Analyzing costs should contribute to everything you do beginning with the most basic function: pricing jobs and setting contracts. To do this well and stay profitable, you need to understand the best equipment for each site, whether to rent, lease or buy that equipment, and what manpower you might need to complete the task. Each has hard costs and opportunity costs. Add to that various layers of insurances, software, office support and de-icing materials, and the costs stack up quickly. Your job is to control these costs so you still have a margin at the end of your snowy day.
PLOW magazine’s inaugural Insurance, Labor & Pricing Survey is intended to identify how the snow and ice management companies address these costs in their businesses and off er ideas on how to maximize profits. It also identifies pain points in your business so we can find solutions by tackling additional stories, like how to analyze whether to rent, lease or buy equipment for a season or a particular site.
The majority of respondents, 70 percent, identify as landscape companies that also do snow management in the winter months, and 17 percent identify as primarily snow management companies (see methodology and demographics). Most respondents, 87 percent, have commercial accounts, and 74 percent have residential accounts. About 10 percent do some government work, whether city, state or federal.
As almost a direct corollary to how companies identify, 69 percent of primarily landscape companies make less than 25 percent of their annual revenue on snow and ice management services, and almost all make less than 50 percent of annual revenues on snow. Conversely, about 34 percent of respondents that identified as primarily snow companies make more than 50 percent of annual revenues on snow; 60 percent say annual revenues are less than 25 percent, and the remaining third say snow revenues are 26 percent to 50 percent of their business (CHART 1).
How companies identify as either a landscape or snow company is interesting. Although many on both sides have a similar revenue breakout, it is likely the complexity of the snow business, the time spent on cost control and staffing, and capital expenditures that push companies to say they are primarily snow guys. In the realm of insurance, there are added complexities. No one, to my knowledge, has ever been sued for a public safety concern over an unmowed lawn or because a few grass clippings were left on a sidewalk.
One concern is that smaller contractors sometimes forgo the necessary insurances, thereby making their cost of services less expensive, and these smaller contractors are less likely to follow best practices as well. Reassuringly, just 2 percent of respondents say they do not carry any comprehensive general liability insurance (CHART 2). While many would say that’s 2 percent too much, there are not as many single-owner/operators tearing through town without insurance as popularly believed. About one-third of respondents have less than $1 million in CGL, and 64 percent of companies have more than $1 million.
Fewer companies carry an umbrella policy, but not by many. Just 8 percent of contractors don’t carry one, and just 11 percent have $500,000 or less (CHART 3). This is a positive thing for the industry because it allows a business to continue to operate in the case of an unforeseen accident. With an umbrella policy, contractors don’t need to worry about limitations with their CGL, and you won’t need to worry about losing your business if you strike a little bad luck.
Insurance for your equipment is less common, especially for pickup truck guys because you’re already covered with your other insurances. Almost a quarter of respondents don’t carry inland marine insurance; 62 percent have $1 million or less (CHART 4).
While the importance of insurance has reached all types of contractors, industry operating standards have some room to improve: 55 percent of respondents use either SIMA or ASCA best practices all of the time or most of the time, while 45 percent use them some of the time or not at all (CHART 5).
Labor and operations
There are a lot of one-man shows in this business, but respondents average 7.6 employees during the winter months. More than one-third of respondents (34 percent) have two or fewer workers, and 62 percent have five or fewer workers. Just 18 percent of respondents say they are solo owner/operators, and 9 percent of respondents have more than 20 employees.
The average hourly pay for sidewalk workers is $16.10, although the range varies widely. There are a lot of companies that pay $10, likely sending them out with a crew of actual shovels and maybe some equipment that a homeowner might own. On the other end of the spectrum, some companies report paying $30 per hour for sidewalk crew members, who likely are operating specialty equipment to reduce the need for additional sidewalk employees. Fully 75 percent of respondents pay shovelers between $11 and $20 per hour.
Of the respondents that have sidewalk crews, 28 percent use them as independent contractors, and 72 percent hire them as payroll employees. Obviously having them as formal employees is more expensive with benefits and worker’s compensation, and the independent contractor route is more flexible and unstable. You might not have payroll obligations when it doesn’t snow, but those workers might not be available when you need them (CHART 6).
As a direct corollary to employee designations, 70 percent of respondents pay into worker’s compensation insurance, and 30 percent do not.
When it comes to how to schedule, deploy and track employees, fewer than a quarter of companies are using software for crew management, fleet management, routing, tracking and documenting work (CHART 7). That seems woefully difficult for any operation with more than a few guys servicing a handful of accounts. I’d expect this number to rise as this software becomes more ubiquitous for larger companies. Just 30 percent of respondents use a pay service for weather data.
Of course, fancy software can cut into your bottom line if you don’t use it properly or often enough to generate cost savings through the efficiencies that are realized by deploying it. Labor, software, equipment and other factors all contribute to the pricing model that you give clients.
The most popular pricing model is a per-event contract model, followed closely by per-push calls (CHART 8). Hourly contracts are still widespread, as are seasonal. Interestingly, the model that probably makes the most sense for seasonal contracts is the least utilized: Seasonal contracts with a cap and floor are used just 14 percent of the time. That model requires a bit more of a relationship and dialogue with clients, but contractors can stabilize themselves from snow-event variances from year to year.
PLOW Magazine conducted its Insurance and Pricing Survey in December 2017. The survey was emailed to our subscriber list and kept open for two weeks. It’s 267 respondents give it a ±5.97 percent margin of error with 95 percent confidence. The companies that responded were 92 percent professional landscape and snow contractors or subcontractors; 7 percent are government entities, and 1 percent are national staffing and service companies. Individual respondents are 96 percent owners, managers and supervisors, and most of the “other” respondents indicated “all of the above.” Respondents from 35 states participated in the survey, and 84 percent of respondents reported revenues of less than $200,000 for snow management services.