When a company’s business is dependent on the whims of Mother Nature, it can be hard to make a reliable profit.
It is also difficult for potential customers to know who to enlist for their snow removal services. According to market researcher IBISWorld, there were about 116,000 snow removal establishments in the United States last year.
Customers using snow removal services have several different options when it comes to paying, depending on the provider. One choice is to pay by the inch of snowfall, another by how long it takes to clear the space. Some customers choose to pay a flat fee for a contract covering the entire winter.
Commercial property owners will always second-guess their decisions in working with snow-removal contractors. Those who pay by the inch will be hit hard after a blizzard, but those who pay a flat rate will certainly feel foolish after a winter in which snowflakes are mostly absent.
“The client needs more predictability in their spending, and the contractor needs more predictability in their revenue,” Phill Sexton, director of education and outreach for the Snow and Ice Management Association (SIMA), told Bloomberg. “A good year for one is a bad year for the other.”
Even though a rise in nonresidential construction over the past five years has boosted the snow removal industry’s customer base, the average company brings in less than $125,000 in revenue.
As private equity firms continue to buy landscaping companies, it seems that larger customers are choosing to go with bigger landscaping companies as well. The prime example of this is BrightView Landscapes, which brought in $2 billion last year – $342 million of that from snow removal.
“There is a market for large businesses that can deliver consistently in multiple locations and are easy to contract with,” said Ron Edmonds, principal at the Principium Group, an advisory firm.
Yet smaller companies are likely to keep their smaller landscaping companies.
“The local manager is often going to opt for the local plow guy,” Edmonds said.