BUSINESS OPPORTUNITIES: Deicing Product Dealerships

Landscape firms with snow removal divisions certainly understand the ups and downs of doing business in a snow-driven market. Many companies look for ways to stabilize their winter profits – whether it’s through increasing sales or cutting costs.
     
A business model has taken shape over the last decade allowing snow contractors to become sub-distributors, or dealers, of liquid deicing products. Adding dealerships allows contractors to increase profits two-fold: by acquiring the product at wholesale pricing for their own use and by reselling the material to other contractors and non-municipal customers. Considering retail profit margins can reach 60 to 100 percent, adding a liquid deicing product dealership might be worth a look.
 
Jonathan Jackson of Jackson Lawncare, Columbus, Ohio, added a liquid deicing product dealership to his business in October 2005. Currently, he does about $250,000 in snow business with six employees and 25 subcontractors. The main reason he added a liquid ice melt dealership was to have access to a product he wanted that he couldn’t purchase in his region.
 
After two seasons, Jackson is pleased with the product’s performance and says he’s close to breaking even on the $30,000 investment he made to become a dealer. However, he has experienced two sub-par snow seasons and hasn’t yet focused on outbound sales, which he says has limited his ability to realize the service’s true earnings potential.
 
“I haven’t pushed it real hard,” Jackson says. “But the potential is huge. It could easily grow to a million-dollar a year business if you give it enough time.”
 
Snow contractors like Jackson are ideal dealers in the master distributors’ eyes because they are the primary users of the product, says John Oakes, sales manager for Taconic Maintenance, Poughkeepsie, N.Y. Taconic, a former snow-removal firm itself, is the distributor of Magic Salt. “Contractors know how it works and can really give the hands-on sales experience because they are the users themselves.”
 
But even if a dealer chooses to reap the benefits of wholesale pricing rather than ramp up sales, deicing product distributors say they don’t mind. Either way, their product is being exposed to the user community.
 
“Some people really get that this is a great opportunity to make some additional cash, and they go gung-ho selling and marketing,” says Brian Walters, director of business development for RMG Enterprises, the parent company of Ice Kicker, a deicing product master distributor. “Other people do very little selling – they probably don’t even pick up the phone to call prospects. They value the fact that they’re buying the product at wholesale price. Either scenario is a good one.”

HOW IT WORKS. Becoming a dealer entails buying bulk deicer (usually a 4,500 gallon semi-trailer tanker), storing it and treating customers’ stockpiles of rock salt and/or sand. Typically, the dealer provides a spray tank unit and the customer provides a loader and operator to turn the material as the liquid is applied to ensure uniform treatment. Application time is about 30 minutes for a 25-ton pile.
 
First, though, a contractor must have the infrastructure required to house a dealership. No storefront is needed – a typical landscape yard will do. Dealers need to have trucks equipped with spray systems (a 230-gallon capacity spray system is required to treat a 25-ton stockpile of rock salt), the space for at least one liquid storage tank that can hold up to 5,000 gallons and the ability to fill tanks (pumps, hoses, etc.).
 
Contractors source a lot of their supplies from the master distributors, and many contractors may already own some equipment, such as a spray system. Of Jackson’s initial $30,000 investment, about $15,000 was for the cost of equipment and deicing material, including two 3,000 gallon storage tanks plus plumbing and pumps, a spray system, one semi of granular material and one tanker load of liquid deicer. The other half was for a franchise-type fee and two days of classroom training. Jackson says he took advantage of a financing plan set up through the master distributor, which put monthly payments at less than $900.
 
Other master distributors report initial investments as low as $10,000. Some assign strict territories and have annual fees, others are more flexible. Most provide some sort of marketing support, whether it comes in package form or a la carte offerings.
 
Master distributors also provide pricing recommendations, Jackson says, though the dealers have complete autonomy over what they charge their customers. Prices vary depending on region, but as an example Jackson treats 100 tons of material for $24 per ton; the price per ton increases slightly if he treats fewer tons per trip.
 
Jackson pays an annual “collective” marketing fee, depending on the plans set by a dealer marketing committee. He paid about $1,200 in 2006. “There’s a lot of buzz and I’ve gotten a fair amount of calls,” he says, noting he hopes to add a salesperson in the future.

RISKY BUSINESS. One obstacle is selling to other contractors. Some may be averse to patronizing a competitor’s business. Other challenges are proving the product’s worth and the inherent risk in any seasonal business. Although liquid deicers have many believers, sticker shock may drive away price shoppers, as liquids tend to be more expensive than bulk rock salt. “People have been using salt for 120 years – it’s hard to convince them there’s a better way to do it,” Jackson says. And if it doesn’t snow, customers won’t buy snow melter, Walters says. “The risk is just like any snow-related business.”
 
Beyond that, the drawbacks are limited, distributors say. Because the bulk of the start-up cost is equipment, the worst-case scenario is the contractor will just use the product himself and not sell it to other parties. “The greatest risk involved is their time,” Oakes says. “Very rarely do we have dealers who drop out.”