Tuesday, June 9, 2015
Timing is everything
For smart snow removal contractors, though, the time to secure contracts for next winter is now, before last winter becomes a distant memory.
That’s what Tom Hougnon, chief operating officer of Reliable Property Services, says. Until six years ago, the Minneapolis-based company was strictly a snow removal company and had been so for the past 25 years.
Realizing that some of the company’s competitors were landscapers who moved in on their snow clients while working for them in the summer months, Reliable expanded into landscaping work so the company could be visible to customers all year.
“Many customers were looking for 12-month vendors. They wanted one service provider for summer and winter,” Hougnon says. “Part of it was a business decision to become a more predictable, viable company and make money each month.”
Last year, Reliable’s service mix was about 60 percent snow removal, 40 percent landscaping. Reliable also has branches in Des Moines and Racine.
Reliable employs 65 year-round employees that can ramp up to about another 400 seasonal employees in winters. The company yielded $27 million in revenue, with snow revenue another $2 million higher than the previous year.
“That’s a big change for us,” Hougnon says. “We really work to balance out our business model. Last year was the first year we made a profit every month of the year.”
Early and often
With Reliable being in contact with clients throughout the year, it has led to procuring snow contracts earlier in the year, well before Labor Day, which had been typical. Now, Reliable’s company retreat in early May focuses on the winter sales cycle.
“In effect, we’re putting that sales season into the late May time frame, especially on renewal customers,” Hougnon says.
He says the company usually has 20-25 percent of next year’s business locked up by the end of the winter season. “We are pushing three year contracts much more in the past few years,” he says.
Nonetheless, he says not every customer will want to think about winter that early.
Also, Hougnon says that many larger companies are pursuing multi-year contracts using in-house procurement departments, which has led to contracts being signed earlier in the year.
These can benefit the client, Hougnon says, as they often lock in the price for the first two years, leaving open a fuel and a salt clause if prices climb. “We are seeing more customized contracts than we used to see, so it is important to be more flexible with the customer,” he says.
While it has worked for Reliable, nationally recognized snow industry consultant John Allin of Erie, Pa., says that a year-round business isn’t necessary to keep in contact with clients.
“Keeping in touch on a more personalized basis is just as effective and doesn’t give you the added strain of trying to make another profit center work, though I’m not saying it’s a bad move,” he says.
Still, no matter how they are procured, timing of contracts is critical, and is often dictated by the attitude of the client or potential client. “Some very progressive companies will have the contract signed by mid-summer,” Allin says. “Progressive contractors know and understand, like any other business, that running a snow business requires planning. Those who wait till October/November aren’t planning, they are scrambling.”
Such planning includes material purchases and training staff, Allin says, as well as drafting preseason documentation.
“If you wait until two weeks before the first snowfall, it is almost impossible to get your preseason work out of the way in time. Then you are working from a position of weakness than a position of strength regarding planning for the season.”
Located in Oak Creek outside Milwaukee, Kujawa Enterprises (KEI) is a four-season landscape management company with 120-150 regular employees.
Depending on the year, the snow removal portion of its business comprises about 35 percent of its annual revenue.
Like Hougnon, KEI’s Executive Vice President, Chris Kujawa, says that his company has changed its practices regarding timing of snow removal contracts, from Labor Day/October to earlier in the spring.
“Nowadays, it’s really a year-round proposition to try to solicit that kind of work and lock it in place,” Kujawa says. “The whole industry has matured quite a bit, and that’s one of the results of it. You get out there early and get contracts and people in place and get equipment out early.”
Allin says contractors aren’t the only beneficiaries of early contracts. “There is no question that a client who signs up earlier will get a much better pricing structure,” he says.
The best time is between April and June, Allin says, both to get them out of the way and to get a feel for what kind of work they can take on. Customers who wait until winter will pay a higher premium.
Some of Kujawa’s clients still wait until August or even later. He says that KEI doesn’t do a lot of incentivizing other than bundling services with summer landscaping, for example.
“That cuts down on the number of contracts you need,” he says. Hougnon says clients like the single point of contact for all their services. “The players remain the same, expectations remain the same and you don’t have to repeat that learning curve all the time, he says. “That’s why it is very attractive to clients and to us.”
He says Reliable may offer a discount for early sign-up, but doesn’t guarantee to hold the pricing the same as the previous year. Hougnon says when it comes to renewals, the company will check profitability to make sure it makes fiscal sense to offer a discount.
“We also may try to incorporate a summer ‘coupon’ for some services, flowers, plant material, even if they are not a summer customer,” he says.
Hilary Daninhirsch is a freelance writer based in Pittsburgh.