Come winter, Sammy Cahn’s classic, “Let it snow! Let it snow! Let it snow!” will play on every radio from coast to coast. If you’re in the snow removal business, you might well be singing the same tune.
For those in the landscape industry, snow usually means a few months of unpaid vacation. During that time, those cold and wet winter months can start to feel pretty dry. So like many landscape contractors, you probably bundle up and wait until spring brings the green back.
But winter doesn’t have to mean freezing your bank accounts. In fact, the answer has been right in front of you all along, winter after jobless winter: snow.
When the grass stops growing, and—in many parts of the country—the snow starts piling up, your existing clients will need all the help they can get. Let them know that you’re getting involved in snow removal; maybe you can switch them from a three-season contract to year-round service.
“There are really no other revenue streams during those winter months, so snow removal is the best way during this time to utilize men and equipment. And another thing to think about is that if you’re not doing it, another guy is. Now you’ve just let him in the door to your clients,” says Chris Kujawa, executive vice president of sales and marketing at Kujawa Enterprises, Inc., in Oak Creek, Wisconsin.
Snow removal can bring big bucks. It doesn’t have to simply supplement your off-season revenue; this service can quickly turn into one of the most profitable components of your business. It’s also a good way to keep your crews working year-round.
“The fact that it can add significant revenue and margins to the bottom line is probably the single biggest reason that contractors stay in the business,” says John Allin, a snow consultant in Erie, Pennsylvania. “They’ll get in it because they want to do something with their time in the winter. But when they do it and figure out how to price it properly, they find out that it’s a very high-margin business.”
Before anything, though, you’ll probably want to get your equipment in order. It might surprise you to know that you probably already own some, if not most, of the necessary gear. Pickup trucks and skid-steers—even lawn mowers—can be converted into plows simply by attaching the necessary blades or blowers. You’ll need salt, too, but luckily, it can be bought and stored well in advance.
And if, for whatever reason, you don’t have the gear, consider renting it. But keep in mind that the closer it gets to winter, the more rental companies will charge for equipment. That’s why it might be a good idea to discuss prices while the demand is low. The same goes for salt.
While the right gear can get you started, success in snow removal comes down to one thing: the pricing. Properly pricing a job can mean the difference between a winter counting green or one spent singing the blues.
“You have to take into account the weather variables when you’re pricing jobs. The weather doesn’t work on your terms, so your pricing should reflect that,” says Kujawa. “You could get 50 inches in five 10-inch snowfalls or you could get 50 inches in 10 five-inch snowfalls, and both of those are vastly different.”
Pricing differs from season to season, but your best bet, and the most commonly employed method, is a mixture of different pricing models. Starting out, most contractors use hourly pricing as they learn the business, and then later include ‘per push’ and seasonal pricing. Per push means that you’re paid each time you service a property. With seasonal pricing, you’re paid a fixed amount for the entire season.
Hourly pricing is the least profitable method. The margins for by-the-hour work are usually low, generally in the 20 to 25 percent range. However, if you’re new to snow removal, you might consider using it as a starting point. Hourly lets you get a feel for the business before committing to more complicated arrangements and contracts.
Although it won’t bring the same margins as per push or seasonal, hourly does, nonetheless, allow you to experiment with snow removal. While working by the hour, swap out crew members, test out gear, or try new techniques. Worst comes to worst, you’ll take a little longer and lower your margins, but by doing so, you’ll gain the know-how needed to tackle larger, more complex jobs.
You can also use hourly pricing to accumulate a list of clients. Once you’ve serviced a few properties and feel comfortable enough with the business, talk to your current clients about a seasonal or per push contract.
Transitioning away from hourly pricing, insists Allin, will make all the difference in your bottom line. “If you’re doing it by the hour, you have no incentive to be more efficient. But if you’re doing it on a per push or seasonal contract basis, you want to be as efficient as you possibly can. Increased efficiencies mean increased profits.”
With seasonal contracts, you agree to service a client’s property throughout the season. These contracts provide steady, guaranteed income, and can be extremely profitable, especially in seasons with light snowfall. Be careful not to load up too much on seasonal contracts, however, because stormy years can hurt profits. You always want to maintain a balance.
“A seasonal flat rate means that you have a pretty good feel for what might happen in your market,” says Allin. “For example, east of the Mississippi, two years ago, there was very little snow. Seasonal contracts paid off handsomely. This past winter, some markets, like Chicago, got twice their annual snowfall. So a seasonal annual contract became a hardship, since you were essentially plowing two seasons worth of snow in one winter.”
To avoid losing money with seasonal pricing, include a snow cap in the contract, suggests Tom Canete, owner of Canete Snow Management, Inc., in Wayne, New Jersey. “Last winter, we didn’t have any caps, and there was quite a bit of snow, so we didn’t make any money on our seasonal contracts. But this year, we added caps and we turned a big profit on our seasonal work.”
A snow cap allows you to renegotiate a contract after a certain amount of snowfall. If snowfall passes the agreed-upon amount, then you can negotiate a new pricing method or contract with the client. This can prevent you from losing money in years with heavy snowfall. These small contractual details can make or break your winter, so make sure you zero-in on the fine print. Keep in mind, however, that the market defines the prices. Some contractors might offer capless seasonal contracts, but that doesn’t mean you should, too. A capless contract, or anything else that undercuts your sale, but in a harsh winter like this competition, might get you a quick year, it can really cost you.