Operating a Profitable Snow Removal Business
|By JOHN ALLIN|
With winter on its way and its inherent bone-chilling temperatures and falling snow in many parts of the country, many landscape contractors have chosen to add snow removal services as a way to supplement their income and retain their employees. However, others still question, “How can we make a profit at this type of work?” Other reflective thoughts often include: “Snow work is blood money,” “It’s a pain in the butt to do this work,” or “It’s hard work for the money we generate,” and “My guys want to just stay home in winter anyway, so why bother?”
Often, it’s just a matter of attitude. Think about it for a minute.
Isn’t attitude just a matter of how we think about anything we do or say? If you address your marriage with the right attitude, things often go well. If you approach your employees with the proper internal motivation (and a positive attitude) they will generally work harder and be more productive.
If you approach the landscape maintenance, tree care, or chemical lawn care portion of your business in the right manner, it becomes your “core business.” Can you imagine treating this core business portion as if it could not ever be profitable, and was just something that “had to be done” instead of what you needed to do to be able to support your family?
This author would submit that attitude has everything to do with success. It’s the underlying foundation of every successful entrepreneur. Contractors who treat the snow business as a profit center generally report gross profit margins in the 55 percent to 65 percent range. Deicing profit margins often top 70 percent amongst those who view this as a profit c e n t e r. T h e s e contractors are convinced that they can make a profit at snow work, and they do. Those who are convinced that they cannot, usually do not.
If you want to “think you can,” then it is imperative to bring a businesslike attitude to the snow side of your business, if you’re going to have any chance at being successful. One of the biggest problems with those of us in the snow business is that we don’t have enough respect for ourselves and the service we provide. So, that is job one: self respect.
Anyone who provides a necessary service to a paying customer by putting in incredibly long hours, with equipment that costs $40,000 or more to have on hand, working in horrendous conditions, is known (in my book) as a “professional.” Customers who don’t treat us as the professionals we are should not have the privilege of being our customer. If you think of yourself as a professional, you are.
Pricing snow services requires some basic knowledge of the snow industry. Some feel they should price snow services by the hour. To do this requires no knowledge of the industry or of production values of equipment. The margins for “by the hour” work are very low—generally in the 20 to 25 percent range. Charging for services “per push” allows for higher margins for your services. This means that the customers pay each time you visit the site and provide some service.
“Seasonal” pricing is where you figure out how many times you might visit a site (average) for the winter season, figure out what you need to get for each visit, and give the customer a flat fee for the season. This is good for cash flow, but can be a low margin site if it snows more often than you predict. Most contractors do not take more than 30 percent of their total winter revenue in this fashion—so that they can mitigate the downside of a winter that is more harsh than normal.
Non-refundable retainers are a great strategy in markets where they don’t get a lot of snow. Price a job (for example: residential $25; commercial $150) and tell them that you need two plowings paid for up front, non-refundable, even if it doesn’t snow. They might hang up, but if they agree, you know that job will be very profitable, plus you get your money up front. Then you can start dropping off some of those non-profitable, $15 driveway accounts.
Why should you shoulder all the risk of snow-free winters? You have trucks that need to be started up every week to get the oil through the engine. You have trucks that you have to drive around to avoid dry-rot in the tires. You have a mechanic that you need to keep on staff. You have rent and utility bills that need to be paid. The customer should pay to have you waiting and available to take care of them as soon as it snows.
Commercial snow projects generally come in three types. Industrial type accounts usually generate the lowest amount of revenue for the season. This is usually because workers going into and out of an industrial manufacturing facility do not need the parking pavement bare in order to walk to work. Office parks and office-type facilities require a higher level of service quality because of the nature of such sites. White collar workers’ shoes are such that accidents can happen more often than with work boots. Retail facilities (including hospitals, restaurants, malls, etc.) require the highest level of service. Having many visitors to a site requires higher safety concerns. They are inherently more prone to liability claims and it’s the snow contractor’s job to keep the site safe for vehicular and pedestrian traffic.
Residential snow plowing can be very lucrative if handled appropriately. Many contractors around North America make generous livings doing strictly residential snow plowing. Residential customers usually require a smaller amount of time per site. And, if you have several customers situated together so that you move from one driveway to another, the potential for profit rises dramatically.
From a business perspective, you have to project a professional image. Customers need to be able to communicate with you. You must have a phone. Sounds basic, doesn’t it? It is. But have the phone in the name of your business so customers can find you. Real businesses have a business phone. It’s a cost of doing business.
Have business cards. You don’t have to go to a print shop, given the current technology available for use on any standard PC. Pass your business cards out to everyone you see. This “networking” can garner all kinds of attention, leads, and inevitably, more business. Signs on your truck help tremendously. Have them professionally made. It is worth the expense to project professionalism for your business.
Remember, if you think you are a professional, you are.
When meeting potential customers, always view it as an opportunity to show off your professionalism. The old days of handwritten quotes on slips of paper are long gone. Printed quotation forms are a must. A positive attitude (there it is again) towards the service you will provide the customer also shows confidence and exudes professionalism.
Be understanding of your customers’ inability to understand what it is we actually do during all night snowstorms. Explain what you will do and what the price will be for the services rendered. Set yourself apart by treating the business like a profit center—and project the professionalism you have within you. It works.
I have a sales philosophy that seems to work for us. I believe that there are only two reasons not to get the sale:
1. We cannot do what the customer wants.
2. We got outsold. If you got outsold, then the other company had a better salesperson.
If you quote a job at $100 and the customer wants it done for $50, of course you can’t do what the customer wants. Ascertain the customer’s budget. In the snowplowing business, they all have it in their minds.
When customers call, I would ask why they called us and what they are paying now. If the answer is that they need to get three bids, I think—cheap. The word bid is customer speak for cheap. You should never “bid” anything. Quote work, but I won’t bid on anything. I would tell callers that I have a reputation in town for being the best and the most expensive. If they are just looking for the cheapest price, then we can’t help them. If they are happy with their current contractor but are still looking for a lower price, tell them to call when they aren’t happy with the level of service they receive. Take the best customers and let the rest go away.
Remember, you cannot alter how people treat you. But you do have total control over how you react to how you are treated and perceived. My former company secured the snowplowing contract for the 2002 Winter Olympic Games in Salt Lake City, Utah. People were always saying to me, “I don’t see how you could do a contract like that, from so far away from home.” My response usually was, “That’s okay.” And this is because I could see it. You alone control your attitude and how you react.
If you think you can, or you think you can’t—you’re right. Be prepared with the right tools and the right attitude, and the answer to that first question is, “Yes, you can make a profit at this business.”
EDITOR’S NOTE: John Allin, a snow industry consultant, founded the Snow & Ice Management Association (SIMA) in 1996. His book, Managing Snow and Ice, is considered the bible for snow contractors looking to become more productive and profitable. Visit his website,www.johnallin.com. Allin can be reached via email at firstname.lastname@example.org or via phone at 814-452-3919.