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Tiered rates. What is the general consensus?

Discussion in 'Bidding & Estimating' started by Buswell Forest, Feb 22, 2014.

  1. Buswell Forest

    Buswell Forest PlowSite.com Addict
    from NH
    Messages: 1,668

    I have said before in here how tiered rates were foolish. Now, I can see how they might make it a bit more fair and profitable..

    What are your thoughts about a fair structuring as far as how much more $ and how to break up the amounts?

    Here is my first stab at it, just for S&Gs. Yes, no, maybe?

    Base rate is what it is today, good to 5.9 inches.

    Base + $5 from 6 to 8.9..

    Base + $10 from 9 to 11.9...

    Double base rate from 12 to 16.9...

    Double + $10 from 17 to 20.9

    Triple rate 21 and up.
  2. BUFF

    BUFF PlowSite Fanatic
    from FR NoCo
    Messages: 9,082

    I've been using tiered rates since day one, I use a 40% bump from the base rate on every tier.
    Resi's have two tiers in 6" increments.
    Commercial property's have four tiers in 3" increments
    As an example for commercial property's
    Base rate...$100
    1st tier......$140
    2nd tier.....$196
    3rd tier......$275
    4th tier......$385
    All my accounts are per push.
    I've found this approach to costing to be received by my customers very well and it works out very well for me to.
    More snow requires more time to deal with which also requires more fuel too.
    Last edited: Feb 23, 2014
  3. jhall22guitar

    jhall22guitar PlowSite.com Addict
    Messages: 1,056

    I would go with what Buff posted. Only because yours Buswell wouldn't make money in my mind.

    Lets say your 3" trigger for a place thats per push is $100, that would mean that it would now be $100 up to 6" and then at 6.1" it would be $105. So i can't see you making money from that, while Buff seems to have a fair compromise between just charging double and the amount of times the site is serviced.
  4. grandview

    grandview PlowSite Fanatic
    Messages: 14,609

    Here's my take with seasonals ,it snows a lot ,I plow a lot. It don't snow they still pay.All is fair to both parties.
  5. YardMedic

    YardMedic PlowSite.com Addict
    Messages: 1,266

    The way I do it is 2-6 full charge, and half charges every 4" over that
  6. Buswell Forest

    Buswell Forest PlowSite.com Addict
    from NH
    Messages: 1,668

    I should have said this was for my per push resis, where the most I currently charge is 45. I know these customers. Any more, and I risk having them shop around. And there are plenty of low lowballers here. One thing in my favor is I have late model equipment. They know I always show.

    My commercials are all with the same company, and I work it like this;
    I charge enough now to make money on each if I am done within an hour.
    So, up to an hour, is x. After that, I charge 1/2 again for each 1/2 hour. They do not have any issue with it, and I make a profit.
  7. jhall22guitar

    jhall22guitar PlowSite.com Addict
    Messages: 1,056

    That makes more sense, I was trying to figure out how to make money charging $5 more for the next tier on a small commercial lot. I like the commercial pricing you have though, especially if it works! :salute:
  8. basher

    basher PlowSite Fanatic
    from 19707
    Messages: 8,993

    We tier on 4" increments, if 0"-4" equals $100. The multiplier is 1.6

    0"-4" $100
    4"-8" $160
    8-12 $256
    12"+ $25 @inch

    Doesn't matter the number of pushes, push a 8"+ inch storm once or three times still $256.
  9. andersman02

    andersman02 Senior Member
    Messages: 756

    This is how we are doing our per push (I guess it would be per event) pricing next year although we only have a few per push.

    1-3.9= x
    4-7.9= x(1.35)
    8-11.9= above rate (1.35)

    etc etc

    Seems to be the fairest way imo.
  10. WIPensFan

    WIPensFan PlowSite Veteran
    Messages: 3,594

    Where did you come up with "1.35"?? seems really random.

    This stuff makes me laugh...6" of snow is twice as much as 3", yet a lot of guys either have no increment boost until after 6" or they bump up some small amount like $5. Jesus you gotta make more money when it snows more! More gas used, more money paid to employees, harder on equipment and more stress on human bodies.
  11. Buswell Forest

    Buswell Forest PlowSite.com Addict
    from NH
    Messages: 1,668

    The caveat is we know our customers. If we could charge more, we would. And in my case, a $5 upcharge on a 30 driveway is a 17% increase. How much of an increase is 3" worth?
  12. MattR

    MattR Senior Member
    Messages: 218

    This is how I plan on charging any new customers next year. I am going to keep current customers on the system I am using now, and if using a tier type pricing works and does not scare any new customers away, then I will switch to this after next year for all customers.
  13. YardMedic

    YardMedic PlowSite.com Addict
    Messages: 1,266

    Matt I would suggest implementing the change across the board. A fair system to you AND the customer... Start the next season with 1 billing method, mine, yours, or whatever new calculation works best. I believe the best system is one you can apply anywhere, small or large driveway, small or large commercial.
  14. andersman02

    andersman02 Senior Member
    Messages: 756

    Our per time rates are already higher then most companies around here. Looking at the rates with this 1.35 seems to be fair for both.

    $50 dollar drive
    4-7.9= $67.5
    8-11.9= $92


    That way we typically go out twice if we are expecting 6-7"+. I cant see charging someone twice within 24 hours.. good for us bad for customer. this way it is almost double but not quite.
  15. Dog3

    Dog3 Junior Member
    Messages: 8

    We've been using tiered rates since '95. Com and resi same system and all per push.

    Started out using base price good up to 3" and adding 30% every additional 3"

    In '05 we adjusted to base price good up to 4" and added 50% every 3" after

    Our base prices are very competitive around our area and have had no complaints about the change 50% price jump every three inches. Vast majority of events are under 4" here anyway. Most larger companies have a similar price structure around here.
  16. maelawncare

    maelawncare Senior Member
    Messages: 871

    2-3.99" base
    4-5.99" 1.5xbase
    6-7.99" 2xbase
    8-10" 2.5xbase.

    Only once in the last 10 years have we got over 10". And only 4 times in the last 10 years over 6". So people bicker at 4".
  17. cbservicesllc

    cbservicesllc PlowSite Fanatic
    Messages: 12,532

    Subscribing... looking to do something different on per plow resi's next year... my flat rate for resi's hasn't worked out to my plan this year with these very fast moving storms...
  18. gasjr4wd

    gasjr4wd Senior Member
    Messages: 287

    (don't see the popcorn guy)
  19. Rat_Power_78

    Rat_Power_78 Senior Member
    Messages: 184

    Are you still profitable on each occurrence with your 17% increase? Are you profitable over all (i.e. on average for a given season) with and without it? don't take this the wrong way, but if your margin is so slim that $5 is the difference between profit and loss, you may want to reevaluate your pricing structure overall. I have noticed that usually the smaller the amount of snow the more profitable we are. Of course in my case a lot of mine are zero tolerance and this year we have had a LOT of 1" events.

    I feel that as much as I want to have enough work, if I cannot make money doing it, then I don't want the work. I have lost jobs this way and I'm sure i will lose more in the future, but I'm not doing this for my health. Plowing snow should not be a non-profit line of work. Thats not to say you are not making money, just my way of looking at things.

    Maybe the way to think of it is this: how much longer does it take to perform the work for a given increase? For example if you have a place that takes an hour to do on 2 inches you charge $100. Now at 4 inches it takes and hour and ten minutes. At six inches it takes an hour and a half. I think at some point you have to look at the increased time percentage and turn that into increased charges to the customer. Maybe your breaks are 4 inch increments, maybe you pick a different break. Personally I think 6 inches is too big of a jump.
  20. Buswell Forest

    Buswell Forest PlowSite.com Addict
    from NH
    Messages: 1,668

    Well, I do make money now. The wildcard is the customer. There is no way mine will accept a double charge for anything under 12 inches. We are talking mature (Not young) Yankees here. Thrift is a religious tenet. My first guess is about as much as I would dare ask for. And in truth, it takes me maybe 3 minutes more to push 6" vs 3" on each drive.
    Right now, I plow 34 drives for $1,025 a push...and it takes me about 8 hrs on a 6" storm. That = $128 per hour. If I went to my tiered rate, I would make $21 more per hour for the same exact 6".