The mercury's dropping and contractors who deal in snow removal are hoping for the worst – or at least a few good inches of the white stuff. After some relatively mild winter months for the last few years, snow removal crews are itching for something to do.
At a GIE educational session titled "It's Snowing Profits," Mike Rorie, president, GroundMasters, Cincinnati, Ohio, told attendees what to consider when looking at their own businesses.
Rorie first insisted that contractorsdetermine why they are in the snow contracting business. His categorized responses included landscapers whose customers insist they provide the service; contractors who do snow removal for a living without a landscaping businesses on the side; contractors who live in good geographic areas for snowfall; and those who have enough equipment and manpower to provide snow removal services. Ideally, knowing how your business was originally formed can help keep it going in the right direction.
Rorie noted that regardless of why a contractor chose to take on snow business, the fact of the matter is that the majority of contractors understand the costs, but not the value of the services they provide. "Early on as 'doers', we deeded to know what stuff cost," he explained and discussed the idea of risk reversal. That is, when bidding on a project or negotiating costs, contractors should encourage potential clients to consider how much they value the service. In other words, what would it cost them to not have proper snow- removal or deicing services for a period of time?
Really, risk reversal is just another aspect of the number crunching that goes along with a snowremoval business. In terms of being paid for snow removal services, a number of contractors who attended the session acknowledged that they were paid regardless of whether it snowed or not, whereas a few attendees only received payment if it actually snowed. This situation can be a problem, Rorie warned, because if a contract is predicated on snowfall, the contractor may not get paid.
"Get paid for what you’re spending to be in the snow business," Rorie said, reminding listeners that all the money a company spends to run its business must be recovered in the end. A departmentalized profit and loss statement can clear up questions regarding how much money is occupied in the snow division of a landscape contracting company.
Additionally, contractors must remember that the current situation in the United States is that, as Rorie put it, costs are up and opportunity is down. Overhead expenses -- like insurance, fuel, and worker’s compensation -- are on the rise, while actual snow events that would bring in revenue are decreasing.
"Hard work cannot overcome this, technology cannot overcome this, increased sales cannot overcome this," Rorie added. "No matter how hard you work, how much you prepare, how much you invest, you’re at the mercy of Mother Nature."
Certainly, Rorie's comments were not meant to discourage any contractors in their snow removal endeavors. On the contrary, his words should challenge contractors to think smarter about their businesses. For instance, in taking his own advice, Rorie moved GroundMasters somewhat away from snow to make it less of a make-or-break issue. Moreover, Rorie also suggested that contractors meet with competitors in an effort to avoid collusion and to create a situation where, even in a slow winter, everyone can win. Even seminars like Rorie's can stimulate a discussion of how each competitor's businesses can make the most of existing and available clients.
Ultimately, choices made about snow removal are up to contractors and their teams. Still, Rorie’s comments and good business sense are definitely applicable to any snow management division, especially considering recent economic and weather conditions. Armed with these tips and considerations, contractors may not have to concentrate so much on crossing their fingers for a big snowfall.
The author is Assistant Editor of Lawn & Landscape magazine and can be reached at lspiers@lawnandlandscape.com.