What a Difference a Year Makes
Snow fighters review last season and prepare for next season's challenges
Thriving in the snow industry takes a strong stomach and steely reserve. After the 2011-12 season's snow drought across much of the country, winter came roaring back ready to show who was boss. Multiple blizzards hammered the Northeast, fresh off the devastation of Hurricane Sandy. The Denver area, which hadn't seen significant snow in four seasons, was still getting snow in mid-April, and markets like Kansas City, Mo., where snow doesn't come calling much, saw multiple events.
And, yet, there is no rest for the weary. As May rolls around, planning for next season should already be underway. Having the experiences of the winter fresh in your minds and the minds of your customers can be a blessing and a curse. It can allow you to review the season's success and shortcomings before they are forgotten in the summer heat. But, it can also drive snow contractors (and their customers) to make decisions based on the emotion of the winter. And those knee-jerk reactions can prove devastating to a snow business.
Looking back while forging ahead, snow savvy professionals will put their trust in data and good business practices when examining the following areas of their business.
Behind The Numbers: What to Track
Gabriel Asebedo, CSP, owns Snow Clearing Service, LLC in Minnesota and is also a certified financial planner. As companies look at their financials to review the season, he suggests taking a close look in particular at the following:
- Their income statement's gross margin and operating expense. These numbers will help owners evaluate how the company performed during the season.
- Data that measures productivity, profitability and liquidity. Four areas to hone in on are revenue per employee, gross margin percentage, operating profit margin and cash ratio.
- The most advantageous way to obtain dependable equipment at the lowest possible cost. Understand the financial implications of those acquisitions and consider all of your options, including leasing or renting equipment.
- Are your landscaping and snow numbers separate? Combining the two activities for financial statement simplicity actually prevents planning opportunities for both services.
"It's all about getting a leg up on the competition, making the sale, serving the customer well and knowing why it all worked or didn't. Knowing why is so important because successful efforts can be replicated, errors can be corrected and failures can be abandoned," he said. "Snow business is a high-profit-margin business if done right. The financials provide a blueprint on how to succeed."
It snowed - and snowed and snowed. Rushing out to buy more equipment in anticipation of another heavy snow year is short-sighted, says Neal Glatt, CSP, an account executive for Case Snow Co. in North Attleboro, Mass.
"It was a very extreme winter. Two years ago we had a heavy winter and saw contractors buying all kinds of equipment. They paid a ton of money and then last year we got almost no snow. You really have to study your snow numbers to know what equipment you need and what you can afford."
Rick Kier, CSP, owner of Pro Scapes in Jamesville, N.Y., agrees. "Equipment is almost the last thing you look at when planning. You need to buy equipment to match the jobs you have."
Rather than rush to buy, Kier suggests first taking a look at the equipment you have and how it held up through the season.
Did you have so many failures that you let your customers down? What was behind the failures? Fleet age, preventive and in-season maintenance procedures, repair processes and capabilities all come into play. "If you're having so many failures that you're disappointing customers or you don't have enough backup equipment in the event of failure, you need to look at big-picture changes," Kier says.
Dale Keep, owner of Ice & Snow Technologies and a respected industry consultant, encourages companies to conduct a site-by-site equipment review to determine whether it was productive and profitable.
"Looking at the repairs that were needed can reveal many things, including misuse of equipment, incorrect work procedures, training needs or that the wrong equipment is being used to properly perform the work."
A postseason evaluation of your suppliers is also in order. Did you run out of materials? Were you able to get backup equipment in the event of a failure? Were the vendors' responses to your needs timely? Building relationships is paramount to having a solid vendor base that will be there when you need them.
Contractors whose portfolios of work were out of balance most likely are paying the price after this winter. Companies who rely too heavily on seasonal contracts got hammered unless there were caps or clauses to protect them from extreme situations. Too heavy on occurrence contracts (per push, per event, etc.) may not only have the contractors feeling the pain, but their customers probably are as well.
"You have to have a balance between those contract types. It takes the risk out of winter. Now is a great time to look at that balance and make sure it's in line," Kier says. "The first thing to do is take inventory of where all of your contracts stand. If you have contracts up for renewal, now is a great time - especially if you were their hero during the winter - to get them resigned while your great service is fresh in their mind."
How well did you manage your customers' expectations during the winter? Clear communications and extra TLC during a particularly harsh winter can go a long way toward easing their fears and concerns. Those who did not perform well or who did not manage client expectations well may find themselves out of a contract for the coming season.
Glatt said he already is seeing RFPs from customers unhappy with their snow removal companies. While that may open doors to new business, he cautions contractors to really look at the potential client to make sure it's a good fit for both sides and that the customer isn't guilty of making the emotional decisions you're trying to avoid.
"It is important to know why the customer is unhappy and that if you plan on taking the business you will be able to perform to his expectations," he says. "Contractors come and go for several reasons, but if a potential client has had a new one every year, that is a red flag. They are either always chasing the lowest bid or they have set expectations so high that not even the best contractors can achieve it. I am not sure I want to dive deep into those unrealistic expectations."
Sam Granados, CSP, owner of Integrated Snow Services in Colorado, says it is important to educate the customers, particularly in property management, where there can be frequent turnover and inexperience in budgeting for the volatility of snow and ice management.
"A lot of property managers will budget on the previous season and don't take into consideration the cycles we go through. They are often very inexperienced and are getting a lot of pressure from the top down. We went through four dry seasons. If they budgeted based on those scenarios and have a year like we're having, they are going to be in trouble," he says.
A market's historical snowfall average is but one component of formulating a solid bid. When developing pricing, Glatt says, cumulative snowfall doesn't tell the whole story. At Case, they also take into consideration the number of events; the types and timing of events, which affects the service approach; and even snowfall intervals (1- to 3-inch storms, 3- to 6-inch, etc.).
"We want to understand it at every level because all those variables affect how we perform the service."
Once you have a good handle on projections, you can then determine whether you have the right amount and type of capacity to bid the job or whether you are in a position to add equipment and/or labor to ensure you can successfully service the customer.
"It shouldn't be a guessing game," Kier says. "In my business, it comes down to minutes - how long will it take to plow a lot under normal conditions and how many jobs can I fit into the schedule. You also have to have a contingency plan in place for backups if you get heavy or more frequent snowfall."
Stick to your plan
Despite the emotional toll snow can take on both customers and contractors, Granados says it all boils down to having a strategic plan and sticking to it - regardless if you get an inch of snow or 100.
"It is irrelevant how much snow we get. We plan our growth and track it. We know at any time what our numbers and goals are. If you don't have a plan and you're flying by the seat of your pants, it's scary and not a good place to be."
Cheryl Higley is editorial director for Snow Business magazine, the official publication of the Snow & Ice Management Association. Learn more about SIMA at www.sima.org and read more snow-specific resources at www.goplow.com.