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Tight profits in Maine this year..

Discussion in 'Commercial Snow Removal' started by grandview, Jan 16, 2008.

  1. grandview

    grandview PlowSite Fanatic
    Messages: 14,609

    Snow Magazine Online Magazine » News »
    Frequent Maine storms, fuel costs make snow contracts unprofitable
    By bangornews.com
    Print This Story E-Mail This Story Save This Story

    CARMEL, Maine -- The ring of Mike Dunton’s cell phone was barely audible as his plow truck’s engine droned and heat blew into the cab so fiercely it muffled most conversation.

    The call was from the town office: A car had slid off Fuller Road and officials wanted a truck to plow the stretch of road again.

    After a short telephone call, the closest driver was en route.

    "He said he just did that road a half-hour ago," Dunton said during Monday’s snowstorm, noting how quickly the snow was falling. "All you can do is hope nobody got hurt and keep going."

    Dunton has been plowing for R&R Lumber out of Carmel for about 10 years, and while the ice storm in 1998 was his biggest test, he said this winter season has been tough on all contractors, exhausting their budgets, sand and salt supplies, and staff.

    "Anybody who says they want a year like this has got to be nuts," Dunton said.

    The frequency and quantity of this season’s snowfall, coupled with the price of fuel, have contractors concerned about annual profits.

    Bob Noyes, owner of R&R Lumber, said each storm costs him $3,000 to $3,500 in fuel to keep nine trucks on the road, plowing the towns of Carmel, Etna and Plymouth. Fuel aside, the year’s plentiful storms have required a lot of overtime for his hourly staff.

    When bidding for a town contract, Noyes has to estimate the number of employee hours needed to complete the seasonal job. He bid calculating 250 hours per employee, but one more storm will bump him over that figure, he said Tuesday, and it’s only January.

    Clair "Cook" Whitten of A.R. Whitten & Son Inc. holds the snowplow contract for Winter Harbor and has a separate crew that plows private driveways. Whitten does have a fuel clause written into his contract, which specifies that anytime diesel fuel jumps above $2.50 a gallon the town pays the additional cost. Even with the fuel clause included, Whitten said he has exhausted about $36,000 of the $50,460 he will receive this year, mostly because of overtime for employees.

    "We are way, way, way, way behind," said Whitten. "If I didn’t have income coming in from driveways, it would be really bad."

    The frequent snowfall has helped Whitten regain some income by plowing about 100 driveways, especially since many customers pay by the storm, he said. The cost of fuel has been passed on to customers. Whitten said last year he charged $22 to $28 for an average driveway, but this year the price has jumped to $25-$30.

    Even Keith Wilson of Wilson’s Lawn Service in Bangor said he has increased his cost to commercial customers by 5 percent to 10 percent to compensate for the higher fuel prices. The percentage increase means an additional $10-$15 a storm for each customer, he said. The company uses 12-14 trucks to plow more than 100 commercial driveways and parking lots, and in December the fleet’s fuel bill was $12,000 to $15,000, he said.

    "You can’t go up too much because you’ve got to stay competitive," Wilson said about his prices.

    The company’s primary income, as for most snowplowing businesses, is earned in summer, he said. In fact, he started plowing in 1994 to keep his hardworking seasonal staff and to retain his loyal customers. He said about 95 percent of his plowing customers use his company for their summer lawn and landscaping needs.

    Wilson said he preferred a busy winter, as it has been so far, and hopes the snow will be long gone before April. Late-season storms set back his more profitable summer business and don’t give the company adequate time to prepare for its more fruitful months.

    In addition to fuel and labor costs, the price of steel and parts has really pinched contractors and plow companies as well. Cutting edges at the bottom of the plow that scrape pavement have to be replaced every two to four storms, Noyes said. The steel pieces have nearly tripled in price in the past few years, Noyes said, and now cost around $170 a piece. Each truck needs four.

    Both Noyes and Whitten hold three-year contracts with their respective towns, and both said that in the first two years no money is made. Those years are spent paying off truck bills and building the business, Noyes said.

    "What I tell people when they start out is: Don’t go buy any toys," Noyes said. "When you get the first one-seventh of the [annual] check you’re thinking you’re making all kinds of money, but it’s October. Come March, you’re pinching pennies."

    Wednesday, January 16, 2008
  2. bribrius

    bribrius PlowSite.com Addict
    Messages: 1,609

    and that is the truth.\
    plenty of snow here but money you have to plan carefully.
  3. qualitylawncare

    qualitylawncare Senior Member
    Messages: 502

    ohh the drama caused by unlimited contracts....

    SMART contractors don't work for free, thus no unlimited anything..

    Don't want to pay? I make more sitting here typing, than I would if I was working for no profit.
  4. bribrius

    bribrius PlowSite.com Addict
    Messages: 1,609

    he is just trying to keep people employed and the bills paid. most companies in maine that i know of dont look at winter as a money maker. it is just a survival time.
    keep the crew working. keep the payments paid.
    far as seasonal contracts you get what you can.

    i was just talking to another company owner who did seventy accounts, commercials too. went good for a few years but then the money started drying up and they werent getting paid timely and a couple claims came in. they aren't doing snow removal now they dropped the accounts. but now the employees have less work.
  5. Ole Tower

    Ole Tower Senior Member
    from MAINE
    Messages: 210

    Tight Profits?

    I read this Site often but Do Not Post very often as Snow Plowing is getting WORSE evey Year! & Common Scense Dictates Why! w/ More & More Plows appearing every Day! & w/ New & Used vehicle Sales Lots Full of 4X4s w/ Plows & New Bees asking Advice on this Site & Others I personally have Posted my Observation of All of the Above! & the Replies? consider My Warnings of every thing Rising in Price! as Some JOKE? the Bottom Line IS!! Snow Plowing is in TROUBLE! Our Last Storm I saw More 4X4s w/ Plows than CARS & to ME thats NO! JOKE! I hear a lot of Plowers saying their Loosing Customers & their NOT Loosing them to LOW BALLERS There Loosing them to Large Contractors here Any WAY! I Dono? as most of You Guys may Think? Your Doing OK? but w/ the COST of Equipment-Insurance-Registrations-Maintainance & Fuel rising every DAY! & there Is a LIMIT to what? You can Charge? & as stated Above--BIDDING is a HORROR Show! & assuming? the Big Guys can Loose more than the Little Guys? & still keep Going? I personally have had the Same Route & Customers for many Years! & w/ the Higher Cost of Every thing TODAY! I Dono? about YOU? but MY Profit is Shrinking! & to ME Adding a Few Bucks is NOT the Answer! as Tommorrow! every thing will Rise in Price Again So wheres it Going to STOP? & any Plower that thinks? any of this is a JOKE? I have Veyy BAD News for HIM! as FUEL continues to RISE now Loccally at $3.79.9 a Gallon--when It Reaches $3.90.9 I*M Done! I*LL Park all MINE!! as I*M All DONE Working for NOTHING!-Have FUN--OleTower--
  6. Mick

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

    Well, all I say is - "This is great. The more it snows, the more money I make". Potential for fuel costs increases were figured into pricing, so it didn't bite as much as it could have. Combination of seasonal and per push accounts make it profitable whichever way it goes - although I really prefer more snow. Even with the seasonals, I won't actually lose money on them unless unless we were to get about four times as much snow as average. I had two customers who are on Social Security ask if they could make payment on December's bill. That's fine, just means I'll still have money coming in next Spring and Summer. This really has been my most profitable winter yet. Even the snow itself has cooperated. Every snowfall so far has been light and fluffy stuff so it's been easy pushes.

    I've always heard that the seasons with little snow drive weed out the field of snowplowers since they're saying "You can't make any money plowing snow". I always figured it was because they weren't making enough to make the truck payments. Maybe it's actually the opposite; The more it snows - the more money they lose.
  7. wishin4snoww

    wishin4snoww Junior Member
    from S.E. MI
    Messages: 27

    How is it possible that he is paying 3000 to 3500 per storm in fuel, and why would he not charge more? We only need two trucks to bring in that kind of money just plowing, if he's doing any salting for that he is crazy. Story sound fishy and that’s what he gets for seasonal contracts I don’t feel sorry for him.
  8. Mark Oomkes

    Mark Oomkes PlowSite Fanatic
    Messages: 10,426

    This from a 21 year old. Glad you're so smart.

    Let's see now, the business I own has been around since 1932, my dad bought it in 1962 and started plowing the same year with unlimited contracts. Hmmm, guess we're not smart, might as well fold up.

    What am I thinking?

    It's called multi-year contracts, so a light snow year will balance out a heavy snow year.
  9. LoneCowboy

    LoneCowboy PlowSite.com Addict
    Messages: 1,760

    Where were they last year when the snow wasn't so heavy and they were making a ton?

    Sounds just like the .gov who whines that they are running out of money for snow removal because it's been a heavy snow year, but you never hear word one out of them in a drought year when it never snows. WTH happened to all that extra money?

    nobody held a gun to their head and made them sign a contract that they didn't want. It takes two parties to contract. They want the assuraty of constant money from a seasonal contract, well, occasionally it snows a lot and you don't make any money.
  10. QuadPlower

    QuadPlower PlowSite.com Addict
    Messages: 1,056

    My $.02

    Most government bids are sealed and you get one shot to make your bid. If you are the low guy they hire you. If not, you don't get a second chance to say, "Wait a minute, I can do it for that."

    These guys put together bids, submited it, and was accepted. If they didn't want the work at that price, then they should not have bid it at that price.

    The story said, "Both Noyes and Whitten hold three-year contracts with their respective towns, and both said that in the first two years no money is made. Those years are spent paying off truck bills and building the business, Noyes said."

    Whitten's contract is for $50,460.00. He made that for the last two years. Even back in '05-'06 when no body got snow he made $50k. You can't say you didn't make any money. They made money, they just chose to spend it on paying off their trucks.(nothing wrong with that. I would have done the same) But I bet they didn't talk in an article about how they felt bad about taking the money from the City when they didn't have to do much work.

    Like Mark said, "It's called multi-year contracts, so a light snow year will balance out a heavy snow year."

    I wish articles like this would give percentages instead of actual numbers. Saying they spent $3,000 a storm or $12k a month on fuel means nothing to me. Saying they spent 30% of the bid on fuel would.

    I wish them luck and I hope they make money at it.

    EDIT: Mine took too long to write with getting the kids ready for school. So I agree with what Lone Cowboy posted between me reading Marks post and getting mine posted.
    Last edited: Jan 17, 2008
  11. JD Dave

    JD Dave PlowSite Fanatic
    Messages: 11,032

    I totally agree. Around here the town trucks are all on a monthly standby, plus an hourly rate. It protects both parties that way. The only way I will plow snow is with unlimited contracts. You actually have to know how to price things accordingly. The law of averages always works out in the end.
  12. SnoFarmer

    SnoFarmer PlowSite Fanatic
    from N,E. MN
    Messages: 7,921

    Gee oletower..
    Get a grip, It's all relative.....
    The sky is not falling.

    How much did you pay for a gallon of gas in the mid 70's?
    Around $0.65 now today $3.09?
    Your going to quit when it goes up $0.10 ?
    Heck it already went up $3.20 yet we are still plowing.

    Using your logic there should be fewer plowers not an abundance.

    So if fuel costs go up there will be less of a need for plowing?
    How could this be?

    Don't fret about all the new shiny plow trucks..
    I plow a customers business and he owns a nice new plow truck him self. he does not want to be saddled with the job so he hires me.

    As long as there is snow I will be making money no matter
    if gas is $5.99 + a gal
  13. xtreem3d

    xtreem3d PlowSite.com Addict
    Messages: 1,547

    i'm from the midwest and no one down here uses unlimited contract's so i don't fully understand what all goes into offering them but it doesn't seem to be sound business if the light snow years even out the heavy snow years. if you were plowing by the push or hour you'd be making money EVERY year right?
  14. Mark Oomkes

    Mark Oomkes PlowSite Fanatic
    Messages: 10,426

    Not if it doesn't snow. 0 hours plowing X whatever your hourly rate= ZERO income. Zero snowfall X your per push rate=ZERO income.

    Customers look at seasonal contracts just like they do insurance policies. They know they're covered for anything that happens throughout the year. Basically, we are providing them with an insurance policy. Except they are getting a better return on their plowing contract, because it is pretty much guaranteed they will be receiving services for at least a portion of the money they've paid for snow and they hope to never use the money they pay for insurance policies.

    I know, it's a regional thing. Areas that get a pretty much set amount of snow a year--not the lake effect areas or the banana belt areas--some customers want to know how much it is going to cost for snow removal. Just like mowing. So if you've been around long enough, you can get a pretty good history of how much time you're going to spend plowing, shoveling, and how much material for salting, etc. You base the price on the above X how many pushes, shovelings, saltings, 24 hour service, 7 day a week service, closer to the lake, further from the lake, etc.

    There are variations on this as well. We have a couple customers that are all inclusive--except for hauling and\or stacking. They get invoiced X amount whether it snows 100" or 1". (Our seasonal average is about 73", lowest was 36" back in the early 80's, highest was 144" back in the 50's or 60's. Couple years ago we had 105") Some, the contracted amount only covers plowing and shoveling. Some cover only night time and weekend plowing and return trips during the day are extra. It all depends on what the customer wants, we provide within reason as long as we are making money. The customers that are not all inclusive pay extra for salting, per ton or per application.

    Very few of the all inclusive that I have we had no history on at all. And those are small lots, so I wouldn't lose much, which I'm not, because I'm fairly good at estimating.
  15. ECS

    ECS Senior Member
    Messages: 485

    Very well said Mark.
  16. Pristine PM ltd

    Pristine PM ltd PlowSite Veteran
    Messages: 3,794

    Our problem is that we have grown alot in the last two years. And the easy last two winters we had were amazing and made us love our 1 - 3 year contracts. December sucked because we have alot of salt included as well as unlimited plows. I don't think that is normal for most guys, but it is very common in the type of work that we do. (townhouse condo's) We can't blame anyone but ourselves, and it was just bad luck that we really grew at a time when it snowed alot and we had alot of salting events.