Manage Mother Nature AND make money:

Snow bidding workshops

BY BRIAN K. BIRCH

Snow and ice management is tough work, hands down. Countless hours of planning, extensive equipment and logistics preparation, and salty customers make it even thankless work sometimes. As winter weather again approaches (it's only 3-4 months away in some places!), the focus of your snow and ice management company this fall should be on the concept of building a bidding and planning process that is sustainable, scalable, accurate, consistent and unique to you. In this article we will ask two questions, and then provide some insight based on several workshops SIMA has created over the last three years.
 

Question One: What are the core principles of building a bid in snow and ice?

There are four main aspects to accurate bidding in snow and ice:

Know your costs:
Breaking down the true cost of their services, including equipment, manpower, overhead, and more, is key for contractors who want to create accurate pricing for their companies. Do you factor in ALL of the costs for your equipment, for example? A true cost estimate of a plow truck and spreader combination, for example, could include life expectancy of the equipment, original cost of purchase, resell price of equipment, maintenance of equipment over a period of time, insurance on the equipment, loan and interest rate costs, and more. Each of these elements affects the total and true cost of providing that equipment for service, and should be factored in to your cost structure and carried to your bidding methodology!

Production numbers and measuring:
Knowing your costs is only the start; now you need to factor in your average costs to conduct the work during the season, using some production data collected over time. For the sake of snow and ice, there are two definitions that can apply to the term 'Production Number.'

Use whichever makes the most sense to you:

• The number of units produced in a given period of time or the time required to produce a single article/outcome.
• Average amount of time it takes a piece of equipment, a person, or a material to finish a measurable job.

Once you have determined some specific production numbers for your company, you can apply what is called an efficiency rating to each property, to help standardize how your production numbers apply to different properties. Here is an example of an efficiency rating scale: In the above example, applying an efficiency rating to a production number on a B lot would mean that your production outcome would decrease by 15% (100% - 85% = 15%) due to the difficulty of plowing the lot itself.

Snow event specifics:
This is where snow gets fun! The weather is the single biggest challenge in creating bids that work for your company long term; it is unpredictable to a large degree, but you can institute management tools and data that help you manage the risk of winter. By closely monitoring/researching the average number and intensity of events each season, you will be able to come out with a baseline to build bids on. For example, let's say that your market averages 25 snow/ice events per season, and you break them out into normal, medium, or heavy events based on your research. You can then apply your own production numbers to determine a solid baseline for the average time it will take per season to do the work: These numbers can be totalled, then coupled with other information (costs, efficiency ratings, and desired profit) to calculate a specific bid for a specific property for one season. Remember that in these numbers, the difficulty level is based on amount or intensity of snow/ice, while the efficiency factors discussed earlier focus on the level of difficulty of the property.

Customers are key:
This step in the bidding process is making sure your profit is protected, and illustrating the entire value of your services to the customer. A common mistake is to bid on work for unqualified customers, which is costly to you and wasteful in general. But what makes a customer qualified? In order to know the answer to that question, each contractor must create a set of criteria that potential customers MUST meet before they bid on their property, which could include: Understanding the four major areas of a snow and ice bidding process can really help a snow professional move from pricing based on what the guy next door is charging to a more accurate pricing system that reflects the unique characteristics and strengths of the company.
 

Question Two: What are the current major strategic issues in snow and ice?

Bidding snow and ice accurately is half the battle, but what about creating a long term strategy for growth in snow? Here is a quick review of some key issues:

Confronting trends:
Over the past five years, the snow industry in North America has proven to be a dynamic, highly adaptive market. With a relatively low barrier to entry, intense pressure on pricing from consumers, and generally more dramatic weather patterns, these trends can be impossible to predict and difficult to manage. In the U.S., large national and regional service management companies have grown substantially in many major markets, especially the retail/commercial sectors. These trends are occurring Canada too, and as increased globalization drives retail and large commercial property management further toward efficiency and sustainability, these trends could become key factors in the Canadian private snow industry.

Managing financial and liability risk:
Perhaps the single-biggest task assigned to the owner or manager of a snow business is managing the risk associated with snow and ice management. One key principle that comes into play more and more often is the concept of portfolio management for snow accounts. In essence, contractors in the U.S. have created methods to offset the risks associated with both low- and heavy-snow seasons. In Canada, the risk is managed most often through a number of years, due to the predominantly seasonal nature of Canadian snow contracts. Strategically, there is both some security in the Canadian seasonal pricing and a great deal of risk, and some strong opportunity for differentiation. With new pricing models like Per Event taking hold in the U.S. market, Canadian contractors should stay in tune with these changes, as they may affect markets long-term. Managing a stronger, more balanced portfolio is key, as is instigating some more firm controls on the ebbs and flows of the snow business, with such tools such as weather insurance, weather-specific brokerage tools and contractual controls helping limit the impact of dramatic winter conditions (such as extreme snowfall, ice storms, etc.).

Identifying new opportunities:
At the crossroads of newer technologies, increased risk, changing political and economic conditions, and intense winters lies opportunity for those contractors who can manage change effectively. More than anything, snow contractors need to find ways to accelerate their ability to analyze and adapt to market conditions. For example, some simple capacity calculations and having a greater understanding of how to increase capacity are key for growth in snow. It is no longer as simple as taking on a new account and purchasing a piece of equipment; contractors need to leverage every piece of equipment they have, use subcontractors and rental when it makes sense, and create a growth strategy focused on their capacity to do work in a focused geographic area.

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Brian K. Birch is assistant executive director of the Snow and Ice Management Association
 

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