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Contract Anxiety!!! My prices are too high?

Discussion in 'Bidding & Estimating' started by snowbird2, Sep 22, 2009.

  1. snowbird2

    snowbird2 Junior Member
    Messages: 6

    I own and operate a small Landscape design build firm (two partners plus seasonal help), I've been in business for four years now but have been designing, bidding, building, and maintaining landscapes (in various capacities) since 1991.

    With the economic free fall, design/build work has been scarce. I used to stay busy throughout the winters with design work, equipment purchases, marketing efforts, accounting, seasonal equipment maintenance, etc. This year I decided to venture into commercial snow plowing to utilize my equipment to generate cash flow.

    I previously avoided snow plowing because of the wear and tear on equipment. A pick-up truck, dump-trailer, & bobcat will provide 10+ good years of service if out of the salt. Using them through the winters, I'd be lucky to get 5years of service before I'll have to sell them to an economically uninformed "lowballer."

    I have been observing this website for some time. I thank all that have provided their insight and experience. From your valuable advice I developed a thorough pricing strategy considering: 5 year snowfall history, anticipated events w/2" trigger, 100 year snowfall average, my modest necessary living expenses (house is paid for), my equipment expenses (all paid for except one truck), 1,000,000 dollar general liability & vehicle insurance, as well as all other business overhead expenses, for the 6 month season. I'm anticipating 6 hours(target) of plowing time per event. Any more, and I do'nt believe I could successfully satisfy my customers, especially in heavy events.

    This worked out to a specific figure that I won't disclose (everybody has to do their own homework). I applied my price structure to 30 +/- potential accounts. As I'm sure you all know, getting contract commitments can be a thankless task. Feed back has been difficult to obtain. Some say I'm right there on price, others say I'm way too high, and most ignore me. Meanwhile I have two trucks waiting to be equipped with plows.

    I wanted to photograph the sites before the snow flies but I'm not sure I'll have time. I truly believe it is impossible to work any cheaper and I refuse to. Any advice on selling quality service to justify your necessary price, or ways to expedite the decision making process? We are in the lake effect snow-belt, but unemployment is high here, and everybody owns a pick-up truck. I even offered a 10% discount if the signed before October, still no bites.

    Advice appreciated...(I feel better already, this site is cheap therapy)
  2. JohnnyRoyale

    JohnnyRoyale 2000 Club Member
    Messages: 2,935

    If I was you I would approach any of the clients you have already done work for. You already have an established rapport and history, and dont have to prove yourself. This is one way to get your rates.

    Oftentimes, this type of work goes to low bidder. Certain types of clients treat snow and ice as critical-its up to you to find them in your market. Good luck.

    And, I disagree with your truck statement. I have 3-10 year old trucks in my fleet that still earn for me 12 months a year. Maintenance is key.
  3. LoneCowboy

    LoneCowboy PlowSite.com Addict
    Messages: 1,760

    The key to bidding is time. It's time times your hourly rate.

    But if you are slow or over estimating the time, your bid is going to be too high.

    What you think might be lowballing, might be someone else doing it faster for a good hourly rate.

    Esp if you haven't snow plowed before, your sense of time can be way off.

    Why don't you throw up a picture (satellite view, bing.com/maps) of something that you already estimated, (post one you already lost, then you won't feel like you are giving anything away if you want) tell us your time (not amount) and you'll get a good selection of time from others. You'll see if you are way off or right on. The averages will come in about the same typically.
  4. grandview

    grandview PlowSite Fanatic
    Messages: 14,609

    With experience you make more money each time it snows.
  5. Bajak

    Bajak Senior Member
    Messages: 999

    Sounds like you know what your needs are in business. If it is impossible to work any cheaper then it is what it is. Submit the bids as they are and if nothing else you will gain a grasp on the market. Even if they don't use your service this year, your still on record for offering your service. It only takes one screw up by another party and you may be next call on the list.

    I've tried the early sign up discount before and I still don't get calls until about the second or third frost. I think it impossible to work any cheaper and I refuse to.:D

    If you think your pricing is high it is better to be in that position rather than finding you have too much on your plate during "the big one" and the phone ringing off the hook while your working your but off for nothing.

    Good luck!

    Oh yeah....
    ................. welcome.jpg

  6. Lux Lawn

    Lux Lawn PlowSite.com Addict
    Messages: 1,137

    I agree. I would start with the established customers and let them know you are branching out to snowplowing. Maybe if you discount their season services 10% like you suggested might help. Good Luck.
  7. Chrisxl64

    Chrisxl64 Senior Member
    from CT
    Messages: 574

    Prices too high or prices too low are in the wallet of the beholder,,,don't adjust your rates just to keep up with the "other" guy, if its not in your best interest.
  8. snowbird2

    snowbird2 Junior Member
    Messages: 6

    I realize each customer has an expected price in their mind, this however does'nt change my costs so I stand by my price. Here are two examples of my estimating process with opossite results, let me know what you think:
    Arbys: Average size, double lane parking raps around the building, both sides plus rear, typical drive thru and fenced in garbage dumpsters, a storage shed and utlity area out back, also a gravel right of way through a vacant lot (two passes with plow, 100' each). I typicly attach 15 minutes to each account for general travel time and miscelaneous BS and I figured 45 minutes of plowing time to do a clean professional job, considering curb islands, vehicular obstacles, fencing, drive thru hazards, light poles, etc. I multiplied this by my hourly rate to develop the price. The response I recieved was "we have three other estimates and your all right in there with price, " I replied with "we only take on a volume of work that we can handle to provide you with timely quality service." Hopefuly I will get the contract?

    On the other hand, I bid a Pizza Hut, 30% larger parking lot, a few less obstacles, the price I gave them was 30 dollars more than the Arby's (per push) and they said I was way too high. I feel they have gotten used to some soft pricing, but maybe it will only take 15 minutes to plow...I doubt it. I have plowed for myself for 10 years, other landscapers when I was green, and even for townships, I don't think I'm way off on the time factor, and I need a little cushion for the varying event sizes. In the lake effect snow bands, we can get 2-3" inches per hour. It is spotty but it happens.

    What do ya think?
  9. Clapper&Company

    Clapper&Company PlowSite Veteran
    from NE OHIO
    Messages: 4,413

    Pizza Huts and Arby's are not the lots I would go after if I was you.

    Around here if you want to plow Pizza Hut, you have to work for PIZZA Credits!
  10. cubicinches

    cubicinches PlowSite.com Addict
    Messages: 1,415

    I agree with Clapper & Co., Pizza Hut and Arby's aren't the kind of lots I would be going after anyway. The pricing on those size contracts seems to be driven into the ground... more than likely by small outfits that have no idea how to bid, and are willing to work for peanuts. The other thing is that alot of these establishments put them up for bid every year, and typically, lowest price wins... which says to me that there is no loyalty, and no matter how good the service you provide is, you'll be competing against low bids to get the contract back next year. It sucks, stick to your guns... It won't do you any good to drop your prices to get work.
  11. big acres

    big acres Senior Member
    Messages: 653

    If you go into the season short on work, don't go home to bed when you finish your first push. Have a few blank contracts with you and some deodarant... look for those that chose the lowballer and have not been serviced. I gaurantee you can pick an account or two up this way.

    Ditto on the fast food joints... anyone can do a couple of them before their day job. You need to go after managers that will overlook bids from those guys.
  12. snowbird2

    snowbird2 Junior Member
    Messages: 6

    Cubic inches,
    Your response has me re-evaluating my targeted customer. I previously viewed any business that needs parking lots cleared to do their business, as customers who would value our services. After thinking about it a bit, It seems that only depends on how much money is held up "behind the snow."

    If pizza buyers have a difficult time getting into pizza hut it probaby wo'nt make or break there business, plus how much money are they actually clearing on that budwieser, a few sodas and a pizza?

    If a neuro sergeon, who is tapped in to the insurance gravy train, loses an office visit or two each time it snows, or worse gets sued for a slip or fall accident, the price may automaticly warrant a higher value.

    Should I follow my hunches here and chace the money? payup (Obamas plan make make this arguement irrelevant by next season!)
  13. JohnnyRoyale

    JohnnyRoyale 2000 Club Member
    Messages: 2,935

    Your right on your assumptions. Problem is your current market dictates the pricing it will accept. Some types of customers expect more and have more to lose is the snow isn't cleared. Its up to you who to chase, while at the same time minimizing your exposure to slip and falls and other potential losses. Good luck. :drinkup:
  14. cubicinches

    cubicinches PlowSite.com Addict
    Messages: 1,415

    I've never really evaluated it the way you have, but you may be accurate in your assessment. It just seems to be the norm that the fast food/chain/franchise type establishments are only looking for low price. That being the case, and as I stated earlier, all of your efforts to provide good service, and maybe form a lasting relationship, are forgotten next season when they throw it out there for the lowball bid again. It's my personal opinion that these places are more work than they're worth... open long hours, difficult drive thru lanes, lots of curbing to wreck, high traffic volume, etc... all for low dollars. That's just my opinion, but I stay away from them.

    I agree that professional type operations (doctor, lawyer, dentist, etc.) are a better target.
  15. BlackIrish

    BlackIrish Senior Member
    Messages: 902

    IMO your estimate volume is way to small, you need to be cranking out many multiple quotes/day.
    You need flyers and signs asap for inexpensive ads.
    Personal visits put a face to a name.
    Professionalism can make you stand out.
    Are all your quotes in writing ?
  16. big acres

    big acres Senior Member
    Messages: 653

    Agreed... great results would be to land 15% of what you put out in bids, better would be a higher percentage of dollars in than the percentage of bids landed to bids out -which means your landing the big ones and putting out fewer bids to do it. You should be practical and shoot for 8-10%... when you are established and consider yourself a helluva salesman, then you can start to worry about even putting out a bid that will likely hurt your closing ratio. I would urge you to track these numbers from day one, and monitor how new advertising and tweaking your presentation affects them.

    PS. People stay in and order pizza delivery when it snows. The sale here is if it fits in your route and if you can sell them on a quick open-up for am, and a final clean-up late morning by lunch... then you can bid lower AND extend the time your truck is billing out.
  17. snowbird2

    snowbird2 Junior Member
    Messages: 6

    I currently have about 30+ estimates out there, (putting out 3-4 more each day) some are chain stores with multiple stores in my geographic radius, they all vary in size but nothing that is going to require multiple trucks. I am trying to fill a 6-8 hour window with two trucks and pay my bills doing that. Is this time window too small - I do'nt want to get overloaded and be one of those poor service companies.

    My estimates are typicly comprised of: a cover letter, insurance certificate, a generic contract with legal terms and conditions, plus a site specific contract with relevant details, and our marketing brochure with business card. Most are computer generated but I occassionally spit out some carbon copy proposal forms when I see a potential customer who doe'snt need so much formality.

    Is this overkill or standard practice?
  18. RLM

    RLM PlowSite.com Addict
    Messages: 1,270

    You don't want to know how much I've got out currently......I'm trying not to think about it. My pricing is competive, I know that. I've called to follow up; no decision made, going to boards next week, even renewals are slow to come in it seems...maybe its just me. Some aren't even out to bid yet, I've got one meetnig Fri, one Mon, one bid package should be in next week & 6 properties to look at tommorow. Some of these are 10 acre +, some are 20,000 ft. I put an add in for help, I have a hard time hiring people when I don't know what work we have. Getting a bad feeling the stuff is gonna hit the fan & be a mad scramble. TO MAKE IT WORSE OUR BABY IS DUE NOV 5 The next 2 months are gonna be rough, my hair is already thin, I'll end up pulling the rest out.
  19. Clapper&Company

    Clapper&Company PlowSite Veteran
    from NE OHIO
    Messages: 4,413

    Mike is like me, If I knew how many we had out your head would spin. If we got every thing back I dont know what I woud do LOL. You have to put a ton out to get, even more since you want to fill two trucks this year.
  20. big acres

    big acres Senior Member
    Messages: 653

    I know you guys have been around the block and probably do know what you have out. i use a spreadsheet to track this and I assign a percentage that I feel is an accurate read on whether I'll close them. At each follow-up contact I get knew information which leads me to tweak the probability number up or down. Then we can can begin forecasting equipment needs and adjust our pricing up, or even down, at any point in the sales cycle.