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Paying to much in light snow years

Discussion in 'Commercial Snow Removal' started by Neige, Apr 5, 2008.

  1. Neige

    Neige Sponsor
    Messages: 2,215

    I often hear from people, yea your losing money this year but look how much you made the other years. I understand that it is the nature of our business, and even after I explain all my fixed expenses it changes very little. What drives me nuts are comments similar to this.
    Next year we are going to get gouged, with an increase in price, when the year before you barely came around at all.
    After reading a comment like this in the newspaper, I responded with a letter of my own.


    I know it won't change much, but it felt good.
  2. Camden

    Camden PlowSite Fanatic
    Messages: 6,604

    Just curious...how did you come to the conclusion that you'll lose money if you have to clear 300cm?
  3. Mick

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

    Maybe you just need new customers. Or have them on "per push" for a good mix of payment types. I give people the option of either per push or seasonal even if they want to try to outguess the weather - with payment for the seasonal one in advance. Then they have only themselves to blame if they guess wrong. Also, sell the seasonal pricing as insurance against a heavy winter: Do they gripe to their insurance company in years they don't have a claim?
  4. creativedesigns

    creativedesigns PlowSite.com Addict
    Messages: 1,929

    Were in the same boat as Paul. With our resis, we lost $22K. The reason we lost money on this is because we had to over extend our visits per house by roughly 15 times, of the "10 - 12 times we should have been" ....which in turn means we cleared out laneways 25+ times ( multiplied by however many resi clients you have ) ....Does that make a bit of sense Camden? lol :p ......so in short, if you clear a laneway more than 10 -12 times, you start to loose money. ( Based on the amount of the seasonal contract ) The biggest mistake manyyyyyy resi contractors made was NOT putting a cap-off limit for snow accululation. And this winter we had 410+ cm of snow.

    Theres a company in ottawa called Appleseed snowblowing & they charge $350 for a driveway only. ( no walkways) After it snows over 250cm, they sell $120 contract extensions per client, or it's $50 per visit ( depending on what the client wants) tymusic
    Last edited: Apr 5, 2008
  5. Neige

    Neige Sponsor
    Messages: 2,215

    I add up all my fixed expenses: Insurance, salaries, phones, license plates, loan payments, lease payments, building taxes, heating and electricity and equipment depreciation . To this I add the average cost of equipment repairs & maintenance over the past 5 years, divided by cm fallen. I us the same formula for property damage. I then use a similar formula for fuel expenses. Lastly I add 20% for profit. Now comes the hard part. How much will it snow next year? Since I don't think my clients will except more than a 25% increase, I,m doing it differently for next year. I will increase the price 25% then remove all the costs above. The cm count was still a little low so I removed 5% profit, and thats how I got to 230cm's. If I get 30% more snow, then I start losing money. With a 300cm cap I protect myself from losing money next year.
    I hope that makes some sense.

    I use the insurance thing all the time. I have to say most clients are fine with paying for snow service. It drives me a little :dizzy: when they say I hardly came by some years. Thats what I was really responding to. I have 2700 residential clients, to start giving them a choice as per push or seasonal, gets to be to much paper work for me. I bill once, halve pay right away the other halve have given a post dated check for Jan. 1st. It works for me.
  6. Neige

    Neige Sponsor
    Messages: 2,215

    Hey Creative I just did the math for that Appleseed guy. We charge $240.00 per drive no cap. If I were to charge his prices with a cap, I would have made $621,000.00 more. Its mind boggling. Just think all the towns around me are still at $200 per drive. What a shame.
  7. Camden

    Camden PlowSite Fanatic
    Messages: 6,604

    Actually, it doesn't make sense. You're not losing money because of the amount of snow, you're losing money because of the frequency in which the snow has fallen.

    Let me explain my point...Let's assume next year Canada has the snowiest January ever. You get 6 storms that drop an average of 24" or 61cm. However, let's say you don't plow at all in December or February.

    You can't possibly tell me that you would still end up losing money by plowing 6 times in 3 months even though you plowed more than 300cm (assuming you've got seasonal contracts).

    Bottom line is that you're putting too much stock into snow fall totals rather than snow fall frequency.
  8. derekbroerse

    derekbroerse 2000 Club Member
    Messages: 2,377

    I have made money every single year per-push, even the light years. Obviously this year we did well, last year we did not... but still made money. Why is that? I own all of my equipment and have no payments on any of it. The trucks and loader get used year round for other jobs and the insurance has to be there anyways for that reason.

    Because you all keep telling me contracts are better, I am thinking next year I am going to try and get some of my new business in contract form... and see if I can't make more money then I even do now.

    Paul, what was the original letter you were responding to?
    Last edited: Apr 5, 2008
  9. Neige

    Neige Sponsor
    Messages: 2,215

    That would be a hell of a January LOL. Around here the plows pass every 5cm. If we were to get a 60 cm storm, that would be 12 passes. Now I know that sounds excessive, but not unheard of. This past January we got a 32cm storm that lasted 3 days straight with high winds. We ended up doing 11 passes. We usually do 3 passes for 15cm snowfall or less, after that add a pass for every 5cm. I can only tell you, that from our past experience, the formula we use works for our area. Now if we only got five 60cm storms for the season, I think my calculations would be of, but thats not how the snow falls here.

    It was a client not wanting to see the price go up substantially for next year. Because of previous soft winters when we made a killing. I will see if I can find that letter and post.
  10. derekbroerse

    derekbroerse 2000 Club Member
    Messages: 2,377

    But the price SHOULDN'T go up substantially--your costs should be the same (excluding inflation). Just because you had to work harder this past year doesn't mean it should cost them more this year. The price should be contractor cost + profit margin... not an excuse to hold people ransom. I think that is what a lot of contractors have in mind for next year already--hike prices in a big way and make the customers take it or leave it. I can see in my crystal ball, a lot of upset people getting raped for plowing next season, because people will use this past year as an excuse to hike prices... and there really isn't a need for it. It just becomes greed for some people.

    Sure, prices go up if our costs go up. They pretty much never go down!

    If you can find that letter it would help complete the story here.
  11. plowman4life

    plowman4life Senior Member
    Messages: 557

    idk about you guys. but we are split up 80% com. 20% resi. 95% of resis are per push while the comercials are seasonal only. all the commercials are based*** off of 15 pushes. if we exceed 17 pushes we charge per push till the season is over meaning it starts per push on the 18th push. the price is also calculated hourly for if we have to come back X ammount of times. on small lots we just charge the perpush price again.

    so if i have a commercial lot that is $150,000 for the year. based off 15 pushes. takes 3 trucks 2 hrs to clear

    so the contract would start off with a base price of $150k for the year. if we plow it 17 times whatever. once the 18th time comes around they will be billed an extra 10K for the storm and so on for each storm untill season end. we also have the hourly figure of $95/hr/truck that will be tacked on if we need to comeback in any storm.

    so we plow 17 times. snows again. 18th push. we charge the 10K for the push but they have us come back 2 times. so $570 would also be added on for us comming back.
    so overall bill for push 18 would be $10,570. if we come back durring the base price 15 pushes. they would just get a $570 fee tacked onto the bill with the salt when that is sent out.

    sorry if that confused anyone. its actually pretty simple just sort of hard to explain.
    so basically all seasonals are billed seasonally hourly and per push if need be. so we never really loose money on low snowfall years or record snowfall years. and all of our resis except for a few being per push we dont loose money if it doesnt snow
  12. creativedesigns

    creativedesigns PlowSite.com Addict
    Messages: 1,929

    Better yet! ....charge by the visit for all the customers....lets say at $45 per visit x 25 snow storms = $ 1125.00 each client pays! Then we would all be praying for snow every day here!
  13. derekbroerse

    derekbroerse 2000 Club Member
    Messages: 2,377

    Thats what I currently have. And everyone pays it no problem... because its fair. They agree to a price and when to do it. No more, no less.
  14. Neige

    Neige Sponsor
    Messages: 2,215

    As I explained, thats what I want to charge is my cost + profit margin. When you quote a snow contract, you have to base it on the hours you think you will work there in a winter.
    The hours are associated with the amount of snow that falls. After years of keeping track of our costs we came up with a formula. This past season my price was based on
    200cm, which has been the average for the past 5 years. So when I surpass 200cm its starts eating into my 20% profit.
    I did not increase my price this year, and the price of fuel went up 30% ($1.38.9 liter)
    I also had no cap so my clients were not charged extra for this year.
    So an increase of 25% for next season based on 230cm of snow I think is fair. Remember that my increase is based on a 15% profit for next year.

    You mention in your next post you ended up charging $1125.00 to your clients based on $45.00 per push. I charged seasonal $240.00. We ended up passing 112 times this year, which comes out to $2.14 per push. So really my clients having noting to complain about.

    I live in the wrong area. With your example your trucks are making over $1500 an hour for the initial contract then $95 hr after that.. With a sure 50 grand each. My biggest contract is 80 grand, it needs a loader with plow and 275hp blower and a tandem truck with plow. Takes min. 4 hrs to do the job. There are no extras if he comes back. Twice this year they put in over 30 hrs non stop. To top it of salting is included. This is my best client, and to think they turned down a price of $45,000.00 this year from a competitor.
  15. Sno4U

    Sno4U Senior Member
    Messages: 480

    For next year I only plan on raising my prices according to inflation and fuel costs. I've made PLENTY of money off of my seasonals in the past and they've paid w/o complaint. So, now that "I" had to earn my keep I'm gonna jump up the price right away?!. Run with the odds and you'll be fine (again) next year. Also diversify your pricing so that U win with some & you'll only come out fair w/ others or vice versa. Either way you make money AND stay in business.
  16. derekbroerse

    derekbroerse 2000 Club Member
    Messages: 2,377

    No no, Paul, I'm not referring to you I think your prices are wayyyy too low to begin with (but then again your driveways must be a lot smaller that ours, ours are all rural). My driveways ranged from $40-50 per push this year, we didn't have to do them THAT often because of the 2" trigger, most snows were under that. But say on average 3 times per month Dec-March, or 12 times... the most expensive place was only around $600 for the year and it takes 20-30mins on a good day...

    What I'm talking about, and I'd imagine the author of that letter was talking about, are the guys that complained all season about having to actually work for their money this year and for that reason want to hike prices 50% higher next year!! Thats the greed factor and there are plenty of contractors on here like that. They were getting used to light, easy years and taking on tons of new work to get more money then got caught with their pants down. Then, after a feverish winter of desparately playing Keep-Up, they figure they are overworked and will just rape the customer the following year. This year was unusually heavy, what happens if they raise prices that way and then get another unusually light year? Customers (non commercial because they are spending their own money) will be furious!

    For next year, yeah, I'm thinking of raising prices to cover rising costs, mainly fuel/oil. But I'm talking $2.50-5.00 for residentials and maybe 10% on commercial. I haven't raised prices in three or four years, so I think I am due. I am also putting a plow on the S15 (following a major overhaul) and if time allows assembling my spare 3/4 ton with a blade and pull plow. And if I get really bored, setting up another of my spare blades on my 2wd dump for backup.
  17. Neige

    Neige Sponsor
    Messages: 2,215

    Thanks Derek, I thought I was missing something.
  18. SnowedUnder

    SnowedUnder Member
    from ontario
    Messages: 65

    I fell off my chair reading some of these numbers. :eek:

    I have a factory filled with millions of dollars of equipment and I can't get more then $100 per man hour even if the guy is working on a half million dollar machine. :help:

    I have seasonal contract "no matter what" and my guy told me he is putting up the price by 25%. My friend is paying $105,000 and he was told that it will be $135,000 next year. The current service providers think it's going to happen just like that? Not a chance.

    With all due respect, the guys that think you can raise your prices to the moon, have you ever heard of COMPETITION? Raise your prices high enough and the NEXT guy will find YOUR business attractive. Again, with all due respect, the guys with trucks/ss can face competition from anyone with 20 grand and a desire to work.

    Last edited: Apr 10, 2008
  19. SnowedUnder

    SnowedUnder Member
    from ontario
    Messages: 65

    Huh? Can the guy who runs that place adopt me? :angel:

    You are running three pick-up trucks for six hours for 17 times and you make $1500 an hour? Are you sure you didn't throw an extra zero here and there? Or are you running Car 994's and affectionatly calling them "trucks"?


    BTW, no PM'ing in this forum?
  20. Neige

    Neige Sponsor
    Messages: 2,215

    Don't forget all the extras he charges.

    A few questions for you Snowedunder, you say a 25% increase is unreasonable. What if the contractor you hired, there were no problems. Got the work done on time, and you never once got a call from any store manager. He has been working for you 3 years, has been very reliable, and the last two years there has been no increase. He comes to talk to you and explains with the increase of fuel 30%, and who knows, that could go up to 50% by next winter. With the excessive winter we had, he needs to increase his price 25%, to continue to give you the same service. Would you outright say no? Would you hire someone new at 10% less. Remember I am talking about a seasonal contract.

    I am not asking this to be confrontational, am very interested in your point of view.