    from chicago
    Messages: 2,762

    i just dont see how your going to show a customer that you paid 100 per ton , and then charge 200 for ten mins of work.. you and me both know how much time and preperation, plus having a loader.. the list goes on ... but in the customers eyes, they will never see that, they will simply see a charge for 200 per ton applided , then an icrease of $10 , because salt went to $110 -

    and again, i dont see how if your bidding against someone, that you can pull this off. i have to already price at the buttom just to land the account. alot of companies dont even know this is going on, and didnt raise there prices from last year. think about which company they will go with , the one that provides the cheapest rate, with out a surcharge

    i love the idea, i just dont think its going to get very fare. instead you need to control your cost by buying your product now, and looking into other products to control your "cost" - im looking into liquid
     
  9. Vaughn Schultz

    Vaughn Schultz PlowSite.com Addict
    Messages: 1,565

    You got it man ;)
     
  10. Longae29

    Longae29 PlowSite.com Addict
    Messages: 1,954

    You have to be proactive about the whole thing really. We sent out renewal bids in July to many of our customers assuming that salt was going to be more expensive this year, a few days after we sent the proposals out i made phone calls informing them of the situation with the availability and price of salt, of course I would never tell them what the price of a ton of salt was last year, or what we are going to get it for this year, i just told them we are looking at an increase of about 65% over last year.

    If you provide a dependable, reliable service, and didnt run out of salt last year for your existing customers they should receptive to the fact that the prices have skyrocketed for salt. We are just going to have to be more careful in keeping an eye on the bottom line this year, controlling wasted salt, make sure the flaps on your v-boxes are in the right position, make sure the spinners and feed rates are set right, make sure that the routes you establish for your trucks make the most geographical sense, put the right truck with the right salter on each job. There is still plenty of opportunity for everyone to make plenty of money, and hopefully with a hurdle like this it will weed out some of the low ballers who take jobs away from those of us that do their homework and actually give the customers what they pay for.
     
  11. Ipushsnow

    Ipushsnow Senior Member
    Messages: 314

    I agree that their are a lot of guys out there that have no idea whats going on, they are out bidding salt at $100.00 per ton not knowing its going to cost them $150 pet ton!!!
     
  12. Snowpower

    Snowpower Senior Member
    Messages: 636

    Sent my contracts out today and it states right on there Roadsalt is $320 a ton applied.

    Im paying $160 a ton or 8 cents a pound. I charge 16 cents a pound applied, and 25 a bag applied for sidewalk icemelter.
     
  13. elite1msmith

    elite1msmith 2000 Club Member
    from chicago
    Messages: 2,762

    wow, i dont think you would ever land a bid around here for that price

    what were you chargign last year?
     
  14. Snowpower

    Snowpower Senior Member
    Messages: 636


    13.5 per pound and was paying about 130 a ton.

    None of the sites I bid require anything near a ton of salt.

    My average application price is 175 per treatment and that includes 3-4 bags of icemelter for most sites.

    Bagged product is 4 dollars a bag for everyone around here. Bulk....if you can get it is 130 a ton retail, and not much less in bulk quantities.

    The disadvantage bagged users have faced in the past is becoming less of a disadvantage as bulk pricing rises faster than bagged.

    You remember me ranting about having to disclose the Per Ton price on contracts in another thread? This is why. That 320 sounds scary as hell....but I bet my application pricing is competitive. It has to be. Im not paying much more for salt than anyone else in my league.

    And I only included the per ton price in my contract because its required by the mamangement company I work with.

    I mean if you aren't charging 250 to 320 a ton around here.....you must be getting a major deal on product, or are willing to use it as a loss leader.


    Least around the Midwest.

    I'm thankful I am gauranteed product....If I pre pay, of course.
     
  15. elite1msmith

    elite1msmith 2000 Club Member
    from chicago
    Messages: 2,762

    im still around 100-125 per ton bulk , with most places using over 1 ton , its the difference between the size accounds
     
  16. Snowpower

    Snowpower Senior Member
    Messages: 636

    You are applying for 100-125 a ton this season?
     
  17. elite1msmith

    elite1msmith 2000 Club Member
    from chicago
    Messages: 2,762

    thats what im paying,

    too many contracts out on bids to say how much i will need, i hope around 500 tons
     
  18. cretebaby

    cretebaby PlowSite Veteran
    Messages: 4,162

    i would agree that this is going to weed out the competition and i sure hope it does as long as it isnt me LOL

    i think you will see the bagges price rise very quickly as soon as the season starts, this product is more likely purchased when needed than purchased ahead like bulk and that is if you will even be able to get bagged product. these salt company a going to slow way up bagging if the price of bulk is nearly what they will get for the bagged

    just my 2 copper pennies
     
  19. Snowpower

    Snowpower Senior Member
    Messages: 636

    Well you have to be well over 200 a ton applied where last year you were applying for that 100-125 a ton and getting for 60.

    Theres not much I can do. I refuse to do it for free and need to make a certain profit, and have a decent handle on what the local competition is paying.
     
  20. elite1msmith

    elite1msmith 2000 Club Member
    from chicago
    Messages: 2,762

    im around that number.... you have to remember, my compition may not be raising their price... so i kinda am spliting the difference in price , lets say