A Buyer's Market
Take advantage of the non-winter to get a great deal on snow equipment
Coming off a light winter across much of North America, snow and ice management companies in the market for equipment should find the odds in their favor. When deciding whether to make that investment, the first step is to shake off the doldrums from the 2011-12 snow-starved season and look forward - your customers are counting on you.
"You can't worry about last season and let that dictate your decision to purchase. You should be looking at your production, the work you've sold and what you expect to sell for the season and making sure you have the equipment to handle those accounts," says Greg Scharf, CSP, owner of Greg's Lawn and Landscaping in Cedar Rapids, Iowa. "You can't be in a high-risk business like snow removal and not be able to perform for your clients because you didn't have the equipment you needed."
Equipment auctions may be a good place to get some deals on equipment, but snow professionals must educate themselves on the process so they don't get burned.
PHOTO COURTESY OF CHERYL HIGLEY.
Cash flow may, of course, be a concern, especially if you don't have seasonal accounts or snow retainer fees built into your portfolio to help mitigate the risk if it doesn't snow. Depending on the financial health of the company, some companies may be able to look for deals on new equipment, whereas those strapped for cash and credit may find better success in the used market. But make no mistake; there are deals to be had. Now is the best time to find them.
Paul Vanderzon, owner of Amenagements Paysagers Vanderzon, Inc. in St. Bruno, Quebec, encourages companies to scout out the inventory of local dealers for good buys. The dealers have already paid for that equipment and may be looking to move it.
"Chances are you can get a good deal now because they don't want to hold onto the inventory. Depending on their cash flow, they may be willing to sell it now for less so they can have money in their pocket," he says. "The closer you get to next season, the less likely they'll be to discount."
Purchasing new equipment may have an advantage over buying used or renting/leasing given the today's still-low interest rates.
"If you have the money, buying new is definitely the best option right now," says Vanderzon. "Because interest rates are low, I can purchase a new ag tractor with five-year, zero-percent financing. Five years later, it will still have 60 percent of its residual value. If I lease it, I have nothing to show for my investment; and interest rates on used equipment aren't as favorable."
Mike Simmons, a product specialist with Grasshopper, says snow management professionals concerned about investing in new equipment may want to consider buying machines that can serve multiple purposes and provide a better return on investment. Grasshopper, he said, offers discounts on multiple implement purchases and provides seasonal programs at participating dealers to make the purchases more affordable. He encourages snow and ice management professionals to talk with dealers to make sure they're getting the best deal for their individual situation.
"Companies that offer snow removal services as their majority or sole revenue stream may find that 2012 is the perfect opportunity to research areas of diversification by providing additional and/or related services to existing and new clients," he says. "Purchasing a machine that can perform multiple grounds maintenance tasks in addition to snow removal can be less expensive than purchasing multiple pieces of single-purpose equipment for the same tasks."
If a new purchase isn't feasible, several options for acquiring used equipment are available in today's marketplace:
Marketplace - Far too many entrepreneurs jump into the snow industry thinking they can make a quick buck and then find themselves in over their heads when a light winter occurs. As a result, those contractors must cut their losses and sell some or all of their equipment, opening up the opportunity for more stable companies to score newer equipment at a great price.
Tom Rice, owner of Island Wide Power Washing in Long Island, N.Y., has found good deals in such situations, as well as through online sites like eBay and Craigslist. Online networking sites like are also a good place to look for companies trying to unload equipment.
"When you have a season like last year, guys need money. They have equipment sitting around and they need to get out. I've been able to find great deals as a result," he says.
Other times, Lady Luck plays a hand in finding good deals. The key is to always be on the lookout. For example, Scharf was bidding on a landscaping contract for a shopping center and the management company was looking to unload a 2008 Ford F350 with 12,000 miles. He negotiated and purchased the truck for $17,000. The truck was outfitted with a Western plow, which Scharf was able to sell as well.
Auctions - Both Scharf and Vanderzon frequent auctions, but both caution that snow professionals must educate themselves on the process so they don't get burned. Vanderzon says he follows Iron Planet (www.ironplanet.com) religiously for bigger equipment such as trucks and loaders because the company provides pictures and verifies testing.
Leasing - This may be the most viable option for a larger piece of equipment that is needed for a specific client, but that a company doesn't need or can't afford to add as a permanent piece to its fleet. As Vanderzon says, weigh the true price - sometimes it costs less to buy than to lease in the long run.
Whether buying new, used or leasing, additional factors will help play into getting the best deal:
Timing - The best deals are usually found right after the season ends or in the heat of the summer. The closer it gets to fall, the less likely a dealer will budge on price. It's also important not to wait too long, especially if ordering new, to make sure the equipment will arrive in time.
Buying not an option? Get more out of your current fleet
Extend the life of your equipment by performing preventive maintenance on a regular basis.
PHOTO COURTESY OF DOUGLAS FREER, CSP, BLUE MOOSE SNOW.
Companies that can't afford to upgrade their equipment may be able to extend the life cycle of their current equipment with timely and proper preventive maintenance.
"Equipment purchases should be based on the life cycle of the equipment and each firm's purchasing plans; but due to the mild winter, many companies' equipment just received an extra year of life cycle," explains Troy Clogg, CSP, owner of Troy Clogg Landscape Associates.
Greg Scharf, CSP, owner of Greg's Lawn & Landscaping, Cedar Rapids, Iowa, says now is the perfect time to evaluate current equipment and perform easy preventive maintenance.
"If you want to hold onto your older equipment, take the time now to replace the simple things [check brake lines, hydraulics, pumps, hoses, etc.] that cost a lot of downtime," he says. "Doing the preventive maintenance now will extend the life of that equipment."
While companies may be inclined to get that last mile out of a piece of equipment, it is important to evaluate the ramifications of extending it beyond its usefulness.
"Know your equipment, its life cycle and its capabilities. We maintain our equipment extremely well because I don't want it breaking down in the middle of a storm," Scharf says.
Paul Vanderzon, owner of Amenagements Paysagers Vanderzon, Inc., St. Bruno, Quebec, says unless you have to purchase equipment to service new clients, holding off may be the best choice. "Purchasing may be very difficult, especially for contractors who sell only per-inch-type contracts and have no guarantee that they will make money next season," he says, adding that he sells only seasonal contracts to ensure consistent cash flow. "Take the time and do the proper maintenance, and it's entirely possible you can stretch the life of your equipment a few more years."
"We are always looking. Deals can often be had right after the snow season, when companies need to sell equipment to have cash flow for the summer," Vanderzon says. "If we come across a really good deal, we will purchase it immediately. Otherwise, we'll look until mid-September and if we haven't found that deal, we go ahead and order to make sure we have delivery guaranteed by Nov. 1."
Warranty/service contracts - For Vanderzon, a key consideration in his buying process is the service program. "You can shop five different dealerships and their prices will be fairly close; I want the company who will be able to offer the best service. For us, that is sometimes more important than the price." Understanding and pushing for warranty coverage (especially for used equipment) is also extremely important.
Know what you're buying - New or used, equipment is a huge investment for a snow and ice management company. Protect it by having a mechanic inspect it prior to purchase.
"Don't get stuck with someone else's garbage," Rice says. "If you don't know enough about the equipment to make the right judgment, find someone who does."
Troy Clogg, CSP, owner of Troy Clogg Landscape Associates, Wixom, Mich., says it is important that you have access to service records to help evaluate the condition of the equipment. And when it comes to the "best deal," what's right for one company may not be right for another. "Whether you buy through a dealer, an auction or a private party, the best deals always come from within," he explains. "Know your stuff. Know what you want, what it is worth in the market and what it is worth to you. Then buying is easy and worry-free."
Cheryl Higley is editorial director of Snow Business magazine, the official publication of the Snow & Ice Management Association. To learn more about SIMA, visit www.sima.org. For additional snow & ice management articles and resources, visit www.GoPlow.com.