Beware these hidden costs
1 May, 2005 By: Ron Hall LM Special ReportsNew Jersey landscape/snow pro reveals where your winter profits might be melting away
The most difficult challenge to providing commercial snow and ice management services isn't the work. More often than not, It's earning a reasonable profit for performing this difficult and necessary work.
Even so, many experienced contractors make good money at it. The difference between them and operators that don't enjoy 25% or higher net snow profits is that successful contractors recognize and manage costs, many of them lurking in the shadows, associated with these services.
Let's start with obvious expenses — payroll, equipment payments and insurance to name a few. These are easy to figure. But there are other costs, profit destroyers. And landscape company owner Chris James, even after two decades in the business, still battles them just like you do.
James bought his landscape company, Chris James Landscaping, in 1981. He's been providing commercial snow services almost for as long. His headquarters are in Midland Park, NJ, about 25 miles northwest of New York City, and his market area typically gets 25 to 30 inches of snow annually.
James counts on his snow services to provide more than just cash flow. He counts on it to help fuel his company's overall growth too.
He provides most of its snow services with his own employees. About half of them work year-round and do winter landscape chores when conditions permit. James admits the price he charges for his snow services are near the top of the price range for his area. But, considering the costs associated with the work and the high quality snow and ice service he provides, they're justified, he says.
James is conservative when it comes to projecting his company's annual snow income — about 75% of a "normal" winter's snow revenue. Unpredictability is the main reason.
Weather, labor, equipment
James can easily tick off a dozen variables in offering snow services. But, just like the landscape business, they fall into three main categories — weather, labor and the use of mechanized equipment — big, expensive equipment.It's the equipment piece of the snow puzzle that often gives contractors their bitterest business lessons. They learn that the price tag on that new truck or loader is just the start. Then begins the expenses resulting from vehicle and equipment operations, cleaning, maintenance, repair and replacement. The ongoing, never-get-out-of-your-face costs.
Watch out for these
For starters, says James, if you're using pickup trucks in your snow work, you'll almost certainly have to buy 4-wheel-drive trucks, adding several thousand dollars to each vehicle's initial purchase price. Count on fuel costs for plowing snow to be almost double what you can expect from your landscape work as well."If you're in the landscape business and you're spending $1,500 or $2,000 a year maintaining your equipment, when you get in the snow business you might as well double that figure," he adds.
James explains that some equipment costs are fixed. "About the same amount of equipment is used whether you have a good or bad winter," he says. "If I use a plow 12 to 15 times a winter and a guy in south Jersey uses the same type of plow three times, it still costs both of us the same amount of money to buy it."
However, many equipment expenses aren't fixed. That's where contractors can enter the danger zone.
"I typically find that for every hour that we push, plow and melt snow, we'll have another hour of what I call general conditions. This is cleanup, setup, prep time and repair work," says James. "You have to build that time into your price.
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