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How will this winter affect next year's prices?

Discussion in 'Business Fundamentals' started by digger242j, Mar 2, 2003.

  1. digger242j

    digger242j Senior Member
    Messages: 672

    I was replying to the thread about whether or not folks felt that plowing was done for the season when some questions occured to me.

    For many of us this has been a really good winter season. For "per push" customers, it's probably been a budget buster.


    Do you think it'll be easier to sell seasonals for the next few years? Would you bid a seasonal contract for next winter higher than you would have for this past winter?

    Given the large amount they've had to pay you this year, are you worried that your current customers might shop for a lower price for next year?

    The past few bad (for plowing contractors) winters may have weeded out some of the more marginal operations. This year might make the snow business look really attractive to some who've not experienced what it takes to remain viable over the long haul. Do you anticipate downward price pressures from newcomers to the business who'll be competing for your accounts next season?

    Obviously, for those guys in the midwest who've gotten nothing this winter, the perspectives would be opposite--Will there be fewer competitors next year, so that prices will be bid up? Will you bid higher anyway, just because you need to cover overhead that you were unable to profit from this year? Do you think you'll be able to sell anyone on the idea of paying seasonally for a service provider that got away with providing no service this year?

    It should be interesting to hear some of the insights this gang is capable of expressing...
  2. Got Grass?

    Got Grass? Senior Member
    Messages: 641

    Prices will stay about the same.
    Current customers who were impressed at how great of a job was done, compared to other contractors. May be willing to pay more next year to keep the great service.
    Usually thats when you deal with the person who is signing the checks & has say in the budget.

    On the other hand. new customers should stay about the same in pricing.
    Some people who received horrible service will pay more if you can sell them on the job you did this year at other accounts.

    But on average my guess is the pricing will stay about the same.
    A lot of contractors went down & some will close up shop.
    But there will be a LOT of people getting into plowing as a "quick way to make money" in these storms & think they can handle anything. These are the guys that will be charging less then this yr. for their service & will attract the price shoppers.

    More people will be looking for per season flat rate pricing & thats the only thing that will sell around here. In some areas a blizzard clause is a must.

    Its all about how well you can sell your services.
    I would go around to your happy customers & ask them for a small compliment/referral letter on their letterhead, you can show off to next years customers. Possibly throw something in it for them.
  3. Mick

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

    I think there will be more people starting plowing. There have been several post on here in just the last month or so saying they have a 1/2 ton pickup (maybe 2wd) and want to know what kind of plow to put on it. Also, how to charge etc. So, I suppose they'll keep this winter in mind. Might even stay on Plowsite through the summer to get some ideas. I know that's what I did (except for the 2wd part) and seem to be doing all right.

    Prices I plan on keeping about the same. Maybe an increase as suggested as a part of normal business operations. As was discussed before, the increase in fuel prices really doesn't have a major effect on income overall. Maybe an increase of $5 for the minimum charge or if it's a long distance to the site. As far as sanding, the charge for that is directly related to my cost of material, but I'm always a year behind for established customers. I quote prices in summer and early fall, but don't get my cost until about November. So I try to watch the trend and make a guess as to what it's going to cost me. This year I got caught a little short, but still did all right.

    I don't plan on lowering price or compete with the new guys. Actually I'm higher than my major competitor. He works on volume and has several employees/trucks etc. I know of two bids we both went after. I was twice his bid on at least one. Of course, he got them. There have already been some discussions related to next winter.
  4. Earthscapes

    Earthscapes Senior Member
    from WNY
    Messages: 577

    I will keep most of the prices the same.
    I have a list of about 23 people who want our service next season already and they have been told a price which is turning out to be about $75-150 more than they paid this season. Most have said they don't care because of the service we give their neighbors.
    Anybody who called this season to complain about something stupid will NOT be returning as a customer for us next yr.
    I am really going to shoot for more commercial next yr.

    I alos agree with GG and Mick, there will be more idiots out here next yr plowing for nothing.
    Now let the snow melt i have a ton of estimates to do
  5. phillyplowking1

    phillyplowking1 Senior Member
    Messages: 412

    The prices will stay the same for me too.I got a few new accounts for next year already.
  6. drobson

    drobson Senior Member
    Messages: 112

    Same here with the new accounts already for next year. Because I did not have many accounts coming into this year, I took some I probabaly would not have just to fill up the schedule. Next year I will be in a position to weed out the customers I don't want to keep, either because of the length of time it takes to do the job or because of the customer themselves. As far as prices, I don't think I will be changing them for next year. I'm more concerned with setting up the accounts I want and ones that will be faster to do. This will increase my per hour rate anyway.
  7. Ohiosnow

    Ohiosnow Senior Member
    from Ohio
    Messages: 415

    I will bump the prices up to cover the GAS price increases

    As I doubt they will go back down till after next year.:waving:
  8. wyldman

    wyldman Member
    Messages: 3,265

    Generaly pricing will stay pretty much the same.We write some standard increases in our multi-year contracts.We try to bump up our hourly and per-push stuff to make them want to convert to seasonal pricing.

    It will be a good time to try to convert people to seasonal pricing if you have had a lot of snow in your area.

    Seasonal pricing does not get adjusted due to one or two heavy years,as it is all based on 15-20 year averages.

    May try to get a bit more next year for salt if market will tolerate it.
  9. The thing most of us will have to consider is "Gas prices". This is what would drive my prices up.

    Depends on our Government!
  10. Got Grass?

    Got Grass? Senior Member
    Messages: 641

    Gas prices are not that big of a deal. I only pay a couple more bucks to fill up the tank so it really dosnt bother me.
    If gas goes up to $3 a gal I may bump everyone up a few dollars. but it's not that big of a deal when you really look at it.

    If you can find a way to convince your customers it is a big deal to squeeze a few more pennies outta them, as I will try to do for the summer "how my costs have risen" then go for it.
    But over all the cost of gas prices hardly effect the bottom line.
  11. Ohiosnow

    Ohiosnow Senior Member
    from Ohio
    Messages: 415

    Got Grass?

    I guess it depends on the size of your BIZ.

    A friend of mine were having lunch the other day & talked about this very thing. His Co. gasoline cost at the begining of winter (gas-$1.17) now $1.77 cost them a average of $1,000.00 more each snow :eek: He figures it will cost them over the year about $150,000.00 Too me I would think that would make a big effect to the bottom line.

    As for me over the whole year the gas increase will cost me around $8,000.00 :waving:
  12. BRL

    BRL PlowSite.com - Veteran
    Messages: 1,277

    LOL We were discussing this in a thread not too long ago. Landman jumped in late in the thread & explained that fact to us. So the 33% increase in fuel costs you mention resulted in a $26.00 increase in my fuel costs for an average 4" storm for my small operation, or a half a percent of sales. But for someone running a big fleet, that half a percent can sure add up fast.

    JD PLOWER PlowSite.com Veteran
    Messages: 751

    Digger great questions!

    For the first question, yes I do think seasonal will be a much easier sell but around these parts it seems to only work at larger accounts anyway. We won't be bidding any higher than what our seasonal average is (41") as compared to the snowfall this year (60.5" so far).

    Your second question brings up a good point, but I think it goes to customer relations. We plan this year on making certain that the decision makers at our clients remember us come next year. I do expect that some customers will go shopping, but in the same way I'll be shopping, as will other potential clients. From what I have seen many contractors really are not prepared to handle a large amount of snow and I suspect those places will be shopping based on service and not just price (although price is as always a major concern).

    As to the last point about people getting "into the business" since its a good way to make money, that does happen after every big season. The other contractor who will be in trouble this year is the one who is plowing "just to get the maintenance contract".

    Overall I expect that it will be one of those off seasons where you win some you lose some.
  14. drobson

    drobson Senior Member
    Messages: 112

    Gas prices:

    If you look at it in dollars, then anyone with a larger business will certainly have a higher cost increase, but the percentage will still be the same. 1% is 1% no matter how you slice it.

    If that is $1000 per year for me with 100 customers and $100,000 per year for someone else with 10,000 customers it is still the same rise in cost per customer. Of course if anyone with 10,000 customers wants to trade revenue with me I'd be more than happy to... :D $100,000 to me is like a dime to Bill Gates.. Everything is relative....
  15. Chief Plow

    Chief Plow Senior Member
    Messages: 201

    Our prices will go up a little. Only because salt has gone up, and so has gas, and insurance. I am looking at about a 5% increase for my customers next year.

  16. Brother1

    Brother1 Member
    Messages: 59

    We are going to raise our rates for some of our customers who haven't had an increase in a year or so. Would like to weed out the lower priced customers who always seem like the ones to complain the most and want more for nothing. Those are definately not worth our time. Plus our insurance increased about 40% this year because of our plowing coverage and we didnt find out about this until after Christmas so we already had our prices out for our per push customers (which is 90% of what we have). So this year we just had to bite the bullet on that but won't do the same next year.
  17. CPSS

    CPSS Senior Member
    Messages: 334

    Don't forget insurance increases. We are looking at a 30% increase this year for the same policy. Why????
  18. lbmd1

    lbmd1 PlowSite.com Veteran
    Messages: 5

    Digger, I was just saying the same thing to my wife the other day about companies switching over or shopping around more due to unexpectedly higher maintenance costs. I think that HOA's and some commercials will definety be looking more closely this year due to going over budget this winter. Either way you look at it, these people have only so much of a budget to deal with and have alot of people to answer to. With all the plowable snow and icing\dusting events we've had in the northeast this season, I'm sure they'll be thinking about those questionable events that were serviced that maybe didn't need doing. This also means that they will also have less available $$$ for this spring for landscaping projects and extras too. Good question and something for us all to consider.