The snow is already thick on the ground. The first event of the season is well underway and you’re worried.
There’s a chill in the air, whipping into your plow-truck’s cab through a cracked window.
You’ve got a thermos of coffee and a long night ahead of you.
One thought nags you: how do you know that your pricing was correct this season?
Wrong pricing can be the difference between a successful, profitable season and the season that closes the shutters on your business.
Don’t leave your pricing to guesswork and intuition. Superstition has no place in a price quote for residential snow removal.
This post will show you how to price so that you know you’ll make money, regardless of what Mother Nature throws your way.
How to Know Your Numbers
You have to know what’s going on in your business to know what’s profitable and what’s not.
If you’ve got data from previous years, you can use it to help you plan for this year.
1. How much does the job cost you to perform?
Job costing is the only business stat that matters. There are three factors that go into the cost of any job, snow or otherwise:
- How long did it take to do the job, on average?
- Equipment costs (fuel used, maintenance and insurance divided by the total amount of time the equipment was used that season).
- Labor costs – man-hours used on the job multiplied by the average you pay field employees.
To calculate your labor burden, you need to compute time on the job as “man-hours.” Because crew size can fluctuate (2 guys on the truck today, 3 tomorrow, etc.) a simple “12:30p-2:30p” doesn’t actually give you a lot of information.
If you multiply those two hours by the number of guys in the crew, then you have a number you can compare to any other time that property was serviced.
Take a look:
Once you know how much a job will cost to perform, you can know how much you will make on it. You don’t have to guess or pad your estimate for some profit. You can know “we’re making 12% on this job.”
Collect this cost data on your current customers so that you can make future pricing decisions by comparing new properties to old ones.
New to the Industry? Use your own drive and a couple of friends’ drives to get some basic figures. You don’t want to start with guesswork, get out there and collect a little bit of data. You’ll expand your dataset this season.
2. Measure the Property
You can do this in-person with a measuring wheel or by using a satellite tool like Maps Pro to measure without leaving your office.
You want to know the area that you’ll work, include any square footage you’ll be responsible for (walks, drives, etc.)
Collecting the square footage of the new property lets you compare it against other, similar properties you already service.
Is it a concrete drive or an asphalt/gravel one? Drive have a heavy grade? Any apparent obstacles?
Anything that makes it more difficult to plow, salt, or shovel will make the job take longer.
Because labor is your main expense and you, generally speaking, pay employees by the hour anything that takes more time cuts into profits, especially if you estimate on square footage alone.
You might implement a grading scale from 1-5:
1 – No obstacles, small drive. Very quick job.
2 – No obstacles, longer drive.
3 – One or two obstacles, ridiculously long drive, or a curved drive.
4 – Multiple obstacles
5 – Multiple obstacles, long and curvy drive, etc.
With experience, you’ll be able to grade properties accurately and know exactly what you need to tack onto the bill to make it worth your time.
For your first season, use the knowledge you’ve gotten from your drive and friends’ drives to rate potential customers.
Remember: time on the job is paramount to every other consideration.
You sell hours of labor NOT a clear driveway.
4. Know Your Area’s Event History
Do you sell snow contracts? They are an effective way to ensure income, even in years with little to no snowfall!
You should diversify your company’s offerings to include a couple of different contracts for the snow season. Different contract types are like different bets. And if you offer all of the bets, you will always win something.
Here’s an example to break this down:
The data in the images for this section was compiled by looking at every December in Boston over the last 10 years. By pulling this data for the whole season (rather than a single month), you can get the average number of events for the season, the average total snowfall for the season and per event.
If you want to create similar visual representations of snowfall data in your area, Beam is an excellent tool for creating graphs from spreadsheet-style data. It can be helpful to see the information rather than just reading numbers in a spreadsheet.
You can do this for the Zip codes in your area to produce a good prediction model for each.
This lets you know, on average, how many times you’ll service a property in a season. You can compute a one-time rate using the information above, but you need to have an idea of how many times you’ll have to service them in a season to create a profitable contract.
Multiply the number of average services in a season by the one-time profitable rate and you’ll have a contract amount that works out to be profitable (the majority of the time).
Put in the effort, and see the results.
Guesses, hopes, and 99¢ will buy you a coffee at McDonald’s.
Don’t live in the world of low-ballers and fly-by-night companies. Know your numbers, put in the effort and you’ll see the results.
Here’s the bottom line: snow is a cut-throat business. Knowing your numbers and pricing accordingly can only help you. Information is power; the power to make good decisions. If you don’t know why you’re doing something, if you can’t back it up with data, you’re not making a decision. You’re guessing and hoping and crossing your fingers.
Use the information in this post to arm yourself with solid information. That’s the only way to stay profitable and ahead of all the fly-by-nighters.