4 Reasons The Snow Business Is Like The Stock Market?
From Detroit to Chicago and from Cincinnati to New York everybody is feeling the pinch of a mild start to winter. After the record breaking winter of last year we stocked up on everything in anticipation of another good season. Unfortunately many of our customers are having a hard time during this “snow recession” and we thought it could be a great teaching moment about how being a snow professional is similar to playing the stock market.
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1. Volatility: The stock market is volatile and not for the meek of heart and the same is true for snow removal. You need to be able withstand the inherent fluctuations and this is why some companies only last for a season. Volatility refers to the amount of uncertainty or risk involved in a particular situation. The snow industry has a high volatility because no one can ever accurately predict snowfall in the summer when most snow removal companies prepare for winter. As a parts distributor we try to forecast early, however even with our wealth of historical sales data and buying trends it’s still incredibly hard to gauge season to season.
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2. Education: Getting a solid stock market education is imperative to being successful. Small caps, big caps, dividends, bulls and bears. You wouldn’t risk thousands of dollars without understanding how you actually make money, and conversely how you can lose money as well. The snow industry is exactly the same way. You can’t plow for someone one year and think, “That was pretty easy I should start my own snow removal company next year”, because next year may not be as snowy as the year before. You need to educate yourself before you make a substantial investment and always be looking to learn more.
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3. Long -Term Strategy: Adopting a long-term strategy and dismissing the "get in, get out and make a killing" mentality is a must for any investor and/ or snow removal professional. This doesn't mean that it's impossible to make money in the first year, but chasing short-term profits can often entice those who are new to the market to over purchase equipment or underbid contracts.
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4. Diversify - Diversification is a technique that reduces risk by allocating investments among various financial instruments, industries and other categories or basically not putting all your eggs in one basket. In the snow industry this means offering winter cleanup or other activates that don’t offer the same profit like snow removal, but will keep you working during slow periods. Diversification aims to maximize return by investing in different areas that would each react differently to the same event. Most investment professionals agree that, although it does not guarantee against loss, diversification is the most important component of reaching long-range financial goals while minimizing risk. For many years we didn’t diversify enough in the products we sell only because to be the leading distributor in snow and ice is a full time job. Fortunately, we have expanded our product offerings which now include truck equipment and accessories and safety lighting and equipment .
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