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Top of the snow pile
1 Aug, 2006 By: Heather Gooch Landscape ManagementFour million-dollar company officials share their insights on the industry's challenges & opportunities
It might seem relatively easy to turn a profit in the snow-removal industry, but what about grossing $1 million or more in revenue? It's being done all across the country – and there seem to be several common themes enmeshed in these mega-successful firms' approach to business.
According to Landscape Management's sister publication Snow Business' 2006 state of the industry survey, some surprising statistics emerge from polling the segment of respondents who are at the $1 million-and-above mark (approximately 45 respondents):
- The average full- and part-time staff for a $1 million-plus firm is 31 people, compared to just a 2-person staff industry average.
- 58% of the $1-million club saw sales increase 10% or more in 2005, compared to the overall average of 27%. This, despite the fact that 70% of respondents reported snow as "less than average" or "far less than average."
- 42% of the big guys use a liquid de-icing agent – compared with 17% overall.
- 36% listed "underpricing/undercutting" as having the most impact on their businesses. About 25% of respondents reported it as their top trend.
Rising costs an obstacle
In addition, many firms in this segment cite increased insurance and fuel costs as growth inhibitors for the industry at large.
"I believe insurance costs are putting small guys out of business," says Michel Bergeron, president of Landtech, Inc. in Rockland, Ontario. "This means there are fewer companies competing, but the ones who remain have more overhead costs. It's changing the face of business somewhat."
Bergeron adds that in Ottawa, licensing requirements have been in place for about three years. They mandate that every snow-removal vehicle in a fleet, from the largest truck to the smallest skid steer, have a license on file that is renewed annually. While he admits it can be a paperwork headache (not to mention the $15 cost per vehicle), he sees a silver lining in the practice: "It forces you to keep your fleet updated, so it helps improve overall quality among snow professionals and helps keep reputable people in.
Mike Jones, CEO of True North Services in Kansas City, KS, also sees a change in the level of industry professionalism in recent years. Jones attributes this trend to increased public awareness efforts by the Snow and Ice Management Association, although he points out the strategy has a down side.
"I think prices are being driven down because of increased competition," he says. "More people are learning about snow removal, and thinking 'Hey, I can make some money at this.' Some are going about it the right way but others are not. I've seen some businesses implode because they're either undercutting prices completely or bundling services (with lawn maintenance and parking lot sweeping, for example) and pricing at just the direct job cost. They're not looking at the costs long-term, with overhead and volume. Then, when they try to grow, they can't afford to make a hire. The good news is these competitors are not in business for long."
The people factor
Sources interviewed for this story say that hiring and retaining full-timers and subcontractors is not that big of a challenge for them because they take pains to offer good wages and respect.
For example, Ken Pagurek, CEO of Philadelphia-based Cenova, Inc., throws an annual appreciation barbecue for his 200-plus subcontractors. Efforts like that, as well as paying on time, every time, go a long way, he says.
"We also offer a merchandise partnership program," he adds. "We're like a buying group: We pass along discounts and savings to our subs. They come to us when they need new pieces of equipment, everything from tamper plates to mowers."
For full-time employees, Jones notes that promoting from within whenever possible is important to company growth – and it goes beyond buoying company morale.
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