Pricing a Snow Removal Job
For example, larger commercial accounts will need bigger plows and larger crews than smaller residential accounts. Containment plows and box plows that mount on skid steers will push a lot more snow than a regular straight edge plow. Will you be just pushing snow or removing snow from the site? Are there sidewalks and paths that will require shovel crews and manual snow blowers? The environment you’ll be working in will determine what kind of equipment you’ll need.
After you figure out what kind of equipment you’ll need, you’ll want to start marketing your services and find prospects; the earlier the better.
“We’ve got members that are already signing contracts in July and August,” says Birch. “The earlier they can get that sealed up, the better shape they’ll be in -- especially when there’s that last minute rush after it snows, when people start calling and asking for snow removal services.”
Whether you’re just starting out or an old pro, all the equipment and marketing in the world won’t help you turn a profit if you don’t price the job properly. It is often in this area that companies make their biggest mistakes. Unfortunately, it’s also an area where there is little margin for error.
“One of the toughest areas that we get the most questions about is pricing the job,” says Birch, “and whether or not to sign a seasonal contract. On the East Coast, I know that for a lot of landscape contractors, it’s beneficial to offer a seasonal contract where they provide a package of a snow service in the winter and landscape service in the summer.”
The disadvantage to that is if you sign a seasonal contract, then you’re locked into do the work for a certain price. You base that price on an estimate of how much you think it’s going to snow. If it’s a heavy snow year, you’re probably going to lose some money on those seasonal contracts. You’re plowing more, using more equipment and man hours than what you actually accounted for.
The advantage to a seasonal contract is that when it’s a light year, and doesn’t snow much, you will come out ahead. Seasonal contracts also help customers budget for snow removal. And since they are normally three-year contracts, even if one year is a little heavier than the rest, it will average out.
There are clauses that can be added to the contract, a threshold. Anything over that threshold, you can charge an additional fee. But if you do that, you have to be very careful and document what work you did, when you did it, and how long it took.
When you’re sending out invoices, that documentation could be the difference between getting paid and going to small claims court if there’s a dispute over what work was done. Some companies use digital cameras to take photos with the date on them to prove they were there. You can also get information from weather forecasting services with a synopsis of daily snow events.
Other ways to price a job include hourly rates. Some property managers and residential customers prefer an hourly rate. There’s also what’s called “per push” pricing, which means charging every time they go out to visit the location. A trigger depth is established, and every time the snowfall reaches that trigger depth, you go out and plow the property.
“So the trick is to try and diversify your contracts and get a few clients to sign up seasonally, a few ‘per push,’ and a few hourly, then you’re covered from the disadvantages of each. There’s a balance,” says Birch.
Much of how you price a job will be affected by the market that you’re in and what other people are doing in your market. How you determine your rate structure will also be affected not only by the amount of snow that you remove, but also by the size of the property. Among the factors you need to consider are the size of the lot and the amount of people you’re sending out to the job.
Birch recommends that when you inspect a site, you break it down into manageable parts. You should take into consideration how many people you’re going to need to do the job, how long it will take, and what equipment you’re going to use.
No matter what method of pricing you use, the bottom line is that you need to make a profit. So just like your landscape maintenance business, you want to come up with a figure that will allow you to see a profit after deducting the cost of maintaining your equipment, paying for labor, and covering your overhead.
The unknown factor is the weather. You may have an idea of how bad it’s going to be in the winter, but you never know for sure. So you have to put an assumption in your bid about the weather, and base your pricing on that.
Since you are supplying a service, it is to your advantage to be flexible when it comes to pricing. Depending on what the client needs, you should be prepared to format that information into a pricing structure that they can understand. You may prefer charging an hourly rate, but if the client prefers a contract, or “per push” structure, you may have to be flexible. But ultimately, it is to your advantage to educate your customers as to why you use the type of pricing that you do, and why it is better for them.
“A customer may have had a bad experience with one type of billing structure and may be open to a pricing structure that you develop,” says Birch. “But they may also ask how much it would cost to do the job per hour. It might be to your advantage to do it that way. Or you might be able to demonstrate why it is to their advantage to have a service contract.”
You could break it down by explaining that if you use one containment plow and one pickup truck it will be one hourly rate, and if you bring in 20 people with shovels it will be a different hourly rate. The difference is that it will take the containment plow and pickup truck one hour to do the job; the guys with shovels may be there all night. In the end, the customer doesn’t really want to know how much per hour; what they really want to know is how much it is going to cost to keep their lot clean.
When you draw up a contract, you have several options. SIMA members can log onto the organization’s website and download template contracts. It’s a Word document with the appropriate language that you can customize and enter in your own pricing information.
An advantage to joining a professional trade organization such as SIMA is that you avoid reinventing the wheel. The contracts they provide are specifically designed for the snow and ice removal business. If you’ve never offered or written a contract in this field before, you may not be protecting yourself like you need to. But regardless of where you come up with the language, always have a lawyer look at the contract. That’s the best way to ensure that you’re legally covered.
Insurance is imperative. You may have insurance for your landscape contracting service, but it may not provide coverage for your snow and ice removal service. Check with your agents before touching the first snowflake.
The amount of money you can make offering snow and ice removal varies. SIMA breaks down the sign-up membership for contractors into four different categories: $250, 000 or less; $250,000 to $1 million; $1 million to $3 million; over $3 million. All those categories are for snow and ice removal, and some companies only offer snow and ice removal. During late spring, summer and early fall, they’re doing sales.
“There are companies that make millions of dollars in snow and ice removal,” says Birch, “and it doesn’t always mean those companies are in areas where the snowfall is 130 inches a year. There are also smaller companies making a good living at snow removal, in places where it doesn’t really snow that much. What they have in common is that they do the job right and they provide a good service.”
One of those companies can be you.