Last fall some of my clients asked for advice on how many seasonal contracts they should have in-hand. A couple ended up with 70 to 80 percent of their revenues in seasonal contracts. A good portion did not have “caps,” meaning if it snowed like the dickens, they could have trouble meeting obligations as cash flow could become very tight. This was against my advice. They rolled the dice – and lost.
My clients do not have to follow my advice – that’s their prerogative. However, in some instances, being overly dependent on seasonal revenues can lead to potential financial ruin. Those who had their positions “capped,” making sure customers would compensate them if snowfalls became excessive for the season, were able to stem the tide of disaster by having some money flowing in as the winter unwound.
Those who only had 30 to 35 percent of their total projected revenues coming in from seasonal contracts fared much better because they were still able to generate revenue in per push, per event and even hourly rate contracts.
Some found solace in purchasing insurance or futures to protect themselves against ongoing, repeated and non-stop winter events. As such, money flowed in and not constantly flowing out to foot the bills to keep sites clear and safe.
We continually pontificate and expound upon the fact that snow contractors now consider themselves “risk managers” inasmuch as we provide safe environments for vehicular and pedestrian traffic on the sites we maintain. While “plow jockey” no longer applies, the term “risk manager” should not only apply to the service we as professionals provide, but it needs to apply to our business acumen, as well.
Too often, snow contractors put their own companies at risk by not adhering to good and prudent business practices. Being top heavy in seasonal contracts without any type of plan to mitigate the risk that comes with such practices, is not only unprofessional it is tantamount to throwing dice. Eventually, you are going to throw snake eye. As a result, you could lose your company, your livelihood and possibly everything you’ve achieved professionally.
Now, snow contractors have yet another potential disaster on the horizon, and some are doing the ostrich dance, putting their heads in the sand hoping it will just go away. Of course, I’m speaking of the salt shortage that is fast coming upon us in North America. Some are treating it like having high blood pressure – a silent killer many ignore until it’s too late.
I should stress that salt suppliers are not colluding to artificially inflate pricing.
The coming crisis, though, has been well publicized. Yet in August and September snow contractors are still quoting numbers equivalent to last season’s pricing.
Most are not instituting commodity clauses or force majeure clauses into their contracts. I hear contractors saying “my customers won’t allow that,” and are accepting that as gospel, acquiescing to such ignorance and stupidity at the potential expense of losing their companies.
Hello? Are you listening? Have we learned nothing over the years?
It’s time for snow contracts to act like responsible business people. This means making decisions good for your business, and not solely for your customers wants and desires. I’m amazed by just how customers can be so bold as to suggest snow contractors really don’t need to make any money on those services provided to keep sites safe. And, contractors often seem unwilling to take a stand that says, “I’m mad as hell and I’m not going to take it anymore!”
It is completely understandable that professional snow and ice managers might not want to irritate customers by raising pricing. However, at the very least, insert the appropriate language to protect against the inevitable skyrocketing salt prices. As a business owner or top manager, it’s the fiscally responsible thing to do in this situation.
Yet, some snow contractors continue to argue they cannot get this type of language approved by property owners and site managers.
Not all potential customers are good for our business. Maybe it would be best if those customers went by the wayside and tried to make other snow contractors flirt with bankruptcy rather than you.
Stop making emotional decisions when it comes to business and start making business decisions. It’s either that or we start giving salt away for free – it will save time.
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