16 Nov Snow Budgets Based on Data & Trends (not just last year’s cost)
Establishing a budget for snow removal services is not a straightforward task. It may be tempting to look at what you spent last year and plug away; however, there is a better way driven by data.
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 technique) tells 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.
We are here to help. Sun Valley Landscaping has developed a simple, useful tool to budget snow removal services over the long-run accurately. 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.
Sun Valley Landscaping has been collecting data for 10 yrs 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 of events, not the number of inches, is what drives snow removal cost. An easy way to think about this concept; 10” of snow can occur in (1) event, or we can get (10) events with 1” of snow each. Both will bring wildly different costs but have the same amount of snowfall.
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 2015-2016 with 27.4” vs. 2017-2018 with 17”. You would think 2015-2016 would be a HIGHER expense with more snowfall, but it is 17% LESS due to the number of events being 25% lower.
We are sharing a proven process that works. We use the same tool to create seasonal fixed-rate contracts for our clients. Our budget calculator gives this property an expected budget of $9,643. Although the cost varied dramatically (+50% and -43% to the mean), the average cost over 5-years was $9,887. (Note: our tool also includes a “risk variance” to add or subtract from the budget. We recommend adding 5% to help cover fluctuations.) The goal of our snow budget tool is to predict a 5-year average snow expense accurately.
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 “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! 😉
If you need help figuring out your snow budget this season or have any questions about snow, please email me directly: paul@sunvalleyomaha.com. I would love to chat with you.
