00:00 Introduction
Jack Jostes:
How does your snow company handle years where there's not a lot of snow like certain parts of the country last year? Check out this interview with Todd Reinhart, who just presented at the Simons Symposium about his readiness fee, how he gets his clients to pay monthly, and how it helps him cover his overhead and save his clients some costs in big snowfall years. Plus, Todd shares his vision for having zero riding lawnmowers within five years and how he actually sees that as a benefit to his people by using autonomous mowers and a little bit about how they have a full-time data analyst.
Hey everyone, Jack Jostes is here. Welcome to the Landscaper's Guide. This show is all about inspiring the snow and landscape industry with new ideas on sales, marketing, and leadership. And I'm excited to interview my client, Todd Reinhart, about what he's doing with his company. So let's get into the interview with Todd, and if you enjoy this conversation, be sure you subscribe at landscapersguide.com/podcast so you never miss an episode.
So I'm here with Todd Reinhart, who just presented how to create, what was it? How to create ...
Todd Reinhart:
Win-win.
Jack Jostes:
Yeah, win-win pricing strategies for snow removal. It was very interesting. So Todd, we only have a couple minutes. It was an awesome presentation, really learned a ton. Tell us what is the readiness fee and how does that impact your pricing?
1:34 The Readiness Fee: Impactful Pricing and Preparedness Explained
Todd Reinhart:
Sure. So what we did was we took a general snow contract that's a per inch snow contract, and we really separated it out into two things. We have a fixed cost. Every snow contractor has a fixed cost, whether they park a piece of equipment on the site or whether they rent a piece of equipment, they have that fixed cost for that piece of equipment. And then their variable cost is the hourly rate that they have to pay people to run that equipment.
So what happens in is in a regular snow year, if you have just a per inch snow contract with no readiness fee built in, you can really get hurt and you can really end up paying for your rental or for paying for that equipment all winter and you recoup no cost on that whatsoever. In our model, the readiness fee we have is we take that rental for that equipment or maybe a depreciation if we own it, and we come up with what we would have to pay ourselves either internally or externally for that rental piece of equipment.
We mark that up a certain amount to cover our overhead, whether it be fuel, wear and tear on the piece of equipment, the tires, the use of the blades, maybe the repair and maintenance on the actual blade that you put on that piece of equipment, that type of thing, the mobilization fee. And we try to include that all inside the readiness fee that the client pays per month. It's not a minimum fee for the client, it's just they pay that much fee per month.
But then in turn we give them a much lower rate for the inch pricing because with that way we make sure that in a low snow year our costs are covered for that piece of equipment that we've had to rent or we've had to outlay cash for. We want a good return on investment on that piece of equipment, but then we make sure that we're covered in a low snow year that way and in a high snow year because the client's willing to pay for that piece of equipment to be stationed on their property, or maybe 50% of that piece of equipment if we're divided in over two properties, we give a much reduced rate in per inch pricing so that the client in a huge snow year is saving a significant amount of money on the backside.
Jack Jostes:
So you were pretty open book in your presentation. You're targeting roughly a 50% gross profit margin?
Todd Reinhart:
Yeah. Here at Snow and Ice, we are very vague on pricing. We are very-
Jack Jostes:
I'm not going to ask you for specific numbers, but that's roughly the profit margin you're targeting.
Todd Reinhart:
In my example, yes.
Jack Jostes:
In your example, so would your gross profit margin still reach that 50% with the readiness model or is it a bit lower?
Todd Reinhart:
Well, so on a normal snow year, on a normal snow year readiness versus just a straight per inch pricing would be identical, would be that 50% market or margin, whatever you as a contractor, whatever margin you set as your target. I used 50 today because it was just a great round number.
Jack Jostes:
So that was just a hypothetical.
Todd Reinhart:
Yes, but however, you should always be running at 50%. You should always be targeting 50% or better gross margin.
Jack Jostes:
But then in the year where you're getting above average snowfall, so I understand how you're protected in a low snowfall year. This year you had one and a half snows.
Todd Reinhart:
One and a half snows.
Jack Jostes:
One and a half snows. So in a year where there's 10 or 12, what happens then?
5:05 Adapting Your Business in a Year of Heavy Snowfall
Todd Reinhart:
Because we give the client a reduced rate per inch, because we've created a floor, we're not going to go below. In my example today it was 35% gross margin. On a no snow year, we're probably the least amount we're going to make is 35% gross margin, we've covered our rental, we've covered some fuel, we've covered the payments on that if we own it, that type of thing. On a high snow year, we're giving probably maybe six to seven margin points away because we're only charging the client for those hours. It's built in the per inch pricing, but we're willing to give the client a break on a high year, and that's how it really becomes win-win.
So on the contractor side, a win-win in a low year, is at least we've made some gross margin versus losing money for taking on that client's account. On a average snow year, for us it's 20 inches and 20 saltings. On an average snow year, it's a win-win for both of us. And then on the big snow year, the client is winning because they've been able to offset their exposure to extremely high bills. They've probably saved eight or ten percentage points on what the normal bill would've been.
Jack Jostes:
And so you're in Bloomington, Peoria, and Champaign, Illinois. I heard some people in the Q&A say, "Well, hey, I'm in Buffalo, New York," or "I'm in some of these areas that are getting huge dumps. We're getting 100 inches a year." Do you see this model working there or what do you think? For the people listening, we have people all over the country.
Todd Reinhart:
Yes. Because even those guys, those contractors have years where it doesn't snow.
Jack Jostes:
They sure do. Right.
Todd Reinhart:
And so yeah, I don't care whether you're getting 100 inches or 20 inches, the model still works because you've still covered your cost for that equipment in an extremely bad year. So I know some of those customers and some of those extreme markets where they're getting 100, 200, whatever those inches were, the pricing model may not work. And that's what I kept stressing. This is just another tool in the fight if you have some seasonals, and you have some readiness fee and you have some per inch that are mixed across the board, it spreads your risk as a contractor out.
Jack Jostes:
We had one of my snow clients, Tory Shalanda, on the show, and he shared how some of his clients are on kind of a readiness fee. They're on a fixed monthly, they actually prepay for the year. He has figured out how to do this with residential. He's figured it out. And some of them are still on a per push pricing model, and those are the top 20% of his clients and he's making really good money on that. So yeah, I think you can have a mix of it. It's a tool in the toolbox. This came partly from having a business data analyst on your team, who I've met. Logan presented at our Mastermind. That was really fascinating. I just briefly wanted to hear what is a business analyst doing at a snow and landscape company and how much green industry experience did they have prior to you hiring them?
8:15 What Is A Business Analyst Doing At A Snow And Landscape Company?
Todd Reinhart:
Okay, so several years ago we realized we're collecting a massive amount of data between the devices in the field that guys are logging in and out of, between all the recruiting that we've done, visits to the website, our social media posts, our training videos, all this stuff. We're collecting a massive amount of data on a daily basis, on products used, on what those costs were. And we realized we were maybe using, I mean, some people claim to be using 60% of their data in this seminar. I doubt that that's true. I would say it's probably less than 10%.
Jack Jostes:
I believe it.
Todd Reinhart:
Whether data, less than 10. It's all the features that we have in our vehicles or have in Microsoft Power BI or in Excel or Word, whatever you use, right? You're probably not using every feature. You're using maybe the 10% of the features that you know, and I would challenge that as a company, we were maybe using 5% of the data we were collecting.
Sure, you're looking back at the end of the year looking at, "Oh, did we do well on this client or not?" It wasn't a daily did we do well, it wasn't really a weekly did we do well. It was more like at the end of the year when we go to renew the contract, how did we do this year? Well, when I hired the data analyst that we brought in and started the data analytics team, they started diving into the daily numbers. What do we have to do on a daily basis? Or monthly, they start out at the monthly, what do we do monthly to be successful?
Then they drive down to, or what do we have to do quarterly? And then it was monthly. And then what do we have to do weekly now? What is a successful day data wise? What does that look like? Were we profitable on every service that we did this day? And if not, why? Because day equal month, month equals quarter, quarter equals year. And if you're not profitable, if you're not focused on profitable on every service that you do and what level of profitability, just one or two things can cost you margin points at the end of the year.
Jack Jostes:
Absolutely. And Logan, did he study agriculture? Did he study-
Todd Reinhart:
No, he was he working in the green industry. He came from very much, he was a two tour marine that ended up getting out of after his tour duty.
Jack Jostes:
And he speaks Korean.
Todd Reinhart:
He is fluent in Korean.
10:37 Embracing a New Perspective to Transform Your Company's Trajectory
Jack Jostes:
I just thought that was a good point that came from talking from getting to know you that a lot of people say, "Oh, I can't hire anybody. I need somebody who has 10 years of green industry experience." And maybe you don't. Maybe having somebody who has no green industry experience, who comes in and drives the numbers and challenges you and can bring a new perspective that can change the trajectory of your company.
Todd Reinhart:
With your data analytics team, there are no sacred cows. They're willing to slay anything. If you think you drive Fords and they think Chevys are the better option or they see a higher production number with a given truck versus another, a piece of equipment versus another, they're willing to slay that sacred thing that you're like, "Oh, we're not switching to Ford trucks," and believe me with my brother, we would never switch to Ford trucks. But the data reveals the truth. It does not lie. And as you start looking at this data and your production numbers and why are you doing it a certain way? Or why are you traveling that route that way? Hey, could we use a different piece of equipment that's more efficient on this site?
All these things that used to be sacred, or you grow up in the green industry, when you bring someone outside of the green industry that really starts to question why you're doing something that way, and a lot of times you like shoo them off, like, "Leave that alone." I love that. And a lot of times they find things that you should be more aware of. Because at the end of the day, yes, you want to have fun in what you're doing. You want to be "comfortable." But at the same time, the end of the day is net profit. The end of the day is happy customers produce great margins. And it doesn't matter how you get that work done, whether it's autonomous mowers, whether it's a guy on a lawnmower, whether it's a guy on a different type of lawnmower. It doesn't matter how that work gets completed.
12:39 Achieving a Riding Lawnmower-Free Future
Jack Jostes:
So one of your goals, your big, hairy, audacious goals is to have zero riding lawnmowers within five years, to switch entirely to autonomous. When I share that with people, and when I see people react to that, some of them feel it's unethical or they think about all their people who are currently mowing the lawns, the way they've been doing it and the dealer that they bought it from, and the people part in my business is important to me. I'm curious, how do you talk to people who are listening who are like, "Wow, I couldn't imagine using autonomous mowers because I'm worried I'm going to lose my people and I'm here to help people."
Todd Reinhart:
Sure. And we addressed this at our company from day one. Before we ever put a mower out, we were talking to our staff about this doesn't cost jobs. In fact, you're going to get to do the things that you like to do besides sit on a lawnmower. You're going to get to spend more time at that client's doing bed control. The things that are important, the weeds in a bed are more important than ever mowing the grass, because the weeds are the first thing the client notices, not if the grass was perfect. And you're going to get to do those gardening things that a lot of our staff enjoy more so than even getting on a lawnmower and riding, the quality goes up, because you have no clippings. Just this mower, these autonomous mowers mow all day every day.
So the quality of the client goes up and the guy and the staff that we have, their sites actually look better. It allows us to then take that staff member and divide him. He can do almost double the amount of revenue as what we're projecting in some instances, double the amount of revenue because he's only visiting a site every two weeks and it's only one guy instead of two people in the truck. It's only one staff versus two. And he can spend more time making that site look much better because instead of being rushed in the spring, that grass is never getting tall. It's always mowed.
So he is never rushing to the next account, got to get it done, working those late hours. He's never into his overtime. And family's important to us. We went out to the staff before we put in our first auto mower, "Look, this is what's happening. You don't need to be scared for your job. We're not replacing you. We need you more than ever, and we need you focused on the value creation because mowing's no longer a value creating activity by an individual, by a person. Value creation now is done autonomously."
Jack Jostes:
So I'd love to keep talking with you about this and other things, but we've got other things to go to at the show.
Todd Reinhart:
We got to walk around as twins.
Jack Jostes:
Well, we got to walk around as twins. I'm glad you got the memo with the shirt today. Looking good. And the pants and everything.
Todd Reinhart:
And the shoes. And the shoes.
Jack Jostes:
And the shoes. Right on. That's the look. So where can people see you next? You're speaking at Lawn and Landscape Technology Conference in August. What are you presenting there?
Todd Reinhart:
Well, first, I love the Simon show, but the next time that I am talking at the Lawn and Landscape Show, I believe I'll be talking on data analytics. At that show, I'll be doing the whole presentation on that. It is one of the best shows.
Jack Jostes:
The most expensive. I know, I want to go, [inaudible 00:15:52]
Todd Reinhart:
The most expensive. It is. But the caliber of companies there, and that's where I'm at, I want go learn. I like to talk in front of people, but I enjoy the lifelong learning and that thirst for knowledge more so than I even enjoy talking and sharing my knowledge [inaudible 00:16:12].
Jack Jostes:
Well, I find as a public speaker that I learn a lot by teaching, and you were up late last night and this morning preparing your talk, getting all your ideas ready to share with people. I learn a lot about well, what's working? What's not?
Todd Reinhart:
Let's be honest, we might be preparing. A half hour before the talk I was still moving slides.
Jack Jostes:
I believe it.
Todd Reinhart:
I was still moving. You and I have shared that we've done the same things.
Jack Jostes:
Yeah, every time, but that's because I want to present fresh content and I'm always talking and always learning and reflecting on what I'm doing and what's worth sharing, what's new. So cool. Well, Todd, thanks for coming on the show.
Todd Reinhart:
Yeah, appreciate it.
Jack Jostes:
And it was fun talking with you.
Todd Reinhart:
Yeah, you too.
Jack Jostes:
Where can people find you if they want to network with you?
16:50 Networking Opportunities with Todd Reinhart
Todd Reinhart:
Reinhartservices.com. In fact, our new website just went live yesterday. Looking forward to seeing how that performs over the coming months. We've got a lot of things we want to add to it and a lot of features that we're looking forward to [inaudible 00:17:08].
Jack Jostes:
We're excited to work with you on that. Thanks for working with us. It's live and it is going to continue growing as the brand grows.
Todd Reinhart:
Yeah, we've got some exciting things coming. Cool.
Jack Jostes:
Well, thanks Todd.
Todd Reinhart:
All right. Appreciate it.
Jack Jostes:
Thanks for checking out today's show. If you're going to the Lawn and Landscape Tech conference, make sure you go and see Todd's talk, let me know what you thought of it. And if you're in Florida, if you know anyone in Florida, please invite them to come see me at the FNGLA's show, the Landscape Show in August. Check out landscapersguide.com/events for more details, and I hope to see you there. My name's Jack Jostes and thanks for checking out the Landscapers Guide.
