The Necessity for Seasonal Plus Snow Contracts
The snow plowing business is not like other service businesses. The reasons are explained below. During the winter months, we, GREAT LAWNS, need to cover the costs of numerous trucks and the associated overhead including the wages of those drivers who we need to pay whether it snows or not. When it does snow, we have drivers and equipment ready to service your needs!
Weather patterns are not predictable. This situation had caused our snow removal division to operate in a deficit. Several years ago GREAT LAWNS completed a detailed analysis of our snow removal operation that accurately revealed the amount of money spent on capital equipment purchases and fixed yearly costs attributed solely to our snow removal division.
The conclusion drawn from our study was that it would not be financially advantageous to pursue this activity as it was structured, because there was no guarantee, due to the dependence on the weather, that we could produce income to justify our investment.
We switched to these types of contracts, we call our, Seasonal Plus Contract, to create a retainer type system. The system has been implemented by our company to protect ourselves from winters of little or no storms so that we can guarantee a minimum return on our capital investment and help offset our snow removal overhead cost. The Seasonal Plus Contract also allows us to recover additional costs if a winter produces more snow than normal. Like we experienced record breaking snowfall in the 07’-08’ (5th all time) season and again in the 13’-14’ (1st all time)
The expertise and investment necessary to be prepared to provide timely, professional snow removal services to the public is an expense that our clients must share with us.
These types of contracts allow you to know what your minimum cost will be and what amount of expense you should expect to incur for snow plowing services for the season. All snowplowing operations are billed against this fee and when or if it becomes depleted additional billing commences for any season when, if, depleted, new snowfall events. Salting services are not billed against the retainer fee and are billed per occurrence.
While most contractors can plow snow efficiently, GREAT LAWNS professionals master all business aspects of snow and ice management. In Michigan, the snow and ice business is more like a “Crisis Management Service”, comparable to the ambulance, police or fire stations…where a 24-7-365 state of readiness exists. A significant difference between these emergency services and our snow and ice business is they are funded by tax dollars to ensure their existence and readiness. The list below describes some of what we have to prepare:
# Of days that we need to be ready for service per year….167
# Of days required to prepare on both ends of the 167 day period.. 30
Costs are both front and rear end loaded
Time needed to mobilize for snow service…2-4hrs s per team member
Hire and train personnel for snow service
Specialized stock products and equipment are required
These readiness fees (preparation fees, training fees, stocking fees) are fees that need to be covered by the client to recover the funding necessary for our resources (labor, management, equipment, materials, tools, sub contractors) to maintain our “ constant state of readiness” (24) hours per day, (7) days per week for nearly 6 months. The minimum monthly snow charge fees will be billed for the months covering November, December, January, February, March and April. The fees for season contracts are relatively small for the constant state of readiness.
Providing Snow and Ice Control Services
In conclusion, our winter services are provided to support our clients’ goals of obtaining a convenient and functional environment by extreme inclement weather conditions. Winter snow and ice control service is viewed as any other commodity type service, when in fact it’s not. This service is an unpredictable, emergency service…and GREAT LAWNS understands this. We will make every attempt to achieve the best possible outcome. We welcome your comments in regards to any one of our services.
Please feel free to contact our office if you should have any additional questions.
Call us for a Snow Plowing Quote Today!