Bad weather can create good money, so knowing how to start a snow plowing business is great knowledge to have. If you don’t mind working on days or nights unexpectedly, can respond consistently, and perform high quality work on a regular basis, then you’ll be able to slowly but surely grow your business into a success.
The main thing that you’ll need is a plow. If you have a 500 foot driveway that needs to be cleaned, using a shovel is going to be time intensive and leave you sore. Attaching a plow to a truck will make the process a lot faster and warmer. Securing the equipment is going to be your primary challenge. Plows can be as little as $500, but professional grade equipment can easily be above $4,000. If you don’t have a truck already, then you’ll have that capital expense as well.
You’re Going To Need Extensive Insurance
Most snow plowing businesses are required to have a minimum of $1 million in general liability. In some jurisdictions, that amount might be $1.5 million or even $2 million. Depending on your overall credit profile, this could mean an insurance expense that is $3k-$6k for the winter season.
Some jurisdictions may also require a business to hold a surety bond or a contractor’s license. If you already have a landscaping business or do other contract work, then that license will most times cover your snow plowing work. A contracting surety bond will also cover snow plowing.
If you don’t have these items, however, you may find that a $12k surety bond could cost you upwards of $1,500 in a lump sum payment.
In practical terms, this means you will need to have 7-8 customers on your first season just to cover your insurance expenses. If you need to purchase a plow, then you’ll need 2-5 more customers. Add in fuel and maintenance costs and to break even, on your first season, you may need a customer base of 20 contracts. That’s why selling before winter hits can be a huge benefit to you.
Selling Is an Art Form All Its Own
The classic sales method for a new snow plowing business goes something like this.
1. The new business owner will check out the prices of other snow plowing agencies in their community.
2. The new business owner will then undercut the lowest prices in the community by 10% to make a competitive price point.
3. This low price becomes the emphasis of a sales pitch. A few customers jump on board right away.
4. A savvy customer begins to negotiate because they have an existing contract with an existing snow plow business that they trust. This customer will approach their current relationship and say something like this. “A new business approached me and offered me the same services at a 10% lower rate. Will you match that?”
5. Inevitably an existing snow plow business will undercut the lower rates of the new business.
6. Now the new snow plowing business is getting no more customers and is frustrated.
It is important to make sure you know what the prices for snow plowing are in your community not so that they prices can be undercut, but so that you can price yourself right into the market. Undercutting prices means less profits for everyone and that doesn’t make much sense.
What will distinguish your business from all of the rest is the quality of your equipment, your “like-ability” factor, and the consistency of your job performance. If this is your first season in the snow plowing business and you’ve never done contracting before, your value will be compared to the value of other existing businesses. Don’t be surprised if you come up short.
Most snow plowing businesses are only going to get 3-4 customers on their first year for the entire season. This allows for a high quality job to be completed and the good results will help to build your reputation. The 4 customers in Year 1 can become 12 customers in Year 2. By Year 3, you’ll have 20-25 customers and start cutting into your capital expenses with real profits. That’s the financial reality of knowing how to start a snow plowing business.
Setting Specific Times To Come Out Is Important
The key to your profitability in this industry is knowing when you need to go out and plow and when you need to just stay at home. Many snow plowing contracts have minimum snow requirements in place. In other words, you won’t go plow someone’s driveway unless three inches of snow hits the ground [or your other predetermined snowfall amount].
You also have two ways to sell your services to your customers. You can sell services by the season for a flat rate and unlimited service calls or sell based on services rendered. Each has some advantages and some disadvantages, so weigh these carefully as you develop your business plan.
A hybrid model, where flat rate services are provided one month at a time, can help to reduce the risks of low profitability and high cost for you and your customers respectively as well.
It’s also important to recognize that in this type of service, there will always be customers that are dissatisfied with your performance no matter how good of a job it is that you do. Being in business for yourself means taking the good with the bad. If there are customers that are always complaining and on your case during a season, then you can always choose not to renew them as a customer for the next season.
Being in control of what you earn is one of the best perks of knowing how to start a snow plowing business. Make sure that you’ve secured the equipment you need, have a reliable truck, a good mechanic standing by if you have a vehicle break down on you, and then provide consistent results. When you are able to do all of these things, then you’ll built a great local reputation and that will give you the best chance to experience some massive profits.