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Seasonal contract with cap

Discussion in 'Business Fundamentals' started by Brant'sLawnCare, Sep 27, 2012.

  1. Brant'sLawnCare

    Brant'sLawnCare PlowSite.com Addict
    Messages: 1,754

    Do any of you do this? I had a large potential new customer ask me for a seasonal with 3 different amount options, each with a cap. Meaning if it snows more than they are paying for, it would turn into a "per push" type of a contract. Do you have a salting cap seperate, or does it just go by the number of inches that fall? I'm new to this type of contract.

    Thanks,

    Brant
     
  2. John143

    John143 Senior Member
    from NEPA PA
    Messages: 254

    I have not done any contracts like that. However, I did get two different customers asking for pricing like that so far this year. It's been a weird bidding season to say the least. What I usly do in that case is start off with your per-push price X the number of storms in your area for the year. Thats your seasonal price. Then just give them the per-push price that you used to give them the seasonal price. Any case, good luck. that's the way I do it.
     
  3. merrimacmill

    merrimacmill PlowSite.com Addict
    from MA
    Messages: 1,822

    This is preferable and you should consider yourself lucky to find a prospect that actually wants or expects that over a unlimited contract.

    I'm not sure what the total inch thresholds are in the spec you have, but lets say the first one is all inclusive shoveling, plowing, & salting up to 65" of snow. Determine how many times you would plow the lot with a season total of 65". Base that on the trigger amount. So if you have a 2" trigger, and your doing your job correctly by showing up at every 2", then you would theoretically plow the lot 32.5 times. Multiply that by your per push price for the lot, add in your salting and shoveling using a similar formula and there is your price.

    To find the price for the next threshold, divide the 65" seasonal number by 65, and now you have your "per inch rate". So if the next threshold is 100" (just guessing), then multiply your "per inch rate" by the 35 additional inches that you would get in a 100" season.

    As we all know, if its not a 24 hour location, we can sometimes let it build up a bit more and push off plowing longer when the business is closed for the night, thus reducing the total number of plowing events for a contract. Some people I know figure that they will only push at every 2" about 75% of the time, thus reducing the contract price. But this is so situational, and becomes a slippery slope pretty quick if you aren't really confident in what your doing.
     
    Last edited: Sep 27, 2012
  4. grandview

    grandview PlowSite Fanatic
    Messages: 14,609

    No cap plow till it stops in April.
     
  5. Brant'sLawnCare

    Brant'sLawnCare PlowSite.com Addict
    Messages: 1,754

    Thank you Collin, I truly appreciate all your help.

    They want a 1" trigger, but don't want the whole lot to be plowed all day long. Just certain parts each time we get around 4" or so, to keep entrances accessible and such. I'm guessing we will be able to plow about 1/2 - 2/3 of the lot during regular business hours, and the rest during the overnight.

    I will do some figuring and see what I come up with.

    Brant
     
  6. lilweeds

    lilweeds PlowSite.com Addict
    Messages: 1,178

    CBRE does that with their seasonals. Basically they have a complex formula if it doesn't snow you get slightly less, and if we get a lot you get more. I can't find the exact wording, but if I do I'll post it!
     
  7. JT SNOW

    JT SNOW Member
    Messages: 74




    Complex Formula.....:laughing::laughing::laughing:.....Ya..its called try to Screw the contractor at every turn.....:dizzy:
     
  8. dfd9

    dfd9 PlowSite.com Addict
    Messages: 1,475

    Then it isn't really a cap.

    I'm with GV, seasonal is for the entire year. Go with 3 year contracts and it averages out.
     
  9. Brant'sLawnCare

    Brant'sLawnCare PlowSite.com Addict
    Messages: 1,754

    That's what I like to do. But, I am just proposing how the potential client wants their work done.
     
  10. grandview

    grandview PlowSite Fanatic
    Messages: 14,609

    Wait,They want a seasonal price for plowing up to say,100 inches.Then any time it snows above that they will pay per push?
     
  11. MahonLawnCare

    MahonLawnCare Senior Member
    from Ohio
    Messages: 851

    I have some set up like that. I just figured out how many events (plow, salt, walk clear, walk ice melt) i averaged from the previous 3 winters and come up with my seasonal price. If it snows above the number then it goes into a per push .
     
  12. IDST

    IDST Senior Member
    Messages: 934

    We set up our seasonal contracts for 45 inches. then there is an additional charge of 1/6th the contract price for every six inches above that. Works good here but everywhere is different. I take what i would charge for a driveway and multiply it by 10. We get 10-12 two inch snow events on average per year so by telling the customer this and charging them a seasonal rate based on 10 events it sounds like a better deal to them. the 45 inch cap on the seasonal price covers you a$$ when we get more. like 2010
     
  13. ross3031

    ross3031 Senior Member
    Messages: 108

    I've got a couple contracts set up this way. Normally base our contracts on 18 pushes, the one company that likes to set a cap sets it up for 14 pushes for the contract (the cap) and then any push after that is a "per push" price. So its pretty simple, base the contract price on 14 pushes and then anything after 14 pushes is per push.

    This is a GOOD THING. A normal contract says plow from the first event to the last event. Contracts with a cap guarantee you wont get screwed in a heavy winter...
     
  14. grandview

    grandview PlowSite Fanatic
    Messages: 14,609

    Did you make sure it per push or per storm? What happens if you plow 5 times in 24 hrs in the first wk of Nov. So that would leave 9 times for the rest of the season.
     
  15. ross3031

    ross3031 Senior Member
    Messages: 108

    Set up per push, so ya if something big like pushing 5 times in 24 hrs the first week of Nov happens, then the contract has 9 pushes left. Everything after that is an extra price