Seasonal fluctuations affect myriad small businesses, and perhaps nowhere is that more true than in the snow business where Mother Nature is a silent partner who can make or break a snow season.
“Snow is one of the biggest elephants in the room in our industry,” says Scott Lesak, president & CEO of Kasel Rocks Landscape Co. in Allentown, Pa. A second-generation owner of his commercial landscaping and snow business, he’s learned how to build a business that can withstand storms, literally and figuratively.
“You don’t know when you’re working,” agrees Andy DiMarino, president of ADM Landscaping, which serves commercial clients in the five boroughs of New York City, Long Island, Westchester, New Jersey, and Connecticut. “That’s the downside. You’re always on call.” But he says that after three decades in the business he says he’s got procedures for managing the snow season “down to a science,” so it runs as smoothly as possible.
Here, these two snow business pros share strategies for surviving seasonal shifts in your snow business.
Plan for a Snowy Day
Ongoing revenue and savings are key to staying afloat financially. “We recover overhead (equipment and salaries) in the landscape business in 40 weeks,” explains Lesak. Too much, or too little, snow can still be tricky, but he knows his overhead is covered regardless. To minimize the risk of cash flow problems, Lesak bills accounts where his firm handles both landscape maintenance and snow as a flat fee for all 12 months of the year. This provides solid recurring revenue.
In addition, Lesak says he strives to keep about 30% of his snow business in recurring contracts. The remaining 70% will be billed on a per-occurrence or per-inch basis. If there is little snow, those recurring contracts provide steady income.
Business owners who know revenues will fluctuate need to save as much as possible during peak seasons, advises Rosa Figueroa, director of the Small Business Development Center at LaGuardia Community College/CUNY, which provides free consulting to small businesses. She has worked with hundreds of small business owners over the years, including DiMarino. “If you have a seasonal business you have to put away cash for when times are slow,” she says.
Keep the Right Customers
Completing a job is only half of the equation. You need to make sure you’re getting paid promptly as well: slow-paying clients can hurt your business just as much as a slow season can.
For that reason, DiMarino requires his commercial customers to pay in full within 30 days. “When you’re starting out getting paid is harder than getting the job done,” he warns. It took him awhile to get to the point where he could enforce his payment terms, he says, but these days he’s not shy about letting go of clients who start chronically paying late. “If somebody is behind, we will reach out nicely,” he says. But when necessary, “We let them know that we don’t think we are the right contractor.”
Tip: You can check the business credit reports of prospective and current commercial clients. If they are paying other bills late, or their credit reports list negative items such as collection accounts or tax liens, proceed with caution. (Keep in mind your clients may do the same for your business — you can monitor your own business credit reports for free at Nav.)
Even business owners who try to avoid debt can benefit from a line of credit or similar financing to smooth out cash flow. Borrow only when needed and pay it back quickly to minimize interest charges.
“A line of credit is crucial,” says Lesak. He notes that he can gear up for a snowstorm that hits in December but have to lay people off weeks later if there’s little snow. “Then (we can) get the biggest storm of the year,” he says. “That’s when we tap into the line of credit.”
Figueroa encourages business owners to prepare for slow times by getting a line of credit. “Develop a relationship with your bank and make sure you are doing your taxes correctly so when you apply for a loan the bank will consider giving you a loan,” she advises. To qualify, she observes “you need to show you’re paying taxes and making a profit.”
Lesak also utilizes supplier credit to improve cash flow. “We set up net-30 terms on our salt deliveries years ago,” he says. A business credit card can also work well as a short-term line of credit. Unlike personal credit cards, many small business credit cards don’t report activity to the owner’s personal credit (except in the case of default) which further helps to separate the owner’s personal and business finances. Be sure to check your issuer’s reporting policies before you select a card; being aware of how it could impact your business and personal credit is crucial.
Get the Right Equipment
Using equipment that can do double duty can also help spread costs out over the entire year. “Proper equipment and configuration is key to successful snow operations with minimal breakdowns,” emphasizes Lesak. To accomplish that, he only purchases brand new trucks with a life expectancy of eight years. All are equipped to work for both landscaping and snow removal jobs.
“We use mini skid steers in the landscape season for excavation and material handling on small sites,” he explains. “In the winter, we put plows and brooms on the front of these machines for walkway teams. Also, all of our trucks are purchased with a snow spec including heated mirrors, 4-wheel drive, upfitter connections for lighting and auxiliary electronics, higher output alternators, a PTO for central hydraulics, and a flatbed with removable sides for our dump truck bodies.”
DiMarino agrees that investing in the right equipment is key to a successful snow season. He keeps shoveling and other manual labor to a minimum. “We want to try to use technology,” he says. “Everything is pretty much motorized. It’s done with a snow blower or a machine.”
Labor costs can be uncertain during the winter season and planning ahead is crucial. “We are always interviewing and always hiring even if we don’t need them immediately. We have a hiring process that helps attract people who want to work for our company even if they have to wait,” says Lesak.
“Snow is very difficult and it’s hard to get labor when it’s a cold winter,” DiMarino explains. One way he’s minimized labor shortages is by not going too big on the snow side of his business. Instead, he keeps a solid client base he knows he can service well. “We’re not a big snow business, but we do well,” he explains.
Gerri Detweiler is the author or coauthor of five books, including her most recent, Finance Your Own Business: Get on the Financing Fast Track. She's also the Education Director for Nav, an online platform that matches small business owners to their best financing options and gives free access to personal and business credit scores.