There’s a great story in Steven Levy’s book, In the Plex, explaining how Google came to dominate the search engine landscape. And, not surprisingly for anyone that knows Google, they did it by leveraging the power of their data. And they leveraged their data in ways that other search engine companies didn’t.
For example, their competitors’ business model was based on people staying on the search engine web page. Yahoo placed ads at Yahoo.com, meaning the more visitors to that page, the more money they made. So Yahoo didn’t necessarily care if their search results were so poor that people kept returning to Yahoo.com to search again. They made more money if people searched multiple times.
But Google quickly realized that if people had to search 4 or 5 times to find what they were looking for, the search results just weren’t good enough. So they were constantly testing which results resulted in the least repeat visits. The less repeat visits from a result, the better the result and the higher it should be ranked.
By uniquely using data to determine the quality of their search results, Google quickly became the best search engine in the land. Which increased their market share, and which they eventually made wildly profitable thanks to their advertising product.
And so should you. Data can help you better understand your industry and position your business appropriately. To help snow removal businesses better understand their market, HindSite Software recently surveyed nearly 300 snow contractors, and then compiled those results into the 2013 Snow Industry Benchmark Report.
So what did we find? Here are five key takeaways:
1. 2012/13 was a pretty good year.
Snow businesses are nearly universally dependent on the weather for revenue. If it doesn’t snow or ice doesn’t form, there’s no work to do. But if it does – which it did in the 2012/13 snow season, then there’s lots of revenue to be had.
Generally speaking (there are obviously going to be regional differences), snowfall was up for most contractors. 73% indicated the number of snow events increased in 2012/13 when compared to 2011/12.
That increase in snow, not surprisingly, led to a nearly identical growth in revenue, with 77% of snow contractors indicating their revenue grew in 2012/13. And, with a little more money in their pockets, many contractors are looking at ways to make their operations more efficient, with 64% indicating they plan to increase spending on equipment and software.
2. Keep an eye on your margins
Our survey also showed that snow industry businesses had pretty healthy margins during the 2012/13 snow season. 17% of respondents indicated they had margins in excess of 40%, while 58% indicated margins in excess of 20%. So there is money to be made in the snow removal business.
We also examined regional data to determine if any regions fared better than others. To a certain extent, the Northeast US was the most profitable place to remove snow, followed by the Western US, Canada and the Midwestern US.
There are some significant regional differences, with nearly 70% of respondents in the Northeast indicating they had margins in excess of 20%, while only about 50% of those in the Midwest reported those same margins.
3. Consider your prices and pricing mix.
Expect snow removal prices to rise next year. 50% of those we surveyed indicated that they plan to increase their prices for the 2013/14 snow season. Many cited rising fuel costs and an improving economy as the main reasons for the price increases.
A good pricing mix can also help snow contractors insulate themselves from the unpredictability of the weather they rely on. Many contractors use a mix of event-based, monthly or seasonal contracts and time and material pricing to ensure revenue when it snows a lot (event-based or time and material pricing) or not at all (monthly contracts). About 75% of contractors use event-based billing, 65% use seasonal or monthly contracts and another 45% use time and material billing, showing that most contractors use a nice mix of contract types.
4. There’s plenty of opportunity to distinguish yourself with Marketing
Once you’ve nailed down your service and identified what makes your business competitively superior, it’s time to start marketing your business. And what we found in our survey is that there’s plenty of opportunity out there. In fact, just over 60% of contractors indicate they have a web site, and less than 50% use tactics like email marketing, social media, search engine optimization, direct mail, the Yellow Pages or blogging. In other words, there is a lot of opportunity for businesses using strategic marketing to grow their customer base.
In fact, a lot of snow contractors are turning to new marketing methods like email (about 48% use it) and social media (about 42% use it) than older tactics like direct mail (about 42%) and yellow pages ads (about 31%). These cost-effective, electronic marketing methods can offer good ROI if performed correctly.
5. You can grow your revenue with software
In our 2013 Green Industry Benchmark Report, we noted that green industry contractors that used field service software were much more likely to have experienced high revenue growth than their counterparts that didn’t use field service software. Not surprisingly, when isolating the effects of weather, we noticed the same result for snow contractors.
In fact, about 60% of those using software indicated they experienced revenue growth of more than 10% in 2012/13, compared to about 48% of those not using software. And only about 11% of those using software saw revenue decrease, compared to roughly 15% of those not using software. Since we sell snow removal software, this isn’t surprising to us, but it may be to snow removal contractors.
There’s a lot more data in our Snow Industry Benchmark Report that can help you better understand the snow removal industry. Be sure to download it today!
Don’t want to read the whole thing? Then register for our free webinar – 8 Things We Learned from the Snow Industry Benchmark Report – scheduled from 1 to 2 p.m. on Thursday, July 11. Click here to register!