# Price increase ?



## Chief Plow (Dec 12, 2001)

Here is a question could use some help.... I took a big hit in rise in insurance cost this year, as I am sure we all did. Also fuel costs are going to be up more this year than last, and I would like to add another sub guy, took on some more work. My prices haven't gone up in 2 seasons. There has to be a fine line for increases I know that, but.... What seems to be the normal percentage, 3% or 5%, 10%... I don't want to loose any accounts, but I don't want to make any less either...Any ideas thanks

Rick


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## Mick (May 19, 2001)

Like you, I didn't raise rates last year. This year, all accounts went up about 15%. I sent letters out about three weeks ago. There are a couple I haven't heard from, so I figure they're price shopping.


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## deluxeco (Nov 20, 2002)

We will see what all the cut-throats have to say about that:crying:


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## DanG (May 20, 2000)

My wife and I were going over the list from last year and figuring out who will be raised and how much.

Pretty much everyone is getting increased by 10% which works out to about an extra $3.00-$5.00 per push for customers who choose that route or an extra $30.00-$50.00 for the seasonals.

Based on the cost of gas from last year to this year(almost a $1.00 more), plus the cost increase of various insurances I have to increase their costs just to keep my profit margin the same.

Dan


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## Greenscape4u.co (Sep 20, 2003)

some guys don't increase every year , they wait 2 and 3 years and then give three years worth. I get in the habbit of minimal increases every year , usually the rate of inflation 3 - 4 %. My experience is that customers are more willing to renew a contract with only a $5- $10 increase any more and they start shopping you around :crying:


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## CT18fireman (Nov 30, 2000)

The fuel price increase has been discussed in the past and really cannot be justfied except in really large accounts. As far as insurance, why did it go up? If it is because you had a claim where you were at fault for something then it is not fair to pass that onto the customers. You may have customers that drop you for not being safe. I am in no way saying anything specific about you.

If insurance went up because of the region or other factors then you certainly can pass that off. Remember you can only increase so much before they start looking for a better deal.


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## DanG (May 20, 2000)

> _Originally posted by CT18fireman _
> [
> If insurance went up because of the region or other factors then you certainly can pass that off. [/B]


Lucky for you you don't live and work in the great state of NY.

We got a nice little surprise this year from the state.

Seems that they borrowed so much money from the federal government to pay unemployment in NY because of the amount of people out on it, that they weren't bringing in enough to cover the cost to pay it back.

So employers got hit with a sur-charge on last years wages of .004%( I think thats the correct amount).

Lucky us.:realmad:

Dan


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## sonjaab (Jul 29, 2001)

DAN.......I hear ya about getting the BIG Hammer from NY
over workers Comp. and Unemployment Ins. Increase !

Heck, I raised my per push price to the bank next door
10 bucks a shot to 60! I love it when the bank mgr.
lady calls for another shot!
Nothing they can do about it either because it my
property and I lease it to them. They are screwed!

Don't mean to come off harsh , but what has a bank done
for you or me for free?
They think nothing of wacking me 24 bucks when some
knucklehead bounces a check on me ! 8 bucks for a
bank draft, 15 bucks for a notary signature etc.....

Heck at my bar if I raise my price on a beer 10 cents
the folks have a spastic fit !
I sell a bottle of Bud for 1.75 for crying out loud!

Are you going to the BBQ? 
I will be there with bells on! Having plowsite shirts made
up to sell there. Rooster is gonna do some sippy coffee 
cups and some other goodies................geo


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## BWhite (Sep 30, 2002)

*rates*

ALways tricky to figure, then you have to factor in the lowballers. People will tend to go for the low price . " After all its just plowing"
PS I have never made a claim(knock on wood) ,CTfireman does your insurance company itemize your bill stating that the reason for your yearly increase was because of the claim ? if not how do you tell ?

I guess part of business is putting in a claim .Why wouldnt you pass it on to your customers . After all the odds are that something will happen . Thats why you get insurance


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## CT18fireman (Nov 30, 2000)

Well my insurance has actually gone down each of the last three years. I guess I am lucky and have had no problems. I do not know if they state why. 

My father was in insurance and told me that it would vary by region and state requirements, so that could be a reason. Also if you have notified them of any changes in your business, such as vehicles, equipment, drivers, storage location, and working sites. If nothing else changes though and you make a claim they will raise your rates.


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## Chief Plow (Dec 12, 2001)

CT,
I understand about fuel costs. I would not be looking into this if it were just for fuel. As far as the insurance goes, I have had no claims put against me, and I have had no incidents. NY is just screwy, they tell me the insurance rate is based on what the business makes. Anyways,
Thanks for the replys

Rick


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## micah79 (Aug 31, 2003)

It is tuff for me because although prices go up ever year for gas, salt and insurance, the prices I can charge go down. I have quite a few accounts from last year who have been calling me saying that I did a good job last year, but some other company gave them a cheaper bid. Competitors are starting to bid as low as $15-18 per drive. I think my min charge of $20/ drive with an average of about $25 /drive is more than fair. I try to tell customers that they get what they pay for, but that only goes so far. I am just so frustrated that so many people are getting a plow for their daily driver, not paying insurance, taxes ,employees, and not even really knowing how to plow. They just figure that they will bring in a few extra bucks on the side. I would be able to charge $15 /drive too if I didn't have to pay for the costs of being a responsible business owner. I am worried that these fly by night guys might be choking me out.
Does anyone else have this problem? Any suggestions.


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## PINEISLAND1 (Dec 21, 1999)

Every day Micah !

I get so sick of it, its about all we talk about this time of year. Some of the bids out there are incredible ! I heard today of commercial accounts that are being bid in the $30-$50 per hour range ! Thats less than 1/2 of our standard target rate.

How do you compete against that, in a Dutch market ?

We just keep on selling them on quality, and reliablility, and risk management, and sometimes it works.....


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## Lawn Lad (Feb 4, 2002)

I don't know why prices have been dropping. Maybe people are hungry for work? Maybe more guys are getting into snowplowing? But the market definetly seems to be getting more competitive. Obviously with those customers you have an established relationship you might be able to maintain your price. I've lost a couple of jobs because I didn't lower my price!

It would be easy to complain that I'm not getting the price on the contracts that I would like. But I'm going to keep beating the brush and flush out our customers - those that will be a good fit.

My recommendation to all... don't just lower your price to get a job. Sell the quality service. Don't use price as the factor for the customer to make the decision, it will only hurt us in the long run.

Here is a post from Lawnsite about "low" pricing and how it can only hurt this industry in the long run.

http://www.lawnsite.com/showthread....e=20&highlight=Rebirth of ethics&pagenumber=1


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## Mick (May 19, 2001)

> _Originally posted by deluxeco _
> *We will see what all the cut-throats have to say about that:crying: *


Well, so far I haven't lost any to lowballers. One emailed me that he's put a snowblower on his tractor, but still wants me to come on "will call" basis to keep the banks pushed back. Another is having a new driveway put in and the neighbor who is doing that offered to plow this winter - for free. I can't beat that . They said they were real happy with my work over the past couple of winters, though, and would be calling me back when this guy retires in a year or so.


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## micah79 (Aug 31, 2003)

Thanks for the input, Tom, Lawn Lad. At least I know I'm not alone. Makes me feel a little better I guess. Our companies tag line is: "Quality and Affordable Solution For Your Outdoor Needs"

The 2 keys are"Quality" and "Affordable" . NOT:"Rushed inexperienced, shady, and blow out cheap"

And we will also be there next year to cut their lawn or install a patio for them. I look forward to working for the same customer over and over again. It makes me feel good when I go to the grocery store and I see customers who want to stop and talk to me about how much they like their patio, or how they are gonna be calling me for snow. Maybe I'm just corny, but I like to be good to my customers and still make an honest living. I'd rather be this way than looking for a hole to hide in like some of the half-baked, here today gone tomorrow competition out there.

Just my theory.
Micah


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## Plow Babe (Feb 4, 2003)

> _Originally posted by Lawn Lad _
> *My recommendation to all... don't just lower your price to get a job. Sell the quality service. Don't use price as the factor for the customer to make the decision, it will only hurt us in the long run.
> *


*

That's good advice, Lawn Lad. We need to educate the consumer about quality and professionalism. When they start viewing snow removal as a real profession, not just something that a ten year old with a snow shovel does, then it will raise their expectations. People want their mechanic, their accountant, their day care provider, etc. to be certified, so why not their snow removal expert?

Our experience has been that the customers who dropped us for the lowballer (only a few over the years) end up calling us again in a year or two, because either they were unhappy with the service, or the guy quit plowing. One of our strongest selling points is that we are an established business focusing on snow removal, not just doing it as a hobby before going to our day jobs. People hate having to shop around for a new plowing service every year. Our affiliation with SIMA has really helped in this aspect of our marketing. With every bid I send out, I include the "How to Find a Winter Services Provider" brochure.

Another way we try to avoid this problem is by renewing the contracts early (in May). If you are just now renewing, you waited too long. At first, we had some customers surprised that we were sending out contracts already, but after a year or two they got used to it, and like not having to worry about it in the fall. I motivate them to respond by offering an "early bird" discount. And this year, we went to three year contracts with price guarantee. Of course, the contract is cancellable, so if they want out, they can get out. But generally, as long as they are happy with the service, they don't look for a change.

Also, try to cultivate a personal relationship with the customer. When they call you, greet them with a "Oh, Hi Mr. Jones, how ARE you, are you having a good summer?" like you know exactly who they are, even if you are scrambling to look at your customer list to remember them. Send out a friendly letter with the contract renewal, and again at the end of the season. Include some personal tidbits, so they view you as a real person, not just a faceless business. Maybe send out little calendar cards or greeting cards at the end of the year. We give our customers referral rewards also. If they refer someone to us, then when we receive that person's paid contract, I send the customer a check for $20 with a thank you note. People love that. And if they are referring to you, it is not likely that they are going to drop your service.

And of course, the most important thing is to consistently deliver that quality, dependable service.*


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## chtucker (Sep 6, 2002)

Karen, all good points.

I have bid on a few jobs around town that I get almost chased off the property. One 80 unit motel in particular balked at $90 per plow (about an acre of pavement, NOT open at all).
Mind you they called me because the other guy was horrible, kept having equipment trouble and would not even attempt to push the snow back far enough (1/2 ton short bed).

I tried the whole "I'll show up, I have new equipment and access to backup" thing, but they were just looking in the wrong place.

As for Insurance... I pay about 35k a year in insurancesssssss. When the stock market tanked, the insurance companies who had been making a majority of their money in the stock market suddenly needed to start making money at insurance too In the mid 90s till 2000 or so insurance rates did not reflect the true costs of insureing. It was not important as the REAL money was in the stock market. Get your premiums, invest that money, make LOTS of money, pay out minimal losses. Now they have to pay losses out of premiums.

Back to the topic, yes I did adjust my pricing (shoot for $90 per hour on per push, $75 per hour seasonal) and I got everyone to sign multi year contracts so that I would be building the business every fall instead of starting from scratch every time.

Howard


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## Lawn Lad (Feb 4, 2002)

When it comes to figuring out how you're going to offer your service and how you'll be the market leader, you can:
1) Be the low cost producer
2) Achieve Operational Excellence
3) Develop a closer relationship with your customer

Pick two... because you can't do all three effectively. I would assume most of us would go with options 2 and 3.

This will require educating your customers. It's very easy to try and win and account based on price, and price alone. "Go with me, I'm cheaper". And it's easy for the inexperienced or naive customer to buy into to. They can evaluate some objective criteria. What your marketing message must convey, and particularly during your sales pitch, is the reason or benefit for the customer to select you over someone else, making price the third, fourth or fifth consideration. Often for the customer price will be high on their list of concerns. Be competitive in your pricing, but don't just undercut to undercut. That is lazy selling and very uninformed. 

Any salesman should have very good product knowledge. You can't sell something that you don't know. The person who recites memorized lines about product information is no help to you when you have specific questions. When I buy a truck I don't care that it has a 7.8 litre engine. What do I need? What's the relative cost to the benefit I'll get when I jump from a 6.0 L to an 8.1? Educate me! 

You've got to remember that people buy from people, in most instances. When they call, they need to know someone is going to pick up the phone and answer their questions then. Not 3 or 6 hours later when you get their message. People buy from people they trust. 

Establishing trust is very difficult with prospective snow customers. They don't know you from the next guy and you're making similar claims. "I'll be here, I have equipment, I'm timely, I'm this, I'm that." The best way to establish trust is to ask questions and find out what the needs of the property owner are and how you can address them. Find out what problems they had with the last contractor and then offer a solution through your service. Trust won't truly be established until you've proven yourself on the job assuming you get the opportunity. 

But if you sell this way, you won't be opening yourself up to price issues. If you win a customer purely on price, you'll loose them on price when the next guy comes along and under bids you. The basis for your relationship was price driven, and unless you're continually willing to lower your price to meet the next lowballer coming down the block, you'll loose the customer. Worse yet, if you do meet the next guys price, the low baller market is setting your prices and you're going to loose money. You may know what your costs are to operate, more than likely the lowballer does not. Why do you want him setting your prices? 

Educate the customer, get to know them, sell the relationship. Don't make price the first thing out of your mouth when you've got that first 30 seconds in front of the customer.


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## micah79 (Aug 31, 2003)

Nicely said. I am trying to convince prospective customers that all snow removal services are not equal. I think the misconception that service companies are like a retail item is a real problem. Its the whole Walmart mentality. But, we are not a box of Tide laundry soap, or a bag of cat food. Due to the new retail strategies, customers think that lowest price is the best value. This may be the case when shopping for a name brand retail item such as soap or catfood. This is not true when it comes to larger purchases or services. I have been asking customers why they are seeking an estimate from me instead of keeping the service they had last year. It seems that most were tired of waiting so long for service to be completed. I then tell them that although my price is a little higher than the guy last year, I will be prompt and dependable. I also have higher quality and I dont tear up grass or hit garage doors. For these reasons, I tell them that I am a better value. This works for a lot of customers, but not for all of them. I have still had quite a few tell me that all snow removal services are the same and they want the lowest price. It makes me feel just like a box of laundry soap when they say that. Some customers just can't be convinced. It seems too much damage to our industry has already been done with these people.


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## Lawn Lad (Feb 4, 2002)

Some people are just literally cheap. Always have been, always will be. Won't change until they have a horrific experience with what cheapness will get 'em. Even then, they might rationalize it and still seek absolute lowest bid. 

I understand taking one of the lower bids, as businesses must be smart about their purchasing. If you have bid prices ranging from $50 to $80 on a property and the owner takes the $50 because it's the lowest, the best value may be at $60. Granted that's a 20% increase. But as a percentage swing I think you'll see bigger discrepencies on the smaller jobs. The jobs that are hundreds or thousands of dollars will likely be closer to one another as a percentage. 

I think the best thing to do is offer your price, try to briefly educate them and then move on. If it sticks, it sticks. I wouldn't waste your time on people that will always be cheap and are not receptive to hearing a sales pitch to encourage them otherwise.


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## Michael F (Oct 18, 2000)

I think part of what we see is not only un-educated consumers(thinking all snowplowing is the same), but un-educated contractors. I'll give an example we ran into this year for an apt complex:
Bid recommended the following.
2 trucks with plows 
Loader with pusher 
tailgate salter
4 shovelers
Salt lots, calcium to walks (main at each visit others"at contractors discrection"=to me each time). Their recomdations were about right.
We did a very through bid(measured walks), looked at all numbers very carefully, spoke with them about production increases(atv vs shovelers, skidster vs truck) they ok those. We came in around $ 200,000, guess what the current guy is doing it for.......$ 60,000...no wonder there doing crap work. Salt & calcium last winter should have cost the guy around 30-40,000 alone, with out any labor. She said no doubt if they hired us we would do a great job, but it's not in the budget. 
It seems many contractors don't read or understand the contracts & liability they open themseves up to. AND many property owner don't understand that they are ultimately responsible for what happens on their property, even public bids go to "lowest RESPONSIBLE bidder". I was sure to point this out to her in a very polite way. She also mentioned they have had several slip/falls. I was quick to point out that the contractor could argue that the property owners should have thrown out his bid as being to low & by accepting it they assumed some of the liability.


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## Matthew Bowman (Sep 21, 2002)

Rick, I also have a hard time figuring out how much to raise my prices. Although there is alot of blacktop in this area, there are also ALOT of contractors! The majority of my work is seasonal contracts on fairly large strip malls that must be bid. All of my properties went up this year, anywhere from 12% up to 25%, and I did not loose any. I'm not sure how we will do on some new ones that were going after. Its always a tough call, but you need to adjust your prices with all the increased costs and hope for the best.


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## IA snoman (Aug 31, 2003)

I am in my second season of plowing, first full season. You guys have so much info that I don't know where to start. As far as lowballing bids I am seeing what you guys are talking about. However, our prices are in the 50-80/Hr range, making some of your numbers sound great! I too am looking for some additional accounts so I can invest in more/better equipment. But we also have a lot of part timers doing driveways on the side, probably way to cheap. I have even seen guys doing driveways with snowblowers only. They were pulling them around on trailers behind a 2wd S-10.


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## CPSS (Mar 15, 2002)

It's guys like you at $50-$80 per hour that are the lowballers! I don't mean that as an insult, I just think that you guys don't realize what the work is worth.I have some parking lots that we can make $200-$300 per hour *PER TRUCK!* These are customers that we have had for several years, and got because their previous "plow guy" did such a lousy job. There are commercial customers that want good service, and are willing to pay for it. The other customers that shop only based on price will get what they are willing to pay for.


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## Matthew Bowman (Sep 21, 2002)

CPSS, I agree with you completely. I think the problem is that not many contractors are in the "snow removal" business, they push snow on the side. Therefore they don't consider all of there costs when they come up with an hourly $ amount. As an example I know many people who figure that they already have a truck so they don't to figure the cost of the truck, just the plow. I know others who are just happy to make there truck payment, thats it! For someone who is trying to run a business (pay for all equipment, employees, insurance etc. and PROFIT) these part timer rates are crazy. That is one reason that I stay away from the driveway thing. The problems that I have seen with commercial are the large companies with lots of equipment and employees, that they want to keep working during the slower winter months, again not taking all costs and profit into consideration because they already have the equipment.


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## Lawn Lad (Feb 4, 2002)

CPSS - I probably shouldn't have used numbers in my example, but they were purely for number sake. I don't know exactly where in NY you are located, but I would say that's its safe to assume that number vary depending on the market you are in. Prices range across the board based on the cost of living or operating a business. The more snow you get in an area the more likely it will be that the prices are lower since there is more opportunity to make the revenue to cover fixed costs. Taking two companies with the same overhead structure, one in southern New Jersey and one in Erie PA, and I'll bet their rates are completely different. 

I sure as heck would like to see rates higher, but to say "It's guys like you at $50-$80 per hour that are the lowballers!" I think is a pretty blanket statement that doesn't account for variations from market to market.

Certainly if your market is paying $150 or $180 per hour, charging at 1/3 of the going rate seems pretty silly to leave that much money on the table. However, if someone IS making money at that price in their market (because that's what it pays), than I'd give 'em a pat on the back and tell them "that a boy" for making it profitable. You too may be equally profitable on your sales of $150 an hour, but your expenses may also be higher.


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## CPSS (Mar 15, 2002)

As I said I wasn't trying to insult anyone. That said, how can anyone make a profit at $50 per hour? I don't care what area of the country you are in, you can't make any profit at that rate, unless, you are a one man part time outfit that does plowing for fun before your real job, have a 10 year old beat up unreliable truck with an equally beat up plow, and are happy to make $15 per hour salary while plowing.

Everyone knows about fixed costs such as truck payment, insurance, fuel and salary. You must factor in overhead costs in addition, such as telephone, shop or storage space rental or mortgage, allowances for future repairs and equipment replacement, advertising, legal fees ( for review of your contracts), office expenses such as copy machines, computers,the time you spend in the office doing paperwork. Even the small one man outfits have some of these overhead costs. Don't forget the time your wife spends answering the phone, or doing paperwork.

I think if we all spend a little time to think about our *REAL* costs, our prices will go up, our real profit will go up, and the public will realize the actual value of our service.


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## Lawn Lad (Feb 4, 2002)

The sad thing here is that there are people making a profit at $60.00 an hour. There cost of operating is less than those that can't figure out how to do it for less. And when it comes to figuring out the costs... I'm talking about snow only companies that aren't involved in any other line of work. They'd rather not work at $60.00 an hour, but plowing is not necessarily where the money is made. So this point is somewhat moot.


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## micah79 (Aug 31, 2003)

Plow site is an excellent national resource for most things pertaining to plowing. I don't however think that pricing schemes are universal at all. The way the business is done around southeastern MI is way different than the northern area of the state. The difference between plowing here and in New York is also completely different. The list goes on..... Not only are prices different, but the way of performing snow removal is also different. It is ALL about the market when it comes to pricing. I have mentioned different prices on here before, and the consensus was that I was nuts or something. The truth is that I would be nuts in a different market. If I charge considerably more than all of the competition in my local area, I will not get many jobs. It stinks that there is so much competition nowdays, but the facts are simple. Stay competitively priced and do quality work, or get another day job.


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## wyldman (Jan 18, 2001)

If your already running a business,and have the shop,equipment,employees,insurance,etc,it isn't very costly to add snowplowing as an extra on the side.You just add a few plows,add the additional insurance coverage you need,and away you go.In this case your operating expenses are greatly reduced,and you can still make money doing it cheap.Not that you should do it cheap,but it can be done.

We see it all the time,especially with seasonal businesses like paving,pool companies,construction,etc that are doing work very cheap just to keep their guys busy and turn over a few dollars.


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## micah79 (Aug 31, 2003)

The future of the business(at least around here) scares me!!!:crying:


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## IA snoman (Aug 31, 2003)

CPSS like I said, I would love to make your kind of dough that you are talking about. But like I said, this is the going rate here, so If I throw out a bid at 150/Hr or more I will get laughed at. I am in a community that has a substantial manufacturing industry. All of which plow there own property. Most all other commercial accounts are smaller lots with the exeption to Wal-Mart and a couple of strip malls. So the market here will not bring those kind of numbers. I have talked to other competitors before I was in business and I am in line with my prices. Speaking of which, I am pretty sure I lost a bid to a resturant this week. My whole reason for this reply was to find out how to bid jobs besides hourly.


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## Chief Plow (Dec 12, 2001)

IA Snowman,

Do you have to bid all of your jobs hourly? That would not fly here. My jobs are all bid on per push basis. Which works very well, and it is very simple... X amount of dollars for every 3 inches. I try to base all of my jobs getting a baseline $ amount per hour, and I will tell you it is not $150 an hour, but I'm no where near a lowballer either. I would think there would be to many variables to bidding an hourly rate. My 2 cents

Rick


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## IA snoman (Aug 31, 2003)

Chief Plow, what kind of variables? If it snows, we push it until it stops snowing or blowing all over the place. Most everybody wants it pushed at an inch or two. If I spend 10 hours over a two day period, it cost them 500.


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## IA snoman (Aug 31, 2003)

Chief Plow, I think I said that most everybody in my area bids jobs hourly. That is why I was asking other methods to bid jobs so that I could give the customers options, not a sticker shock. And no I am not a lowballer, I had two people ask for bids last year and they both told me I was too high because there previous plower was doing it for $30/hr! I told them they had better find him/her because their was no way I would touch it for that amount. I don't know if it was the same person that both were refering to or not.


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## micah79 (Aug 31, 2003)

$30/hr is way beyond lowballer. That is insane. $50/hr is also insane. There is no way a business can be run at these low rates I have been hearing about. At least not a growing money making legal business.


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## IA snoman (Aug 31, 2003)

I agree totally. I am fortunate enough to have my truck paid off so I don't have so much overhead. But that is why I am trying to find better ways to make money moving snow so I can buy a newer truck and blade.


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## micah79 (Aug 31, 2003)

We usually bid per plow or seasonal. We don't like hourly rates either. It makes us loose money if we buy more effecient equipment and get done quicker. Plowing faster shouldn't make a company loose money. I think hourly is old school, and many accounts are switching to per plow or seasonal. Hourly may be ok for some people, but not for us. jmo


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## IA snoman (Aug 31, 2003)

Thanks, I agree totally. I told the manager of one of my accounts that I was looking for a second truck. He then asked me if his price would be cut in half. I think he was joking, but you never know, he is from California. He told me he had five inches in the lot an hour and a half after I had plowed it. The funny thing is that there was less than an inch. Most was hard pack from traffic. Pretty funny stuff. Back to this seasonal contract. How do you do that. Figure what you need for the year on that account and tell them that figure. It's going to cost $4000 for this winter and you plow whatever mother nature gives you.


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## micah79 (Aug 31, 2003)

I'm falling asleep right now, so I'll reply tomorrow. lol


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## IA snoman (Aug 31, 2003)

Also you were mentioning that you shouldn't be hurt by making yourself more efficient. Well I am planning on putting on some prowings. Does anybody know what their website address is. I saw RPM sales on this site but haven't emailed him yet.


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