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Building a weather math toolbox

By:
  • SIMA
- Posted: April 1, 2015

By Phil Harwood, CSP

Weather is the great unknown in the snow business. However, weather data is a different story. By understanding and utilizing weather data, snow professionals are able to be equipped with mathematical probabilities, which can be used to educate current and prospective clients about risk-reward tradeoffs and their relationship to prices and various contract forms. Few snow professionals have truly harnessed the power of weather math or are able to confidently communicate the impacts of weather data in their sales presentations.

Understanding probabilities

Determining the probability of snow events is the key starting point. A mathematical probability of snow and ice events exists in each market. Gathering reliable data is required to determine accurate probabilities. In some markets, reliable data is free and easy to find. In other markets, a fee-based source is the only option. Either way, there’s no way to develop the math toolbox without good data.

In my home market of Detroit, reliable weather data is available dating back to 1880. We have 135 years of weather data at our fingertips. What a shame if we let this information go to waste. There is valuable knowledge residing in this data. We just need to extract it, understand it, and use it.

Why probabilities matter

Probabilities matter immensely and should be understood. Based on the data below, an unlimited seasonal contract in the Detroit market priced below 94.9 inches creates risk for the contractor, since this seasonal total has been achieved and, therefore, is possible. Contractors pricing unlimited seasonal contracts at seasonal averages (41.1 inches in Detroit) are taking on enormous portfolio risk.

As probability increases, so does the snow contractor’s risk. While risk may be effectively mitigated through portfolio management, there is no reason not to attempt to reduce risk associated with each contract. Some current and prospective clients will play along and some will not; but it’s worth the effort to attempt to educate them and help them make an intelligent decision after weighing their risks and rewards.

Find an accurate and reliable source of weather information. Analyze your seasonal snowfall data and probabilities. Calculate your market’s probabilities. These are the first steps in equipping your weather math toolbox.

Weather math 1
Weather math 2

Phil Harwood is a managing partner of Pro-Motion Consulting, Inc. Email him at phil@mypmcteam.com.

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