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Setting up seasonal contracts

Discussion in 'Bidding & Estimating' started by Sudsy81, Nov 12, 2008.

  1. Sudsy81

    Sudsy81 Junior Member
    Messages: 7

    He everyone, I'm new to this part of the business and was wondering if anyone could help me out? Just wondering how you setup a seasonal contract for snow and what you base it on so that you possibly don't get burned if it snows like crazy. Any help would be much appreciated.

  2. azandy

    azandy Member
    Messages: 73

    I'm against seasonal contracts but if you need to do one for the customers sake, figure out the job. If the job should take an average to plow say an hour. Figure the average snows per year that you will have to plow. Add up the forcasted hours. maybe add a few for good math and charge your rate. Usually this is high. You might think good, I'll make more money. Chances are you won't get the contract or if you do, the customer might say, well, it only snowed 6 times and you figured 20. I should get a refund. If you bid it lower to get it, you can easily get burned with a big winter. I've found over the years by charging per plow or per hour, it is more accurate for both you and them. They are happier and easier to retain for the long term. Also we are able to get a lot more work from them year round if they don't feel they got robbed from you in winter.
  3. redman6565

    redman6565 PlowSite.com Addict
    Messages: 1,411

    In order to do an accurate seasonal contract you have to know the average trips you make during a winter season, how much (inches) snow falls on average per each "snowfall". If you dont know this then it will be difficult to cover yourself.
  4. PLCI

    PLCI Member
    from Maine
    Messages: 31

    For our company seasonal contracts are an important part of our portfolio. We balance the amount of fixed contracts vs. per storm contracts. Our fixed contracts are 3 year but we do have a couple of 1 year fixed contracts. The 3 year contracts guarantee income in “low snow” seasons (provided they are bid properly) and they are locked up for 3 years so there’s less running around trying to get the contract signed. The liability is that in a “high snow” season you run the risk of going into the red. the hope is at the end of the 3 years your extra income in the “low snow” season will offset the loss in the “high snow” season. 1 year contracts are tough to bid you need to make sure you cover your costs that season because there’s no guarantee that you will get it back the following season.

    The first step like AZANDY mentioned was to find out how many events you average per season. Check with your local dept of climatology, let them now the area your in and request records for the past 5-10 years from Nov 1st to May 1st. We get it in Excel format and it is broken down by day. The information will give you an accurate average # of events for your area and the average total snow fall. Then estimate what it would take to plow the total avg. events and you have your 3 year price. The 1 year price would be estimated off of the highest recorded snowfall or an average of the snowfall totals that are above the “average total snowfall” (we use this # as a cap for a 3 year contract)

    I would recommend looking into SIMA (snow and ice management association) They have a lot of resources available and a vast network of members to pull information from.
    Hope this helps; it’s a huge subject to tackle on a forum. Feel free to drop me a line if you have any more questions.
  5. azandy

    azandy Member
    Messages: 73

    I do agree with PLCI. Seasonal contracts work great for larger projects. 3-5 year contracts are very important especially if you are purchasing or leasing equipment for this site. Lenders and accountants are much happier as well. I didn't think SUDSY81 was doing multi year projects. I assumed he was doing smaller projects as he mentioned being somewhat new to the industry
  6. RepoMan207

    RepoMan207 PlowSite Fanatic
    from Maine
    Messages: 5,031

    PLCI......where are you in Maine?
  7. BMWSTUD25

    BMWSTUD25 Senior Member
    Messages: 630

    i agree with how this thread is going. Im run a much smaller business than many on here but seasonal is what pays my bills. In my mind you need to keep a good mix of both seasonal and per push customers. The way i see it, Seasonal makes my truck payments, skid payment insurance payments (my fixed costs)and still puts money in my pocket. Per push covers all my variable costs and puts additional money in my pocket. The one time calls i get are just a huge bonus the way i see it. By doing seasonal contracts i can sleep much better in november knowing that even if it doesnt snow all winter i wont go broke. And i have a much harder time trying to charge hourly. when i look at a driveway that will take ten minutes i say okay, i can do this for $30 or so. now when i look at the same driveway and tell them $180 an hour and tell them about 10 min they laugh.....keep in mind its the same cost either way. for seasonal you really just have to figure out how many trips on average you will make to the property and what you would charge per trip. Adding a little cushion always helpspayup
  8. Sudsy81

    Sudsy81 Junior Member
    Messages: 7

    Thanks for all the help guys....

    MIDTOWNPC PlowSite Veteran
    Messages: 4,424

    I give them the option to choose.... per push with a price for salt, seasonal with a price for salt, or complete maintenance.

    I base it upon how many times I plowed last year.

    so it could read.. $50 per push, salt $40
    $1200 seasonal, salt $40
    $1800 complete

    please circle you desired choice.

    I have 2 multi year, but its only been with big lots. I like knowing I dont have to rebid on something, but then again, the multi years usually beatup the price more.

    They usually call and ask, what I recommend and I say complete. Cause its no worries, and this year its all about budgeting to the customer.
  10. PLCI

    PLCI Member
    from Maine
    Messages: 31

    We are located in Eliot, 95% of our snow work is in N.H.
  11. Bajak

    Bajak Senior Member
    Messages: 999

    It is always better Time and material. I find more customers wanting seasonal prices this year because of last years winter. eg. My former employer dropped 50% of his 06/07 contracts and made 5% more in 07/08, all hourly rate, sand/salt per tonne. In your area I would say 25x plowing- 38x sanding. I plowed in Guelph from 1990 to 2006 and I would say that this is a good average.
  12. BlackIrish

    BlackIrish Senior Member
    Messages: 888

    I'd love to be per/hr, esp. last season, but wouldn't that be an acctg/invoicing monster. A mix of per push and seasonal pricing could be optimum.