Over the years we have heard from many contractors as to why they don’t like to take on the snow and ice season:
- The hours are unpredictable, and how it affects their quality oflife
- The bad wear and tear on equipment
- The liability to the company and cost of insurance
These are all valid points that are difficult to argue as each one is a fair reason in its own right. It’s for these exact reasons that contractors who do decide to battle the snow and ice must do everything they can to ensure a fair profit.
In reality, being profitable in the snow industry is not always guaranteed because contractors face solid competition, higher material costs, supply shortages, increased liability, and unpredictable weather. Contractors who manage these risks must control every factor within their power to create success. To ensure success, start each snow season with three key plans.
Plan #1 – A Plan for Profit
First and foremost, we need to create a profit plan. No contractor wants to go through the hassle of the snow season if they cannot make a profit. To create a profit plan, we need to first start with a snow and ice budget. Don’t go running for the hills just yet – it’s not nearly as hard to build as you may think. Here are the items that you will need to create your snow and ice budget:
- Forecast a sales goal
- Forecast your expenses including labor, equipment, material, and subcontracting expenses. Your expense budgets should give you enough resources to execute the sales you’ve forecast.
- Forecast overhead costs like rent, utilities, professional fees, office supplies, and overhead salaries, all of which must be recovered. Some companies assign 33% (4 months out of 12) of their total overhead costs to their snow and ice budget, while others work through each individual overhead expense and assign a fair portion to each division (e.g. snow + ice, grounds maintenance, design build). I recommend the latter method – it’s more accurate. If your Landscape Designer doesn’t work in the winter, your snow customers shouldn’t pay for any of that salary.
- Figure out your profit:
- Total Sales – Total Expenses = Gross Profit $
- Gross Profit – Overhead = Net Profit $
Once you have finished your budget, you will have a clear picture as to what your profit will be for that period of time. Fine tune your sales goals and expenses until this profit is both achievable and desirable. With your budget in-hand, you won’t be caught guessing how much you need to sell and what you have to work with.
And then there’s the topic your customers always want to discuss first– your prices. To set profitable pricing, you need to know what your costs are. What does your pickup and plow actually cost per hour? How much should your customers be paying you now so that you can afford to replace it in the future? You need these answers if you ever hope to drive a successful and sustainable snow and ice business.
Plan #2 – A Plan for Productivity
Your competitors will blindly cut pricing to win jobs without focusing on their costs and overhead – sometimes not even know if they are making a profit. Instead, you need to focus your time and effort improving your company’s productivity.
- Some advantages to improving productivity:
- Competitive prices without sacrificing profit
- Decreased re-work and quality issues
- Better, faster customer service
- Better able to withstand swings in weather and economy
- Less work for more money
Improving productivity involves change, but it’s far from impossible – more importantly it’s far from unprofitable. If change was just a walk in the park, everyone would be doing it. Improving your company’s productivity takes planning and hard work, but look at the payback; the opportunity to permanently increase the competitive advantage between your company and its competition.
When I think of what most influences productivity levels in snow and ice, three key factors jump out at me:
1. The right equipment. The difference between using equipment verses labor is that equipment is more productive. You can get more jobs done in less amount of time. Try to purse jobs in where you can use equipment that you already own. When new opportunities arise, determine what equipment is required to do the job most efficiently, then use your snow budget to determine whether it’s a profitable investment.
2. The right systems & information. Having the right systems in place is a must. Crews tend to rely too much on you or your office to get simple information in regards to a job. Save yourself from endless phone calls as to what is expected by your clients by introducing proper training and snow binders. This will give your crews clear instructions so they can get the job done right the first time and every time.
A typical snow binder includes:
- Phone/contact lists
- Routes and maps
- Site maps with service instructions and marked areas
- Inspection/quality control checklists
- Health and safety paperwork
Or embrace technology and create an electronic site binder. This can be done by creating a job site folder in Google Drive.
3. The right methods. A skilled operator can clear a lot in 40% less time than an average operator. Take the time to train your snow staff in how to apply the safest and most efficient snow removal techniques, how to prepare and inspect your equipment, and how to fix common, minor repairs. The small amount of time invested i training pays for itself in improved productivity each and every event.
Plan #3 – A Plan for Risk
The snow and ice industry is risky – just look at your liability insurance premiums! However, you can reduce your risk and improve your profits by protecting your company on three key levels:
1. Customer Risk. Never start work without a clearly defined snow and ice services contract. Your contract should be accompanied by a marked site map, signed off by an authorized party. In addition, inspect the site and take pictures of any damage that is already present. This will prevent the client from blaming you for those damages after the snow season.
2. Employee/Subcontractor Risk. Use employment contracts and written, signed subcontractor agreements to protect your liability related to your workforce. Make sure subcontractor agreements clear up issues such as WSIB coverage, liability insurance, and payment terms.
3. Health and Safety Risk. Everyone has the right to return home from their job safe and sound. Training on cold stress, snow plow operation, and heavy lifting are a few of the basic requirements of any professional company’s snow and ice program and will establish a culture of safety at your company. Take advantage of convenient new tools and technologies such as LMN’s online training to get your people safe and compliant at a cost that doesn’t come even close to traditional training methods.
Good plans won’t build themselves overnight, and the snow and ice season will be here before we know it. Don’t get caught settling for ‘the way it’s always been’. Traditional values will persevere, but old methods will not survive the new economies. Ensure your success by preparing the right plans for this winter, and I’ll be looking forward to hearing about the positive results on your bottom line this time next year.
Downloads
DOWNLOAD – Snow Binder Procedure Flowchart
DOWNLOAD – Snow Binder Word Document
DOWNLOAD – Managing Snow and Ice Planning Checklist
