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Seasonal Contracts with a Net Adjustment?

Discussion in 'Bidding & Estimating' started by PerfiCut Inc., Feb 9, 2011.

  1. PerfiCut Inc.

    PerfiCut Inc. Senior Member
    from Eastern
    Messages: 161

    We are becoming forced into providing seasonal contract pricing so the customers have a number to budget with, however, given then uncertainty of our seasons we have been reluctant to offer this type of contract.

    We do a number of large properties 10acres or more which are contracted on a per event rate 1-4, 4-6, 6-8 and so on. This works great for us since I know what our production rates are I am able to better manage our profit margins based on the event at hand.

    A seasonal contract for smaller properties would not be so bad, but when your talking about 10 or 20 acres, to account for a heavier than normal season could mean the difference between $40,000 and $75,000. A prety big margin, and one that I don't want to get caught on the losing end of.

    I was thinking about puting together a seasonal contract based on the average annual snowfall (a per inch price, so to speak) of 21" for our area. This price to be divided up into 4 equal payments. At the end of the season, an adjustment to the final payment can be applied based on the actual snowfall versus the estimated annual snowfall.

    Example. (21" annual average snowfall) Given the lot size of say... 10 acres. A price of $1,200 per inch for a total of $25,200 for the season. ($6,300 per month for 4 months). At the end of the season, if it actually snowed 25" this season then an additional fee would be added to the final payment. This fee could be at a reduced rate of say...$800 per inch vs the original $1,200 per inch. Vise versa if it snows less than the estimated annual rate, a refund/credit based on the difference, would be awarded.

    It may sound a bit confusing, but if you understand the concept, it might be a good alternative to a flat seasonal rate. Multi year contracts would be ideal and what we are pushing for, but even still, I think this helps both the customer and us, when it comes to budgeting for the season.

    I havent decided yet on salting. I was hoping to try and keep salting a flat, per application rate.

    Any thoughts on this?
  2. bristolturf

    bristolturf Senior Member
    Messages: 435

    You could do what you said yes, or what we do is this. Our annual average is something like 45" per year.

    So we will do a contract with them for up to 50 inches of snow per year covered under the seasonal agreement. After that, its simply billed per storm. So say we bid a place at 18k for the year well from november 15-april 15 they will pay 3000/month. Lets say then we get 50 inches in february and then have an additional 2 pushes for 400 each, they will still get their monthly bill, and then 72 hours after the storm they will get that storms bill.

    For salt, we do it 1 of 2 ways, and thats a set number of applications allotted in the season. We usually have like 12 plowing events and then an additional 12 salting events. So we might say contract includes 27 salting applications, after that its billed per application. We might also just give a poundage for salt. say its a 1 acre lot, that means we could potentially use 27,000lbs of salt on that lot. We would say, salting included in cost up to 27,000lbs of salt. After 27,000lbs salt billed per pound applied or something
  3. blowerman

    blowerman PlowSite.com Addict
    Messages: 1,275

    The way you describe your adjustable seasonal contract makes sense. However, they want a seasonal price and if you are not interested in doing for a seasonal rate, then pass on the property. Nobody is forcing you to do anything.
    I have always had a strong opinion that a flat fee for the season is just that, a flat fee.
    Somehow, lots of guys enjoy the idea that they have guarantee's that cover the average winter snow fall, but then raise the price when it's above that amount. Or the better one is the flat rate for the season, but we'll charge extra for blizzard conditions, moving back piles that they couldn't move because they didn't own the proper equipment, or price increases for salt in the middle of winter.

    By providing quality service at a fair price, I've provided seasonal rates to customers that want them and they have been with me for over ten years. Sure there have been a few years that didn't work out like they should. What it allows is for us and the customer to have the ability to budget for the long term, not just what's coming in at the end of a busy month.
    Last edited: Feb 10, 2011
  4. PlatinumService

    PlatinumService Senior Member
    Messages: 559

    Yeah your managers are looking for a budgeting number. so if you tell them example 2k a month, thats what they will budget and adjust rent accordingly. to have an extra at the end of the season is no different than what you are already doing. its still variable and thats what they dont want. all of my stuff is seasonal and salt inclusive. they get a set bill every month. if it never snows its awesome, if we get hammered they are gettinng their monies worth. some years will be good years and others will get paid the good years LOL. just have loader work and relocating at an extra cost to make some of your money back on a heavy year.
  5. bristolturf

    bristolturf Senior Member
    Messages: 435

    I agree with both the above posts as well, I was just explaining 1 of the ways I do my seasonals, if they are ok with a cap on it. But sometimes places are not ok with it, and you just need to bit the bullet. In those cases we always bid for a heavy season, usually between the marks of 65 and 75 inches. I also agree with blowerman about not charging for blizzard conditions or salt price increases. The stacking snow one though is a little touchy.

    We own the proper equipment, its just that usually that isnt always needed. We might see 1-2 stacking/push back per year on our accounts so we just bill them all additionally for that, in which they are ok with.
  6. grandview

    grandview PlowSite Fanatic
    Messages: 14,609

    Since you already have been plowing these places all you ready need to do is add up what each account has paid you in the past .Then maybe add a little more to that total then divide it by home may payments they want.
  7. cwby_ram

    cwby_ram Senior Member
    Messages: 907

    I've noticed a lot of talk about contracts like that recently on here. May be something to it?
  8. Jacobsmovinsnow

    Jacobsmovinsnow Senior Member
    Messages: 315

    Have them tell you how many inches of snowfall they want you to price for. Then after that threshold is reached how much of a percentage of the contract total to chargefor per inch of snow. Freezing rain has to be taken into consideration, for example up here one millimetre of freezing rain is equal to one centimetre of snow. Up here Ottawa airport is the benchmark for snowfall totals, we live 60 miles away. Some winters it worked in our favor because Ottawa received more snow.