Bidding Snow Removal

by Mary Weaver

How do you bid snow removal so you can get market share and make a profit, both in winters with a lot of snow and winters with very little snow? Rich Arlington, whose company moves snow in Erie, PA answered these questions and many of others for a large group of interested contractors at iLandscape ‘15, in Schaumburg, Illinois.

What qualifies Arlington to offer this advice? Arlington was successful enough at bidding on snow contracts to be able to virtually retire at age 45 as a multimillionaire. “First of all, to sell anything you need a hook,” he advises. “Use snow plowing as your loss leader.”

Why? Because most of the time, your bid will just be handed up the “paper chain” until it reaches the person who finally decides. Very rarely is this decision made on the local level. In many cases, the only thing a Chief Financial Officer looks at, in Arlington’s experience, is what the plowing costs.

“I’ve sat in on hundreds of these decision-making meetings for some of the largest property management companies in the world,” stated Arlington. “I’ve seen this happen over and over again. Start using this strategy to your advantage to gain market share.”

Arlington personally charges $35 to $40 for snow plowing. Sound crazy? Like a fox!

“If you know your market is $100 an hour, try dropping it to $95 or $92.50. I’ve gotten a lot of business that way. Every time it snows, we’re plowing 600 parking lots.”

Yes, Arlington admits, you will lose money on plowing. However, whatever he takes off the price of plowing will go into salting, pre-treating, cleaning sidewalks and loader work. “People ask me all the time, ‘Rich, how do you make any money at $35 to $40 sending a plow truck out?’

He says, they’re asking the wrong question. They should be asking what he is charging for salt, because that’s where he makes his money.

Arlington believes there is a real potential for profit in doing sidewalks. “In my town, I am the sidewalk king. We have become very good at sidewalks—always edge to edge, always perfectly salted, and I’ve never been sued.”

“Sidewalks and in-between cars are where accidents happen,” he continues. “Workers Comp rates go up the most when people slip and fall in the winter.”

This is a good way to gain market share with companies where women come to work in high heels. Refreezing of previously treated areas requires more salt. Arlington flat out refuses to take a contract where he doesn’t have the discretion of salting.

He says, “If I can make the most money salting, that’s what I do the most. Then I don’t need to care about the price of plowing.” Pretreating and anti-icing are becoming an important part of the industry. That only helps your bottom line. It gives you more reasons to salt. Whether you use liquid, pellets or granular salt, it doesn’t matter. It’s another salting.

But here again, Arlington isn’t out to rip his customers off on price. His aim is contented customers over the long term. “You can lower your price and use the lower salt price as a hook, and gain market share, and you won’t lose!”

The reason for this is quite simple. He says that any snow contractor knows that if you are going to pretreat dry pavement, you’re not putting on the same amount of salt as you would if you were de-icing.

“So if you lower your price, and you call up your customer and say, ‘Hey, can we pretreat?’ the customer says, ‘Sure, go ahead.’ The industry standard is 600 pounds of salt per acre. There are times when you’ll use more than that, if there’s a bad ice storm or hard pack. But what about refreeze?”

At times when there’s still warmth in the ground, you’ll use less than 600 pounds per acre. Arlington is a data collector, and makes his decisions based on hard data. “There are more times you’ll use less than 600 pounds per acre than there are that you’ll use that amount or more.”

So how does he price salt? Arlington charges per application rather than per ton. Adjust your price per application, based on your own data. “If you do 15 saltings at 400 pounds of rock salt per acre, why do you need to charge for the standard 600 pounds? We know that we can charge less and clean up.”

But to do that, you must have your data. If you’re bidding salt per acre, and you save every time you salt, that will be on your spread sheet. “If you don’t have the data, somebody like me who has the data,” says Arlington, “is going to come in at 10 to 20% less than you. They’re going to take that contract from you and make 3 times the profit you do, and then you’ll get mad and call them a ‘lowballer.’”

“That’s my name in Erie, Pa,” Arlington continued, “the ‘lowballer.’ But it works if you have the data to back up your prices. I have a house with a pool indoors. I own a lake house. I basically retired at 45. I’ve been to every island in the Caribbean. Forget what they say about lowballers. I just know my numbers. I know production rates. And I bid accordingly.”

“I was an electronics engineer before I was a snow plower, so I want data. I gotta know my data. In bidding snow, data can make you or break you.” With the data, Arlington explained, it was very easy for him to see how many times he plowed 2 inches of snow, or 4 inches or 8 inches. It was easy to know how many times his company did full saltings and partial saltings and extra saltings. “With the right data, in 5 minutes, I can put together a seasonal contract that will work.”

Stacking can also make you money, if you have the price for stacking in the contract Arlington believes. There is huge potential for profit in loader work.

“Very few times have I run into a conversation with a CFO about somebody having a lower rate for stacking. They just assume the need for stacking is never going to happen. My guys know that plow truck piles are no more than 3 feet high. If the customer wants that pile stacked higher, my guys know to call the loader, according to the contract. Take the money in stacking. I don’t want repairs for welded frames with my plow rucks from trying to lift higher than their capacity.”

Your contract should also contain an ice storm clause, for your own protection. Many snow plowers have a per event contract that specifies a given price for a certain number of inches of snow. Know what one-inch of ice equals and what ½ inch of ice equals, and calculate that into the per-event pricing in your contract for ice storms. “Be aware,” Arlington advises, “that two inches of ice is equivalent to 8 inches of snow.”

Your bottom line will also benefit if you use the most efficient equipment for each job. Arlington learned this early in his career, as he watched how much plowing a loader with a pusher box accomplished in one evening compared to his smaller plow trucks.

“You don’t plow all your customers’ lots with a half-ton truck, particularly larger parking lots. I can’t tell you how much more efficient we are using a loader with a 9-foot vee blade than we were with 811’s and those plows with wings.”

Also, you’ll save in the log run, and maybe prevent lawsuits, if you take the time to train your employees. “Some companies say, ‘I don’t have time to train,’ then complain their employees don’t know what they’re doing. You can’t afford not to train.”

Be realistic with yourself (and honest with your customers) about the size of the lots you’re plowing. Don’t estimate. Don’t say, “Well, I think I could plow that in about an hour.” Know your data about how fast your employees plow. Know the correct square footage, and bid accordingly.

“Don’t cheat. That hurts all of us. I’ve heard people say that a bank parking lot is an acre. An acre is 43,650 square feet. However, most banks in the US, without exception, are 28,000 square feet. You can’t count the building and the grass! At a municipal site that’s 200×300, you’re not plowing the curb or the sidewalk or the grass. Bid on actual square footage.”

Use varied types of contracts. Each of the types can benefit you in certain situations, if you think them through. One of Arlington’s rules for his company’s 17 full-time sales representatives is that 1/3 of his accounts by square footage (but not more) should be seasonal contracts. “These will save you in a year with little snow so you can pay your overhead and stay in business.

“In years with a lot of snow, your per-time accounts will offset the losses on the seasonals. Going above 1/3 seasonals will put you at risk in very snowy years. I also take hourly contracts, which mostly disappeared in the 80’s. I use them to train my new employees. I can’t lose that way.”

Caps are likely coming to more US cities, Arlington believes. For example, a customer may cap his yearly cost in his contract at the cost of 20 plows. After 20 plows, if there are more snows, your company is expected to plow for free. That will be in the contract that you sign. The plow company might think why should I work for free? Maybe I just won’t show up for the 21^st time.

“Don’t do that! If you don’t show up, you are legally liable for what happens on that lot. You signed that contract agreeing to that cap! Don’t sign contracts for things that you don’t agree with!” emphasizes Arlington, who acts as an expert witness on about 80 court cases per year, many of them liability cases.

Are some of your accounts a distance away? Do you charge more to cover the driving time to get there? A better method is to close in the gap with more customers along the road you plan to travel. Even small gas stations can be worth the bother if they’re closing a gap.

“I tell my salesmen, ‘I want everything – except one place.’ That one place that goes to one of my competitors can make me look good!”

Sit down and talk to each of your customers to find out any differences (and there will be some) between what is stated in the contract and what their managers’ expectations really are. When you find differences, put them in writing in the contract. What matters if you are sued is what’s in writing. It doesn’t matter what somewhat might have said to you. Put it all in writing! For more information visit www.richarlington.com.