Mowing How to figure Rate Per Hour

[Rhino172]

I'm new to this forum but was wanting to know if someone that is running a legitimate bush hogging business could explain to me how they come up with an hourly rate to cover expenses, their hourly wage, taxes, insurance, depreciation in equipment, etc. I just started doing this on the side and I want to be an honest person but I also want to make money. Someone's help would be greatly appreciated. My equipment is a New Holland TC45 FWD, rhino172 6ft cutter, dodge ram 2500 diesel, 18ft bumper pull 12000# GVWR.

Thanks

 

[smstonypoint]

Ag.economics departments at the various land-grants provide information regarding estimation of the costs of owning and operating farm machinery. Here are two examples.

Estimating Farm Machinery Costs | Ag Decision Maker

http://faculty.apec.umn.edu/wlazarus/documents/machdata.pdf

Note that liability insurance for commercial purposes would need to be added.

The IRS standard mileage rate for business (56 cents per mile in 2014) is an estimate of the average total costs (ownership + operating, excluding labor) for autos, vans, and light trucks. You could use that value as a starting point in estimating your transport costs.

Steve

 

[Rhino172]

Steve
Thanks for the info. I came up with $50 an hour for the tractor and my wage. Have not included cutter yet or transportation fee. Next question if you were to hire someone how would that be figured in so that you make your wage plus can pay them say $12.00 an hour, without over pricing yourself.

Thanks again

 

[LD1]

This will be long, but it is a long and complex issue:

First, you need to figure all maintenance on the tractor. Service intervals, etc. And my numbers are assuming no major breakdowns for 6000hrs.

My engine oil and filter get changed ever 100hrs, and cost $50. So thats 0.50/hr

Hydraulics get done every 200hrs, and cost $100, so thats 0.50/hr

Air filter and fuel filters, misc grease, gear oil for bushhog, ...another 0.50/hr

Tires. Figure fronts are good for 600hrs and cost $400 to replace...0.67/hr
Rears are good for 1200 and are $600 to replace...........................0.50/hr

Bushhog maintenace, blades, bolts, etc. Maybe $100 worth every 200hrs....0.50/hr

Fuel. Mine sips 1gal/hr. So $4/gal....................................................$4/hr.

Now the tractor. Figuring at 6000hrs, my $20000 equip will likely be bout worthless. At least have to assume that in the business world, because at 6000hrs, cost of repairs may exceed the value, and would be looking for full replacement anyway. So....just owning the tractor and using it....3.33/hr

Add them all up, and we are at $10.50/hr just for running the equipment. So its clear the guys that are charging $25/hr or whatever beer money, arent making squat.

Then you have to figure truck expense. The IRS # is pretty close, but a little low IMO for a diesel, and a trailer. To include towing and the trailer, you are closer to $1 per mile for expense. plus your time. So if you average 45mph towing to and from the job, and pay yourself $20/hr to drive, you would need $65/hr just to drive there and back.

Your cost per hour for business insurance is going to vary. The insurance is a fixed cost. But the more hours you work, the lower that number becomes. If your insurance is $1000/year it aint gonna matter weather you work 100hours or 1000hrs, your insurance is still going to be $1000. but cost per hour goes from $10/hr to $1 per hour.

I'll continue in another post...

 

[mikehaugen]

I would say take what your normal wage would be and subtract employee cost (true cost, not what you pay hpurly) for your new wage... charge the same. I don't think it's reasonable to expect the same personal wage having someone else do the work as if you did the work.

Of course you would also have to figure workmans comp expenses and/or any benefits you decide to offer. I would assume your insurance would also increase if you hired on. I have heard figures anywhere from 50-100% more than payroll for other expenses.

 

[LD1]

Continued....

At the end of the day, it is nice to know a ballpark of what you need to make per hour. But I dont bid the job like that. I dont bid by the acre either. Just give a flat estimate and stick to it.

My target is $50-$60 per hour. And that isnt job time. That is from the time I leave my house till the time I return. I would expect yours to be close. And that works out to paying myself 25-30 per hour.

If you want to hire an employee, you really cannot raise the rate to the customer. cause they dont care weather its you out there mowing or an employee. Just because you send an employee shouldnt cost them more. It should make YOU profit less. Cause the idea behind an employee is to free you up to do OTHER things to make business grow. So instead of you making $25-30/hr to mow, you make $10-15 for doing nothing. With 10 employes, you could in theory make 100-150/hr for doing nothing.....

Back to the job bidding. IF you tell someone $60/hr, and that is from the time I leave my house till the time I return, I doubt you will get many customers. People just have a way of flipping out when they hear hourly rates that are double and triple what their "day job" is.

I dont bid by the acre either, cause they are all different. 1 acre of overgrown lawn around a forcelosed house, with septic covers, well, trees, hidden bicycles, etc takes far longer per acre to mow than a 10 acre open field with knee-waste high weeds.

After awhile, you will get good about assesing a job, acreage, and know how long it is going to take you. Take that # times your $50-60/hr, and give them a flat rate. I just did one yesterday. 6 acres+/-, 45 minute drive. I knew it would take 2.5-3 hours or so to mow. So 2.5-3 hrs + 1.5hrs travel = 4 or 4.5hrs. I charged a flat $250.

Mowing 6 acres for $250 sounds a whole lot better than telling someone you have to pay me $60 per hour for mowing AND travel.....

 

[LD1]

One more note. Not sure what you expect to be mowing, but I would be looking to get a heavier duty cutter.

What you have will be fine if you only plan on mowing open pastures that are maintained yearly. But there will be many jobs with saplings, briar thickets, etc that is really more than your cutter is made to do on a daily basis.

 

[mikehaugen]

Now the tractor. Figuring at 6000hrs, my $20000 equip will likely be bout worthless. At least have to assume that in the business world, because at 6000hrs, cost of repairs may exceed the value, and would be looking for full replacement anyway. So....just owning the tractor and using it....3.33/hr

Don't forget that what ld1 posted only pays for what you already have. If you want to get and stay out of debt and be able to grow, you should double this figure so you have money to buy again when this one wears out.

Btw ld1... do you consider 6000 a reasonable life expectancy for a cut without major repair? My estimate was 5000 but was only an estimate. I know you've been doing this a while and would trust trust your guess more than minen

 

[LD1]

The 6000 is strictly just a guess. And I figure its pretty close. I do have a kubota which is known for good long lasting engines, but they are all different, and how they are maintained and used is all different. So its a big unknown until something actually happens

But in the grand scheme of things, even if it only goes 4000hrs, it only makes a $1.67/hr difference. And when targeting $50-$60/hr for business, theres no point in splitting hairs.

So figuring the maintenance, tires, etc at the intervals I mentioned, with fuel and all, $10-$11/hr for operating a tractor (and that includes the 20k cost) at the end of 6000 hours, I have 60,000-66,000 invested.

But charging 50-60/hr, the gross will be 300,000-360,000.

I guess what I am saying, is that the equipment and fuel for the equipment is a relatively small cost in this business with this sized equipment. Tow vehicles, trailers, tires, insurance and maintenance for them....that is a bigger expense than the tractor that actually gets the job done.

 

[smstonypoint]

Steve
Thanks for the info. I came up with $50 an hour for the tractor and my wage. Have not included cutter yet or transportation fee. Next question if you were to hire someone how would that be figured in so that you make your wage plus can pay them say $12.00 an hour, without over pricing yourself.

Thanks again

If you were to hire someone, you would include their wage + associated employer costs (FICA, worker compensation insurance, etc.) in your operating costs. The price you charge above your total costs would then be the return to your management and the risks you have assumed.

Steve