Business Advice

Determining Who to Serve First

Anyone working in a service industry knows what a struggle it can be to find a good balance in serving multiple clients. That struggle can become pure chaos if every client suddenly demands full attention at the exact same time. In many industries, these chaotic, busy periods often can be anticipated and planned for based on predetermined schedules and events. Not so for contractors in the snow and ice management business, who — believe it or not — don't get advance mailings to inform them of the exact schedule for a given week's snowfall.

So when a snow event does occur, how is a contractor to decide which customer will receive service first?

Unfortunately, many contractors don't have a structured system in place and literally find themselves asking the “Who's first?” question once the season is already underway. When the snow falls, these contractors could very likely wind up on the phone with angry customers with a question of their own, “Why aren't you here?”

If a customer needs to ask such a question, it’s a good indication that the contractor hasn’t clearly communicated or created a protocol for working with that customer. To be successful, contractors must establish realistic expectations — both for their customers and themselves — well before winter hits.

Educate Yourself First

In some cases, a contractor might need to decide if his client list even makes sense. Far too many contractors make the mistake of taking any business they can get. But not only can contractors afford to be selective, but to be efficient and profitable, they must be selective when deciding which customers to service.

Location is huge. Having to chase all over a city can lead to serious dilemmas during a snow event. It automatically slows response time, a problem that is magnified during heavy traffic hours. Heading off the route to reload with deicing material also becomes a more time-consuming task. Fuel costs are more noticeable as well.

Along with keeping accounts more closely grouped together, it is advantageous to find a niche type of customer. For some contractors, that might be shopping mall parking lots. For others it might be small commercial facilities and office complexes. Every contractor will have different resources to draw from, in terms of both manpower and equipment. These resources should have a direct influence over the niche that is developed. And like location, it's a situation that should be the case of the contractor picking the customer, rather than vise versa.

Another consideration is the well being of the business for the long term. Smaller contractors sometimes put all their eggs in one or two baskets, relying on continued business from a couple larger accounts. But customers are human beings who sometimes make decisions with no good reason for doing so. This harsh reality always places a contractor just a phone call away from losing a client, and such a divorce with a large account could suddenly eliminate half or all of a contractor’s business. Looking to replace customers mid-season is never ideal, with most potential clients already having service in place. Gathering more small- to medium-sized accounts is less risky — and usually more profitable.

Who's First?

When prospecting new snow and ice management accounts, contractors will often talk to potential customers who specify that they want their snow cleared by a specific time. But it's nearly impossible for a contractor to give such a guarantee, simply because no one knows exactly when it's going to snow. Furthermore, there's no possible way to be everywhere at once. The reality is that some customers will get service more quickly than others.

There are undoubtedly several methodologies and systems subscribed to by industry professionals to determine which customers get service first. One approach that has proved extremely successful is the retainer and deposit system, a method that basically allows customers to choose their desired response time.

First Priority: Retainer Customers

Under this system, customers are given the option to pay a monthly retainer in order to gain priority status during a snow event. The retainer is based on the price of one performed service, along with the average number of plowing events that can be expected in a given market.

As an example, say a city usually experiences about 12 snow events that require plowing per winter, and it's generally recognized that there are four months — December through March — when snowfall is most likely. To calculate the monthly retainer, a contractor would multiply the price for one service by the expected number of plowing events for the entire season, and then divide that number into each of the likely months for snowfall.

Service Price x Plowing Events / Likely Snow Months = Monthly Retainer

So if the fee for one service is $100, the total retainer for the winter would be $1,200. Since that covers a four-month period, each month's retainer would be $300.

As the winter rolls along, the advance retainer money can be applied to cover any services provided for the month in which the service was performed. This includes instances where no plowing is necessary but de-icing materials are applied. The only way a customer loses retainer money is if it doesn't snow, or if it snows so little that the total service fees in a given month don't add up to the retainer amount.

From a customer's perspective, some of the financial investment may be lost. But what's gained is a guaranteed response time during a snow event. In essence, what the customer is actually purchasing through this guarantee is a better insurance policy against a slip-and-fall incident on his or her property.

Of course, the retainer system only truly works if the contractor can deliver on his promise for a timely response. But this guarantee is nearly impossible to fulfill if a contractor oversells his work and can’t service his priority customers in the time frame agreed upon.

Many contractors in the process of selling their services find that retainer customers are usually agreeable to a response time of six hours or less, and therefore will set up a schedule that offers a total of six hours per truck as priority-one service for those customers. Obviously the intensity and timing of a snow event will have a significant impact on a contractor’s ability to stick to a six-hour schedule, which is why the six hours should be based on a worst-case scenario.

In most cities, the worst case would be a heavy snowfall that begins during the early morning commute right before most businesses open for the day. Just about everything is working against a contractor in such a case. Street traffic is heavy, making it more difficult to travel to and from each account. Contractors must also navigate around vehicles arriving in parking lots. Meanwhile, almost any snow — and certainly a heavy snowfall — will dictate at least a second visit to each account for additional service. If a contractor were to encounter a worst-case scenario having oversold his work, response time can quickly become an issue for some soon-to-be-unhappy customers.

Second Priority: Deposit Customers

Some customers are leery about paying a retainer and possibly losing out on any amount of money if actual snow events are less than expectations. Additionally, many of these same customers may not have as urgent of a need for plowing and de-icing service. However, these people still would like to have a contractor in place so when a snow event does occur, they don’t have to get on the phone to track someone down. For these customers, a seasonal deposit system could be offered.

Like a retainer system, a deposit system uses the service price and expected number of plowing events as starting points. However, while a retainer customer pays a fee to cover specified months, a deposit customer will pay one lump sum that applies to snow and ice control services performed at any time during the winter. This flexibility to have the payment applied whenever necessary is the one advantage the deposit system holds over the retainer system from a customer’s point of view. The drawback, of course, is that these customers receive service second, occasionally more than six hours after the snow begins.

If a contractor is selling six hours of priority-one service, he should limit the priority-two service he sells to about two or three hours. Because priority-two customers aren’t receiving the same benefit of a fast response time, a contractor should consider offering a seasonal deposit price that is slightly lower than the total amount paid for monthly retainers throughout the winter. Using the previous example of a city with 12 expected plowing events and a service fee of $100, a contractor might decide to charge 10 times the price of one service, or $1,000, for a seasonal deposit. Contractors can and should customize the structure of their retainer and deposit systems to find what works best for their individual businesses, and for their customers.

The combined approach of a retainer system and a deposit system is an ideal way for contractors to realistically control and spread out workload during a snow event. By pre-defining customer expectations and establishing priority-one and priority-two timing, a contractor can grow his customer base to a reasonable level, and without promising too much to too many.

Furthermore, implementing a retainer and deposit system provides a contractor with the benefit of guaranteed income during the winter season. Most retainer and deposit money will later be applied to portions of monthly service invoices. But for the contractor-friendly, snow-free months that occur, any unused funds are certainly welcome to help cover equipment costs, operating expenses and other overhead.

Timing and Value

A contractor should also keep in mind that first service is not always best service. If a light snow begins to fall at midnight, it might make more sense to begin a route by servicing priority-two accounts so that priority-one accounts can be serviced closer to the time they open in the morning. In essence, priority-one customers are getting the best timing, rather than the first service.

While first service isn’t necessarily best service, the cheapest service will almost never be the best. This is especially true considering that contractors who undersell the price must usually make up the difference by overselling the volume, making it extremely difficult to offer a guaranteed response time.

If a contractor can establish a disciplined system that allows him to provide timely, quality service, he should take full advantage of it when selling new accounts. The contractor should let a potential customer know up front that while he may not be the cheapest option, what he can offer is a certain response time — every time. And since the consequences of a slip-and-fall incident are far more costly than the fee for putting down a de-icing application, response time is key.

Ultimately, contractors must be able to educate and convince a new customer that the benefits of better timing provide a value that more than compensates for any difference in price. Sometimes if a contractor simply explains his successful service methodology — and compares it to an often-unsuccessful low price/high volume approach — it may be enough to gain a new customer’s trust. If the customer can grasp and understand this value concept, a contractor should have a new client.

Maximize Profits

Getting customers is one thing. Knowing how to efficiently service them is another. The more efficient a contractor can be, the better chance he stands of making money in snow and ice management.

Take the example of contractors whose customers would like them to handle sidewalk work.  Removing an employee from a truck to shovel sidewalks isn’t an efficient use of his time and actually creates downtime for the plow and material spreader. And from the retainer and deposit system perspective, it also limits the number of priority accounts the truck can get to within a given timeframe. Most contractors would be better advised to stick with the bigger money that can be made with a truck until they are large enough that they could actually employ a small crew that is dedicated to sidewalk work.

Contractors should always be on the lookout to discover areas where efficiency can be improved. Knowing a customer’s holiday hours is just one simple example. If a snow event occurs on Christmas, an unprepared contractor may suddenly have to make dozens of phone calls to figure out who’s open. A much more efficient alternative is to ask for holiday hours months in advance. If it’s been pre-determined that some accounts will have their businesses closed for the holidays, their service can be pushed back and another client can get faster service.

Of course, efficiency isn’t the only thing that affects profits. The reason the winter maintenance industry even exists is because of the financial liability customers could incur by not dealing with snow and ice in a timely fashion. It’s absolutely critical that contractors protect themselves from being unnecessarily exposed to liability. No matter what system you employ for your business and no matter what agreements you have in place, be sure to get contracts in writing.

Get Organized

Basically, all a good contractor needs to establish a priority service plan is organization. The weather naturally won’t allow anyone to account for every single possibility, but contractors can make logical assumptions about the number of accounts they can service in a given amount of time. They can also use additional knowledge specific to each account, such as days and times that each is open for business.

Most importantly, know the limitations of what you can realistically promise a client. It’s better to deliver great service timing to a small group of satisfied customers than show up late for a large group of angry ones that might just decide to dump you the next day. Establishing a priority plan that makes sense for you and your customers — and then executing it — should ultimately lead to an arrangement that is more convenient for your customers, and more profitable for you.

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