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Fundamentals of Estimating Seasonal Snow ContractsIndustry Give Back by East Coast Facilities, Inc.

Understanding costs leads toaccurate estimatingDirectCostsCapEx Overhead ProfitPRICE

How do you accurately and sustainably price a job site?

Direct Costs are calculated by the frequency withwhich you will use materials and labor.MaterialsLaborDIRECTS

The frequency and quantity are driven by thecustomer's scope and historical weather.

•Overall, LOS•Difficulty of site•Plowing and de-icing triggers•Facility hours of operation•Material requirements•Loading zone availability •Onsite or offsite staging of equipment and materialsKey components to a SOW that drive direct costs:

WEATHERWhen analyzing historical weatherdata, the total inches is the leastrelevant data point. Event frequency is primarily whatdrives costs, and the standarddeviation is very important withcertain contract types.

Learning the impact of standard deviation is critical.

The frequency andquantity are driven bythe customer'sscope and historicalweather

Breaking down sites into zone types is critical todirect cost estimating.

How Zones Impact CostsGenerally, lanes and roads need high-frequency plowing (fireaccess, operating traffic flow).Parking, if occupied, will be plowed far less than lanes and roads.Sidewalks are usually high-frequency clearing unless the location isclosed overnight or on weekends; frequencies may be less.Dock areas, if present, may be blocked with trailers. They areusually only cleared once per storm and at the end of the storm.

CAPEXCapital expenditures (Capex)are determined by theequipment and tooling needsof the site. All necessarytooling should be included inyour Capex plan. Additionally, understandingyour carrying costs isessential for accuratelyestimating overall expenses.

Capex is the total annual cost of the fleet you are using with a % factor of howmuch that unit will be used for the contract. If it is a dedicated fleet, and it willonly ever be used on this site, factor in 100%.Properly Calculating CapexYou can use your known seasonal rental, annual snow lease, or total annualloan payments to determine the cost of each unit of equipment you need. Ifyou are using used paid–off equipment, MAKE SURE YOU ARE STILLCHARGING FOR IT! Use a replacement cost number or get a quote from arental company to see how much that type of equipment should cost for aseason. Example - If you use a plow truck that costs (or should cost) $18,000 a year fora job. Then the amount charged to the contract is $18,000, if you use that sametruck to do 10 jobs, then each should get charged $1800. Do you think rental companies stop charging for equipment when it is paid off?NO! Then why should you.

Overhead is completely different from direct cost or capex calculations. Whereasgenerally, direct costs and capex should be reasonably consistent from one company tothe next, overhead is not. Overhead may be proportionately much higher or lower depending on the way yourbusiness is currently built. Example, a business owner pays himself $100,000 a year, and his business does$1,000,000 per year in business, he accounts for 10% of the company's total revenue. Hissalary is overhead. But what if he doubled his sales to $2,000,000, now his salary as aportion of overhead dilutes to 5% of revenue. Companies that do volume or are small enough where the owner is the operator are in thesweet spot. Companies that are caught in the middle often have higher overhead ratios.You have an owner living off the business, and he needs to pay a management team tohelp him run the business. The next slide will help you better understand what makes up overhead. Overhead is alsoreferred to as SG&A, or Selling, General, and Administrative expenses.Overhead - aka SG&A

SG&A expenses encompass a variety of costs that support a company's operations but arenot directly linked to service delivery. Selling expenses include advertising and marketingcosts for promoting products or services through various media and channels and salescommissions, which are performance-based payments made to sales staff. Sales salariesand wages also fall under this category, covering the renumeration of personnel involved insales activities. Additionally, travel and entertainment expenses are incurred for business trips,lodging, and meals related to sales and marketing efforts, and shipping and delivery costscover the logistics of sending products to customers.Defining SG&A Expenses

General expenses involve administrative salaries and wages for executive and support staffwho manage the company's daily operations. Office supplies are another significant cost,encompassing items like paper, pens, and stationery necessary for administrative tasks. Rentand utilities are essential expenses for maintaining office space, including costs for electricity,water, and internet services. Insurance costs are also crucial, covering policies for property,liability, and employee protection. Professional fees, including those for legal, accounting, andconsulting services, are necessary for specialized advice and compliance.Administrative expenses include depreciation and amortization, which are non-cash costsassociated with the gradual reduction in value of the company's assets. Lastly, informationtechnology expenses cover the costs of IT services, including software, hardware, andmaintenance, which are vital for supporting the company's operations and ensuring efficientand secure data management.You should work with an accountant or finance professional to determine your SG&A ratio,including equipment depreciation forecasts. Defining SG&A Expenses

Once you add together your direct costs, capex, and overhead. You have arrived at your totalcosts. Then, you add the expected profit. How much do you want to make? The real questionis, how much does the market bear? Generally, 10-15% net profit is acceptable in the economy. Generally, total SG&A is 25-35% combined with a 10-15% profit = which means you need a 35-50% gross margin (GPM). Profit and GPMDirectCostsCapEx Overhead ProfitREVENUECosts of Goods Sold (COGS)

Example of Calculating Your Gross Profit MarginImagine you calculated the costs for a snow removal project and came upwith the following:•Labor: $2,000•De-icing Materials: $5,000•Equipment Costs: $6,000 These costs add up to $13,000.If you need to make a 45% gross margin (which includes your overhead andprofit), your total contract price should be $23,636.36. This includes the$13,000 in costs plus $10,636.36 as your profit margin.

Total Costs:Labor: $2,000De-icing Materials: $5,000Equipment Costs: $6,000Total: $13,000Gross Margin Calculation:Gross Margin: 45% of the total contract price.Total Contract Price:Costs represent 55% of the total price.Total Contract Price = Costs / 55%Total Contract Price = $13,000 / 0.55 = $23,636.36Key Points:Cost Calculation: Add up all your direct costs.Profit Margin: Include a percentage to cover overhead and profit.Final Price: Use the total to set your contract priceSimplified Calculation Steps: Gross Margin