If hindsight is 20/20, then what’s foresight worth? We decided to test that notion out with this year’s State of the Industry research.
We asked participants as they headed into Winter 2017-18 what did they anticipate about the coming snow season. Was the snow shovel going to be half full or half empty. It turns out that around 23 percent of respondents predicted a positive business environment, while 20 percent anticipated dire results. The remaining 57 percent hoped for “normal” winter conditions. From there we broke down some key data and compared it to other popular industry benchmarks. You see this breakdown displayed as “Positive Outlook” and “Negative Outlook” on the following pages. Judge for yourselves whether their gut feelings about the coming winter’s activity were on the mark or just a bad case of indigestion.
Never fear, on the following pages we also include the benchmarking figures we provide with every State of the Industry report. We attempted to provide some deeper breakdowns here to, hopefully, provide some offering insight to what these numbers mean to your overall snow and ice management operations.
This year we did somethings a little different with the State of the Industry research. In an effort to increase accuracy, we delayed sending out questionnaires in late March and early April until late July. The thinking was the majority of contractors would have closed their books on Winter 2017-18 by then and would have a solid handle on how winter panned out. We were hoping to limit the guesswork.
As in past years, Snow Magazine conducted its 2018 State of the Industry research via SurveyMonkey, an online survey portal. Snow Magazine queried professional snow and ice managers from throughout the United States and Canada who were pulled from our circulation list. In addition, we interviewed a number of additional professional snow and ice managers to gain first-hand insights on the challenges and trends that comprised Winter 2017-18, as well as their insight on Winter 2018-19.
So, what’s the profile of the average snow and ice management contractor doing business during Winter 2017-18? Overall, that contractor has been in business for roughly 24 years and either operates a landscape company that provides winter services (56 percent) or defines themselves as a snow removal firm that a provides landscape services in the offseason (12 percent). Only 8 percent were snow-only firms.
In general, the average contractor employed a dozen full-time and four part-time workers, and 13 seasonal employees. More than half (52 percent) supplemented the labor force with winter service providers, with 73 percent using less than 10 providers.
On average, snow contractors provided winter services for an average of 55 properties throughout the winter months. Property types included 34 residential, 6 percent government/institutional and 60 percent commercial.
For Winter 2017-18, contractors serviced around 20 billable events. Snow and ice management makes up as much as 30 percent for more than half of companies (58 percent) that include it among their overall services (The figure does not include snow-only firms). Overall, more than a third of contractors (36 percent) categorized Winter 2017-18’s business conditions as positive, while 23 percent viewed it as negative, and 41 percent said winter’s financial outcome was as they anticipated.
The Labor Question
Snow and ice management is a labor-intensive industry, from site supervisors to sidewalk crews, from plow truck drivers to back-office administrators, the need for quality, skilled workers is at the forefront of nearly every contractors thoughts. Here’s how some intend to address this issue over the next five years.
The old business adage is that it’s costlier to develop new clients than it is to retain them. In fact, some business studies cite recruiting new customers costs five times as much as retaining them, and that it’s 16 times as costly to build a long-term business relationship with a new client than cultivating loyalty with an existing customer.
It seems the snow and ice management community has taken this to heart. Some business sources site an 85 percent retention rate as ideal, however client retention seems to hover in the 95 percent range for the snow and ice management industry. It was as low as 91% back in 2005, and a small segment of contractors (15 percent) seem struggle with below 90 percent retention last year. Despite a 94.5 percent average, according to the research data, the sweet spot for client retention is 95 percent or better. In fact, more than a third or respondents reported 100 percent retention.
Good, bad, the same
And prior to start of last winter, 20 percent anticipated an above normal winter, while 23 percent readied for less than favorable conditions.
At its conclusion, though, Winter 2017-18 seemed to be a relative positive, and therefore profitable, winter for the snow and ice industry. Overall, it was a long snow season, with winter weather reaching far into April. In March, high-impact storms with names like Riley, Quinn, Skylar and Toby brought heavy snow to the East Coast. Erie, Pa., experienced nearly 200 inches of snow from October 2017 through April 2018. And for only the third time in recorded history has snow covered ground from Brownsville, Texas, to Bar Harbor, Maine, according to The Weather Channel.
In addition to the snow, The Weather Channel reports that dozens of locations in the Midwest and Northeast recorded their coldest Aprils on record while large sections of the Midwest, northern Plains, mid-South and Northeast have recorded their top five coldest Aprils on record.
Profit & Revenue
Ups & Downs
It appears those preseason premonitions about winter business conditions played out when it came to the bottom line. While more than half (56 percent) of contractors reported an increase in winter revenue over last year, 64 percent of those with positive outlooks about Winter 2017-18 reported better bottom lines and only 43 percent of those with negative expectations experienced better profits. However, those who entered the season with negative outlooks also reported a greater frequency (43 percent) of red ink at season’s end.
Percent of Total Revenue that comes from Snow and Deicing
The majority of contractors (38 percent) derive as much as a third of their annual revenue from snow and ice management services. However, according to the data, there appears to be a slight spike (around 13 percent) of contractors who report that snow and ice services comprises upwards of half of their annual revenue. Interestingly enough, this same spike can be seen among those contractors who had a negative outlook about Winter 2017-18. Among 16 percent of those contractors report that snow and ice management makes up as much as 50 percent of their total revenue.
Top 5 Business Challenges
Heading into Winter 2018-19, these are the top concerns among snow and ice management professionals.
1. Securing labor
2. Mild, low-event winter
3. Losing out to low-ball competitors
4. Insurance costs
5. Salt supply and availability (tie)
5. Salt and deicing material costs (tie)