Fuel Surcharge

[Nebraska]

I have implemented a fuel surcharge for our maintenance customers. The response has been overwhelmingly supportive and understanding with of course a few exceptions. Did not apply the surcharge to pre-pay customers.

I opted increase certain percentage of each servicing rather than showing a separate line item labeled "fuel surcharge" at the bottom of the invoice.

This applies only to our maintenance division....

What methods have others used?

[HardDaysKnight]

Good move Nebraska! You have to do something nowadays.
All suppliers delivery rates have gone up substantially. We
add a gas figure to every job whether it's a 2 day project or 2 weeks. We don't itemize it but it's figured into all estimates.
It's getting crazy now.

[Bill Schwab]

Let me tell you where things were, and are now.

Fuel one year ago dancing at $2.00

3/4 washed gravel $18.75 per yard delivered.
Class 2 base $12.00 a yard delivered

Fuel 6 months ago, $2.50 a gallon.

3/4 washed gravel $25.00 a yard delivered
Class 2 base $14.25 a yard delivered

Fuel 2 months ago $2.85 a gallon

3/4 washed gravel $28.00 a yard delivered
Class 2 base $16.25 a yard delivered

Fuel today $3.40 a gallon

3/4 washed gravel delivered today $33.00 a yard delivered.
Class 2 base delivered yesterday $19.25 per yard delivered.

three tier, 60 foot long, 18' high wall requiures 100 tons, or, 75 yards of gravel.

Job bid 3 months ago at $14.25 a yard, or, $1068.75. At todays cost, gravel will be $2,475.00, or roughly, $1,400.00 more than before.

I'm hoping, actually betting that fuel will drop after the pipeline is back together, this should only be a temporary thing. But, in the mean time, all jobs are being calculated at todays oil prices.

In yet another circumstance, concrete deleivered 6 months ago was at $85.00 a yard give or take. Today it is at $140.00, and if these oil prices don't drop, it will hit $160.00.

[Dale Wiley]

For locked in contracts, I can see the essence of a fuel surcharge. With a fixed revenue stream for a year, you have to hold your margins if they are that close.

We have about 17% of our gross revenue is from contracted maintenance, which we average 37% net profit on. Our fuel costs are up to about 2.3% of last months gross revenues, which is up from 1.7% the month before, and all from price increases.

We recover our fuel cost in overhead, based upon production manhours we will sell this year. By utilizing a dollar cost averaging and spreading the overhead fuel cost out over the entire recovery area, we are able to keep that impact fairly minor on the profitability number.

We will not implement a fuel surcharge on these maintenance accounts. What we will do is to raise those prices, mid contract by addendum so that we can hold that increase even if gas does come back down :rolleyes: :rolleyes: .

We have not raised a maintenance contract in 3 years, but now seems like a prime time to do it for a legitimate reason.

Our public contracts are bid well in anticipation of inflations, and last year I built the 2005 budget on $ 3.00 a gallon gasoline, and I have 2006's budget set at $ 3.75, which when we add 2 employees and by selling those additional hours, we will actually lower our overhead cost per hour, and allow us to meet our profit protection targets at all times. :cigar: :cigar: if the gas reaches $ 3.75 we are covered, if not then we make some extra profit.

With 83% of our business coming from construciton projects, and with 30 push clauses in our proposals, and by sticking to not less than 30% net profit margin, and closer to 40%, we will not get touched with any profit loss.

We will start operating off 2006
's budget the first of October as we have every year.

[Lawngodfather]

I did 10% across the board on everything. It is written in contracts also

[GLAN]

I haven't done anything as of yet...

But I am going to do something...I am still working out the wording and how it will apply to each customer. I will not use the term "Surcharge" cause in the event that gas comes down in price say $0.20 then the customer may feel it's enough to remove the "surcharge" and or refuse to pay it.

I intend to implement an increase.

The increase will be applied to all our monthly budgeted maintenance contracts........prepay as well will be sent a invoice for the per month increase to the end of the season........and also the 12 month contracts that include snow plowing....All will be increased....

[Lawngodfather]

The letter I sent with statments said what it needed to say. I did not use surcharge. I used increase.

[Rob Shauger]

We will wait until next year to bump things and it will be an overall increase. I had all my fuel more than covered for this year when we did our budget.