Hallelujah! This year we’ve experienced the winter we’ve all hoped for, particularly after last year. Most of us in the snow business have gotten at least enough snow to cover our overhead, and many of us were lucky enough to get much more.
A good winter is always a telling winter as far as who will survive in this business long term, because if you are unable to at least cover your overhead during a winter with a lot of precipitation, you may want to reconsider your strategy.
All too often, when looking at the P&L of a landscape or pavement company that participates in the snow business, there are large losses in the winter. I’m always puzzled when I see a company make strong profits eight months out of the year, only to give back half of their bottom line in one quarter due to lack of revenue. If you’re in a snow market, then the opportunity to break even is at hand.
This is where understanding your averages can really come into play regarding longevity and security of your snow operation. If you can figure out the averages that are thrown at you in your markets each winter, then you will have a much better understanding of how you can strategically plan and execute a profitable winter season.
Use your averages
When you look at snowfall totals over a 5- to 10-year span, it’s all going to even out or average out in the cities you serve. Using this average provides you with an opportunity to understand how much business you need to win, and how much income you can count on to cover your overhead for those three to four months.
The goal is to figure out how much business you have to secure to break even for that quarter. Your accountant or controller should be able to help you determine this number.
Once you have the number identified, then the other obvious factor to determine is how much you can sell, perform and manage with your team and your subs. Estimate these factors and you’re ready to start selling.
When you determine this and actually achieve it, you can decide how much more you want to add to the profit center and overall profit picture beyond the benefits of breaking even.
Look back for reassurance
If you need reassurance, check your revenue over the past five years to ascertain the strategic decisions you can make in your snow business without the risk of failure. When doing so, make sure to adjust for the amount of square feet under management from one year to the next.
Doing more business in your core profit centers at your peak season just isn’t as strategic as wiping out the months you’re losing money. If you can figure out your breakeven number to sustain overhead during the winter months, then apply your averages to help you plan for sales and business development, you’re bound to see those losses on your P&L disappear.
Operating in a snow market provides you with a vehicle to reduce or eliminate those losses and to retain your organization’s profits. Leveraging existing overhead in those three to four months is the mission.
So enjoy the averages and learn how to retain your bottom line with the reassurance that if you build the machine to deliver it, you will produce the return you expect.
Jump start solutions
- Don’t dismiss snow as a profit center. It can be profitable if you work at it.
- Know your numbers. Without solid financials, success will be futile.
- Identify your breakeven point and build a sales plan to get you at least that far -farther if you want to grow.
Mike Rorie has been a participant in the snow and ice industry for nearly four decades. He is now the owner of GroundSystems, as well as the CEO of GIS Dynamics, parent company to Go iLawn and Go iPave. Contact him at Sales@gisdynamics.com.