Features - State of the Industry Reports
2010 State of the Industry: Winter’s crystal ball
5/26/2010
As contractors plan for the 2010-11 season, they face challenges on several fronts. The predominant strategy? Keep costs down, grow smartly and outlast the cut-rate competition.
Now that the final bills for the 2009-10 snow season are in the mail and the plows are stowed away for the summer, snow removal contractors are taking stock of the season that was and looking ahead.
Facing a slowly recovering but still battered economy, a flood of low-ball competitors and the inherent unpredictability of Mother Nature, contractors are in a cautiously optimistic mood.
For the most part, they are looking to increase their business, but most seem to be settling on slow-growth strategies.
This early post-recession era makes things difficult for contractors on at least two fronts: prospective customers are either nonexistent or insisting on low rates, and a brutal job market is inspiring a legion of pickup truck owners to strap on plows and eek out livings offering bottom-barrel rates. Contractors offer the same response to both challenges: wait out the storm.
Patrick Feehan of RBR/Melville Snow Contractors says legitimate, professional snow removal contractors will always outlast low-ballers. The best strategy, he says, is to educate the customer. “What we try to emphasize to our customers or to our potential customers is you can hire the guy who has one truck, and if that guys blows a hose on his plow in the middle of a snowstorm, well you’re kind of up the creek,” says the director of sales and marketing for the Islandia, N.Y.-based snow removal company. “The guys who are trying to low ball you, they don’t have the loaders, the Bobcats, they don’t have the equipment necessary to handle all the contingencies of the winter event.”
The economy has customers shopping for deals, which gives cut-rate competitors an opening. But many of the contractors Snow Magazine interviewed for the 2010 State of the Industry report advocate standing firm on prices and differentiating yourself on service.
“You have to say this is my best price, you don’t want it, you don’t have it,” says Chris Chambers, who owns Baypointe Lawn & Snowplowing in Waterford, Mich. “And 50 percent of the time you get it and 50 percent of the time you don’t. But then there are a lot of times after you give that initial quote, four months later they realize the guy that was the cheapest isn’t doing their snow plower anymore. What comes around goes around.”
The only element in a snow-removal contractor’s life that might be more unpredictable than the economy is, well, the elements. While parts of the Mid-Atlantic and Northeast were blissfully buried this winter, the Upper Midwest was too dry for most contractors’ liking. Savvy contractors address this by, whenever possible, structuring contracts so that they’ll get paid consistently regardless of the weather.
For example, Feehan’s snow removal operation offers per-push, lump-sum and annual contracts. The annual agreements cover a certain amount of snowfall, and then anything over that results in additional charges for the customer. The lump-sum deal, which puts the contractor in the best possible position during a dry winter, offers the customer consistent service in return for five payments during the year.
Kasey Thren encourages his snow removal customers to sign similar, regularly paying contracts, but he says “you’ve got to be a salesman” to consistently structure your deals this way.
“It’s hard to sell them, because the person says, ‘Hey, if it don’t snow, I’m getting screwed,’” says the owner of K.T. Lawnscape in Mecosta, Mich. “But you come back and say, ‘Well, if it snows every day, you’re going to save money.’ You’ve gotta know your numbers. Know your snowfall and how many snow events there have been in previous winters.”
Being a snow removal contractor requires a certain amount of risk taking. But successful gamblers know when to go all in and when to play conservatively.
Chris Chambers, whose snow removal company is small but consistently growing, speaks for the majority conservative crowd when he says, “It’s a good time to grow, but you can’t overextend yourself. You can grow by buying a $10,000 F-350 out of Florida rather than buying that F-350 for $35,000 here with a $5,000 plow on it. … You’ve got to be economically responsible.”