# Dumb Question



## HenkeRep (Aug 26, 2003)

Dumb, because I don't know a damn thing about the actual, business side of removing snow.

I was once told by a very successful contractor (100% snow removal, in business for 20+ years) that charging by the hour was a bad way to run your business.

Then, I've talked to other contractors who charge by the hour, and, can't imagine doing it any other way.

So, I'm curious: What is the ideal business model for a contractor?

What things would determine whether you went one way, or the other, or another?

Essentially, what is the best way to determine what your rates should be, and how you should negotiate your contracts?

Just trying to learn. Thanks -


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## wyldman (Jan 18, 2001)

When you charge by the hour,there is no benefit from increased productivity.Actually going faster makes you less money.

Charging per push,or seasonal can make you a lot more money if your fast and efficient.Seasonal pricing guarantees you a set amount for the season,so your always getting paid.A slow winter will not hurt you.A heavy winter will cost you some profit,but at least you can pay the bills.Seasonal pricing is someting you need to ride out,and average over a few years,so the good and bad years will even out.Still a very profitable business if done correctly.

All the stuff I quote is pretty much seasonal only.If it's per push,then we get a minimum number of pushes per month to cover expenses.I wouldn't touch anything else.


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## HenkeRep (Aug 26, 2003)

> _Originally posted by wyldman _
> *When you charge by the hour,there is no benefit from increased productivity.Actually going faster makes you less money.
> 
> Charging per push,or seasonal can make you a lot more money if your fast and efficient.Seasonal pricing guarantees you a set amount for the season,so your always getting paid.A slow winter will not hurt you.A heavy winter will cost you some profit,but at least you can pay the bills.Seasonal pricing is someting you need to ride out,and average over a few years,so the good and bad years will even out.Still a very profitable business if done correctly.
> ...


Is it tough to negotiate those kind of "seasonal" rates?

And, what would you look at when doing that? Do you check local, climatology records and such, to see what the average snowfall is in your area?

Also, when you evaluate a customer...say the local shopping mall, with "x" square feet of plowable area...how do you go about determining how much snow that could likely represent, and how long it would take to remove it?

I'd be nervous as hell giving a seasonal rate, and then get hammered with snow all winter long, much like the eastern U.S. was last year.

Like you said, I guess you gotta take the profitable years with the not-so-profitable years.


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## wyldman (Jan 18, 2001)

Quoting isn't too hard.We start based on square footage,and add extra for obstructions such as islands,curbs,entrances,loading docks,sidewalks,removal,etc.Most of the time I can do a quick drive by,and estimate it pretty close.It's only the big chain store plaza's that need a lot of calculations.This will give you a ballpark idea of how long it should take to clear a snowfall that meets or exceeds your trigger point.

Next is determining how many 2" (or whatever your trigger is) snowfalls you get a season on average.Climate and meteorological data is a good start.A snowfall larger than 2" would be treated as more than one push.You should then be able to draw up an average number for the season.Around here,it's 18-20 per year.

So to get the final figure,it's just simple math.Cost per push (hrs required X hourly rate) X number of average pushes per season.

I usually have a Max snowfall amount per year,so if we go over,it's additional.It also helps to have a blizzard or extreme snowfall clause,to protect yourself .Salt,and removal are also billed additional to the contract price.

In the slow years,you get paid,and expenses are very low,as the trucks\drivers stay put.You don't make much on salt and removal.When you get a real bad year,your expenses can easily overrun your gross,but all the additional income in salt and removal usually offset a lot of the loss.

I've been at it for 18+ years,and haven't had a major loss yet.We had some bad years,and some really good,but I'm not complaining.


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## HenkeRep (Aug 26, 2003)

Oops!

Just realized this thread would have been more appropriate in the "elements of business" section.

Sorry  

(Moderators...feel free to relocate...)


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## nsmilligan (Dec 21, 1999)

I agree with Wyldman's post, hourly rates are unfair to both the client and the contractor. I prefer a mix of both seasonal and per push accounts. The per push accounts will generate more income in a heavy snow season, to offset some of the reduced profit margin on the seasonal contracts. Like Wyldman I have a per square ft figure that works well for me in my climate, and add for additional work because of obstructions, service level required for the site, etc.

Bill


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## Mick (May 19, 2001)

*???*

???


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## Mick (May 19, 2001)

Click on this link, then scroll down to "Starting ... Business". There might be something there or on other subjects that might help.

http://www.snowplowing-contractors.com/plow_site_FAQ.html

I've never plowed by the hour and don't intend to. Basically, if I tried to charge by the hour what I get per push or on seasonal contract, I'd never get any accounts.


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## Pelican (Nov 16, 2001)

Chris, how do you sell the per push minimums?


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## wyldman (Jan 18, 2001)

> _Originally posted by Pelican _
> *Chris, how do you sell the per push minimums? *


When I quote the property,they are told are trucks don't move unless we meet our "minimum cost" every month.When I explain what all that covers (ie:insurance,maintenance,overhead,equipment cost) they quickly understand what it's all about.Then I figure a minimum number of pushes per month to meet that figure.It's kinda like a non-refundable retainer.I can't be bothered with the one time deals.This is paid up front (VERY important),or they get NO service.It's near impossible to collect at the end of the month for something you didn't actually do.When it's paid in advance,they consider it like insurance.

Sometimes,all the hassle with pre-paying for a minimum amount,they come around and sign a long term contract.We can offer them better service,at a better price.


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## Pelican (Nov 16, 2001)

I've been considering this type of billing, I haven't been able to sell seasonal contracts on my accounts.

I've got it figured with 2 push per month minimums, I'd at least meet expenses. Is this about where you are?


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## Arc Burn (Oct 21, 2002)

That's a very lucrative business approach,unfortunatly it would never fly in my area.I know we have been thru this a hundred times but seasonal is not an option around here either.Every body prefers per push were they get what they pay for each time.


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## wyldman (Jan 18, 2001)

It does depend on your location,and what everybody else does in your area.

I have been fortunate,and when we started to sell seasonal,everyone else did too.

You will never sell seasonal if you don't try.You have to try and sell it as a benefit to them,and how it will help control variable costs for snow removal,and again,it's like insurance.If you just whine about not making enough money,or getting payed for standby,they won't care.Explain all the costs involved,show them a few lawsuits againts improperly insured contractors,etc etc.

Like John Allin says.....If you think you can,or if you think you can't....your right ! or something to that effect.Someone correct me if I'm wrong.


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## Arc Burn (Oct 21, 2002)

I just feel it's a double edged sword,it can cut both ways.It would be wonderfull on a slow year but i would have lost my azz last year.Nobody wants it so i won't push it


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## JD PLOWER (May 18, 2001)

Arc your right about it being a double edged sword, but thats why we aren't exclusively seasonal or per storm. I personally prefer a mix (our goal is to be 40-60% seasonal- per storm) it just gives you the ability to pay the bills when you get a down year. Seasonal totals around here are too wild for my liking to be exclusively one way ( too much money to be made) and after last year seasonal contracts are a much better sell. If your ever going to be able to sell seasonal, this would be the year. I would try to pick a customer that paid a hefty price last year and give them a quote, you might be surprised when you sell the "fixed cost" idea to them. All they can say is no.


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## wyldman (Jan 18, 2001)

The best time to sell seasonal is after a heavy winter.Your seasonal price will look good to them,as it will be less than they paid out last winter,so they save money.

Adding a limit to the number of pushes,total snowfall amount,late start\early contract ending date,blizzard clauses are all ways to protect yourself against losing big time if we get another heavy winter.Don't forget,salting and removal are usually above and beyond the seasonal price,and gross will increase if we get a lot of snow.

Raising your per push rates,as well as imposing a minimum service fee,or monthly minimums will help push them towards a seasonal contract,as well as weed out the smaller low paying accounts that we don't need anyways.


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## Mick (May 19, 2001)

In this area, "nobody does seasonal contracts - won't sell - don't even try it". Well, two years ago a camp owner asked me what I'd take to keep a small area of his road open for the winter. On a whim I said "oh, just write me a check for $xxx and I'll take care of it for the season". He agreed and thought it was a good deal. Contrary to others, last year we had a below average snowfall - that account worked out to $500/hr. Far as I know, he and his wife are still happy (they haved "assured access") and will write me another check this year (for a little more due to inflation). Now, can you imagine the response I'd gotten if I'd said "Sure, I'll keep it plowed for $500/hr"? Now, there are even more people expressing interest in seasonal payments (I don't have many contracts).

So, I agree "if you think you can or you think you can't..." The same thing was said about salt around here instead of sand - last winter I got my first request for straight salt. I'm also getting many requests for Magic Salt this year - something else that "wasn't supposed to work".


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## chas4x4 (Jan 30, 2003)

*price per push*

How do you know how much to charge per push is there a minimum in most regions?


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## SCSIndust (Mar 4, 2003)

Doesn't anyone charge by the inch? (0"-4", 4"-8", etc) That is what I do, and some of my associates in the area. It seems to be the most efficient way to make the most money in this area (Central MD). This past year with the big storm, it was snowing so fast, we were pushing 10-12" at a time. So that would mean I would have only pushed about three times. I grossed quite a bit, even though I didn't push that much. Doesn't this seem logical? What am I missing? Just looking to see what all you guys say.

Jamie


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## wyldman (Jan 18, 2001)

Charging per push,or per inch is almost the same.

One push,would be for 2-4".If you get 12",then you'd bill for 3 pushes.


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## SCSIndust (Mar 4, 2003)

What if you only push 2 times? Do you still charge for 3?


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## BRL (Dec 21, 1999)

If your contract is "per push" you charge for 2 pushes. If the contract is set up by inch increments, you charge the price that applies to that accumulation, no matter if you pushed it once or 4 times (example 8"- 12" = $500.00). I've seen "per inch" contracts as well, so the 12" example at $50.00\inch would be charged at $600.00, whether it was pushed once or 4 times.


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## Mick (May 19, 2001)

Another example of what BRL is saying is what I use.

Mine are generally set with a 3" trigger so I'll charge something like:

3" to 6" - $xxx (ie: $30)
over 6" to 9" - 1 1/2 times $xxx ($45)
over 9" to 12" 2 times $xxx ($60)
over 12" - 2 times $xxx plus "y" ($1) per inch over 12"

so a 16" snowfall would be billed at $64.

I specify that 24 hours from the start of snowfall will start a new billing cycle.

(an alternative, which some guys do, is to charge $xxx every 3".)

Now you can push as much or as little snow as you decide. The customer pays the same regardless if you push 16 times with every inch or wait till it's over and push 16". You can decide which way to go based on the nature of the snow. If it's wet and heavy, you will want to push more often than a light and fluffy. Obviously, this won't work well if it's a commercial account and it's snowing during the day or the customer may specify that he wants it cleared at a certain depth regardless of the time of day.


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## SCSIndust (Mar 4, 2003)

Wyldman said:
"Charging per push,or per inch is almost the same.

One push,would be for 2-4".If you get 12",then you'd bill for 3 pushes"

I know what you guys are saying, but I was try to decipher what wyldman is talking about. If my contract states per push, and each push is 2-4", and we get 12", but only push 2 times, do you still bill for 3 pushes? 

Even though the contract specifies 2-4" per push, what if it snows too fast to push every 2-4"?

I know all about contracts by the inch, because that is how I have mine setup. This per push contract is strange to me. I'm just trying to make sure which ever method I go with this year is the best.


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## wyldman (Jan 18, 2001)

We specifiy in the contract what one push includes.It is usually 2-4".So if we got 12",we bill for 3 pushes,even if we only pushed it once with a loader.The way it's set up,it's almost the same as billing for 2-4",4-8",etc.

If it's a smaller place,and it's not spelled out in your contract,then a push is just that,one push.So if you got 12",you'd most likely have to charge for only one push.

Sorry if I confused you.


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## SCSIndust (Mar 4, 2003)

One more question for you wyldman:

What don't you know?!?!

You seem yo everything about everything!

Anyway, I got it down pat now. I'm going to look over everything to see which way would be the best for us. It will probably be by the inch this year, since we do small to medium propoerties. Anything big we do, is usually sub work, though we wish it was ours...

Thanks!


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## wyldman (Jan 18, 2001)

> _Originally posted by jalawn _
> *One more question for you wyldman:
> 
> What don't you know?!?!
> ...


What don't I know ?? LOTS  Still learning everyday.


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## szorno (Jan 3, 2002)

I've got a hybrid system. We figure out how much time a job would take at 3- 5 inches. Then we price it based on $100 per hour. that becomes their base rate. Any storm 2-5 inches is billed at base. Anything over 5 goes to a flat $100 per hour for however long it takes. Second pushes or cleanups have a $50 minimum and go straight to $100 per hour. That way the customer actually gets snow moved for every dime he lays out, but we keep our hourly at a profitable level. payup


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## Lawn Lad (Feb 4, 2002)

Here is a little calculator I use to figure out how long it will take to plow a parking lot assuming a production factor. 

Once you have the time, you can apply your hourly price to get your per push price. From there you can build seasonal contracts based on the expectation for snow fall. 

What you have to figure out is what is your production factor for a piece of equipment assuming "average" conditions from which you'll base your bid. A wide open lot may or may not be good for a pick up truck depending on how long the run is.

It's tough, but you've got to be a little like Frederick Taylor and pull out that stop watch and do time trials on equipment. Or just pull completed times off of route sheets after an event. Either way, you've got to measure your own production rates. 

Oh well, can't attach excel files. Email me if you want it. Moderators... can you add excel to the list of file attachments?


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