A few months ago, our CEO Mike Rorie had the opportunity to talk with John Allin on his blog talk radio show Managing Snow & Ice with John Allin. Mike and John talked about progressive snow contractors, and what it’s like to operate a snow business in Cincinnati, OH.
They also talked about selling “snow ready fees”, the strategy Mike came up with to save his snow business after several winters of losing money.
“Back in the late 80’s I was ready to get out of snow because it was crippling and it was costing us a lot of bottom line,” Mike said. “To buy product, to gear up with equipment and trucks, and to try to keep the guys around…we were spending money in hopes we were going to recover it.”
Cash Flow Whether or Not There’s Weather…or Not
To make the winter a little more predictable, or maybe reliable is the word, Mike started billing clients “snow ready fees”. Every client would pay for one round of salting, sidewalk clearing and parking lot plowing (per the terms of their agreement), regardless of the weather December-March.
If Mike’s crews serviced the property once, the client didn’t owe. If it didn’t snow and they didn’t provide any service they were even. If the property was serviced more than once, the client was billed accordingly.
It’s essentially selling your snow and ice management services as an insurance policy. You’ve got all the materials, equipment and labor needed should it snow, and if it doesn’t the client is paying for the availability of it- just like an insurance premium.
Are Snow Ready Fees Applicable for You?
Mike sold services like this until he sold his business in 2006. Implementing snow ready fees helped him take his business to the next level.
“The ready fees really saved us, ” he said. “Now that we had cash flow, we had income…we were also committing the customer… Snow ready fees enabled us to go prepare and know we were at least going to do four rounds a year, win, lose or draw, any given year.”
Do you think snow ready fees are applicable in today’s market? Please share your thoughts with us in the comments section of this post. And be sure to listen to Mike’s interview on Managing Snow & Ice with John Allin below.
Listen to Mike’s interview on Managing Snow and Ice with John Allin: