Anyone that’s in the service industry as a self-starter knows the growing pains that come with pricing your services. There’s a fine line between making each endeavor provide an amount of revenue that makes your business a continuous (and scalable) success versus a business that can’t build enough monetary momentum to clear your overhead and provide you with a healthy profit. In fact, pricing your snow removal is often a nerve-wracking and constant challenge in what is a very competitive market. Luckily, there are principles you can follow to help you with creating a pricing strategy that has staying power and won’t price you out of your market.
Understand Your Overhead
What is overhead? It’s every expense that your business incurs in order to simply exist. And your list of overhead expenses can be daunting at first. But you’ve chosen to build a business from the ground up because you’re unafraid of challenges and enjoy the freedom that running the show provides. So, if you haven’t memorized your overhead by the time you’re pricing your services out, then you’re headed for disaster. You need to know how much every component of your business costs, the frequency of that cost, and the tendency for that expense to fluctuate. And when you’ve mastered the art of the overhead, then and only then is it time to come up with a pricing strategy that thoughtfully bakes those expenses into pricing snow removal at a competitive and healthy rate.
The most common overheads to account for when pricing snow removal are:
- Insurance—you’ll need both vehicle and snow plow insurance, and yes, they’re separate.
- Driving & setup time—driving time and the time taken to set up your hitch is billable to your clients and not billing for it will lose you a lot of money.
- Employee Wages—your employees earn a wage and your overall revenue needs to accommodate for this. Yes, even you need to earn a wage as the owner of your business. There are other costs associated with employees — insurance, accounting, training, etc.
- Supply costs — This can be supplies you need immediately for the job, like deicer, or they can be equipment expenses, like your snowplow or salt spreader.
- Fuel—this goes without saying.
- Business Operations – Costs can explode in this category as you grow your business. This category includes things like marketing costs, office rent, utilities, etc.
Be sure you take you equipment costs and spread them out over the number of jobs
Estimate Job Length & Do It Accurately
You’ve already set a competitive rate for your area that still provides you with plenty of revenue after all of your overhead is paid. But what good is that if you’re not accurately estimating the scope of your snow removal jobs? For instance, are you taking into account pricing both snow plowing and pricing salt spreading when calculating your rate? Many snow removal businesses fail because they undersell their services. The fact is, your clients may surprise you with how willing they are to agree to the cost commitment you create for them. Especially if you have a well-thought-out strategy for calculating job scope.
To estimate job length, you’ll need to put on your Manager hat. Think of how long it would take one man to finish a particular job. Once you have a handle on how long it takes one man to complete a job, you can easily calculate the labor needed when estimating a job that you know you’re going to put 3 guys on. Simply calculate how many hours one man would take, then divide by the number of guys you’ll actually be putting on that job to get an accurate number of hours. This formula is foolproof and scalable.
Know Your Market
Every successful business has a reasonable expectation from its clientele based on its location and its overall market. The same is true for your snow plow business. Depending on your radius, you may even have multiple “markets” to accommodate, all with different rates.
A wealthier community is going to pay a premium for snow removal services, so you’d be doing yourself a disservice by not acknowledging that. And the inverse is true for less wealthy communities—they may stay away from you due to sticker shock if you’re advertising a universal rate that doesn’t fit into the market rate in their area. Your best bet is to get into the habit of pricing your services strategically depending on your clientele. Soon enough, you’ll gain the intuition needed to remain competitive across a diverse marketplace. And don’t be afraid to ask around and see what other businesses are charging—they might have already done the work to establish a strategic rate—so why reinvent the wheel?
Either Be A Great Salesman Or Hire One
As your business’s momentum increases, it’ll eventually be time to increase your team. But not everyone you hire needs to be pushing a plow. Ask yourself what you’d rather do for your business—be out in the field or in the office. And if you’d rather be in the office, ask yourself one more question—how good are your people skills? If you’re not the best schmoozer, then you may want to invest in a salesperson who can man the phones and even make sales runs to businesses in the area.
You’d be surprised how much business the right person can drum up. Believe it or not, there are people out there that thrive on human connection and can find common ground in any conversation. That’s the kind of person you want on your team—a go-getter, a visionary, and a smooth talker that can vouch for your business and “shake the bushes” for new clients while you’re plowing snow or working on higher-level operations.
Get Into Digital Marketing
This day and age, a lot of us will vet a business online before we give them a phone call or send out a quote request. The truth is, your first impression can often be made online before you’ve seen a potential client’s face or even spoken to them. The last thing you want is for a business to Google you only to find an empty Google Business entry and a bunch of unrelated search results that could turn them off from contacting them.
Instead, take control of your digital marketing. Set up your Google Business page so it proudly displays a photo of your business, or one of your gleaming snow plows shoveling a mountain of snow. List your phone number, website, and office hours and respond to any Google reviews, positive or negative to show people that you’re an active business owner. Most of all, make sure you have a website that people can visit. For your kind of service-centric business, simpler is better. Make it concise, personable, and give visitors numerous ways to easily contact you. Make your web page work for you. In fact, treat it like a digital receptionist. After all, it’ll be on the clock 24/7 without complaint, and you don’t have to pay it a cent!
Pricing Your Snow Removal is a Multi-Faceted Process
You may create a killer formula for pricing your snow removal service. But so much more goes into the pricing than just numbers. You want to cultivate an environment that gives your business some sophistication and prestige. And you want to ensure that what you charge customers is competitive yet gives you enough revenue to cover your overhead and then some—you’re not doing this for your health, after all.
But at the end of the day, the way you price your business is a continuous, multi-faceted effort. It needs to accommodate the numbers, your customers, your brand, and your peace-of-mind all at once. With these principles, and with your knowledge of the snow removal industry, it will be second nature in no time, and a sign to your clients that you’re a seasoned business owner with the knowledge and intuition needed in the competitive industry of snow removal.