Snow Budget Like A Pro: Data and Best Practices for Commercial Properties

25 Sep Snow Budget Like A Pro: Data and Best Practices for Commercial Properties

Posted at 11:03h in Commercial Landscaping, Winter Tips by Kelly Dowell

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Accurately budgeting for snow removal services can be one of the more challenging tasks on a commercial property P&L. Snow is a wildly variable expense that regularly fluctuates in costs +/-50% per year.

It may be tempting to look at what you spent last year and plug away; however, there is a better way driven by data. We have been studying snow data over our 30 years in business and have prepared some insights and best practices to help you budget like a pro!

Why Last Year’s Snow Budget Won’t Work This Year

In our experience, most snow budgets are estimated too low for the property. This does not have to do with the rates you pay the contractor but with the formula for calculating the expected variable cost.

I believe this is a result of human nature. The recency bias (and common budgeting techniques) tell us we should budget for what we immediately spent over the last few years. A lot of snow last year? Raise the budget by 30%! It hasn’t snowed much in a few years? Move 20% of that snow budget to add more flowers in the spring! Unfortunately, mother nature does not work that way… especially in Nebraska.

Snow Data Insights from 30 Years of Experience

As you can see in the history since 2000, there are significant variances in both the amount of snow and the total number of events that drive snow removal costs.

How can we make sense of this and create budgets that work for our stakeholders?

Introducing the Snow Budget Calculator

We are here to help. Sun Valley Landscaping has developed a simple, useful tool to budget snow removal services accurately over the long run. This tool will not give you next year’s budget precisely, but if you use the process over a series of 5+ years, it can provide owners, tenants, and contractors a realistic mark to gauge performance, manage funds, and cash flow your properties with fewer surprises & stress.

You can find a free-to-use snow budgeting tool here -> Snow Budget Calculator.

Determining Your Snow Budget Risk Tolerance

Part of establishing the snow budget is determining your financial (budget variance) risk tolerance. In some cases, the snow removal portion of operating expenses may be low – i.e., a corporate owner-occupied building. In other cases, it can be one of the larger expense items on the operating P&L – i.e., a managed triple net lease. Part of our system encourages you to set your own “risk tolerance.” In simple terms, adding extra cushion to the budget or playing it tight and banking on a “typical year.”

To help gauge your risk profile, ask yourself, how much of an impact would missing the budget by 30-50% be on my property? Based on our research and recent weather patterns, you can almost count on this happening at least once in the next 5 years. See our real-world property example below. The budget outcomes over the previous 9 years had two years which exceeded the budget by 38% and 54%.

Real-World Example: Managing Budget Variances

Using our suggested system will get you “close” in many of the years – within 10% five out of nine years. But how do you feel about those 30-40-50% variances? This is where two practices come into play:

Set the risk variance (budget cushion) for your property between 5-20%.
Set aside a snow reserve fund or consider a flat-rate seasonal contract.

With the recommended 5% risk variance in place, this property would be 4% under budget over the period and have a reserve fund of nearly $4,000 going into the next winter. This reserve will help to cover any overages in the coming years. By raising the risk variance even higher (i.e., 20%+), you can save additional monies in this fund and consider a system where it may be released for other uses. One creative idea used by a client is setting their snow budget 25% above the expected costs and saving the excess to be used for parking lot maintenance. Another option to consider is a flat-rate annual contract that can smooth out many of the budget variances.

What Really Drives Snow Removal Costs?

Sun Valley Landscaping has been collecting data for 10+ years that measures the number of inches we receive each winter and the important information about the amount, type, and timing of events. The number, type, and timing of events, not the number of inches, is what drives snow removal costs. An easy way to think about this concept: 10” of snow can occur in one event, or we can get ten events with 1” of snow each. Both will bring significantly different costs, although they equal the same amount of snowfall inches.

Timing and Event Frequency: Key Cost Drivers

Timing of snowfalls can also affect the expense incurred—i.e., a daytime snowfall may require 2-3 services if the parking lot is being used during continual snowfall. We always joke that for many properties, the best day for snow is Sunday. Many businesses are closed, and we can wait until all of the snow is done, and the lot is empty to service with only one visit (unfortunately, it seems that Mother Nature likes to snow during weekday rush hours 😉).

Real-World Cost Comparison: 2020-21 vs. 2019-20

Below is a real-world example of a property in Omaha (1-acre parking lot + 6,000sf of sidewalks). To illustrate events driving costs, see 2020-21 with 48” vs. 2019-20 with 20”. ‘20-‘21 had 240% more snow than ’19-20’, and you may think it would cost twice as much, but the expense was only 51% higher. This is because ’19-20’ had 27 events that required many service visits for lighter snowfalls. While deicing and light snowfalls may cost less than a blizzard, they happen more often and are what really drives the trajectory of what you will pay each winter.

The Proven Budget Process for Snow Removal

We are sharing a proven budget process that works. We use the same tool to create flat-rate seasonal contracts for our clients. Our budget calculator gives this property an expected budget of $9,643. Although the cost varied dramatically (+38% and -53% to the budget), the average cost over five years was $9,565—within 1% of the budget suggestion. The goal of our snow budget tool is to predict a 5-year average snow expense accurately within a tolerable variance.

How to Use the Snow Budget Calculator

You can see the data, download the calculator, and learn more about the example property HERE.

To utilize the tool for your property, fill in the yellow boxes on the “Budget Calculator” tab. The notes section of each tab covers assumptions and notes for your information. The averages are based on our experience and data, but we are not liable for your budget calculations! 😉