New tractor business

[icat]

Re: Thinking about rates to charge???

Not at all. Actually there is a small profit that the rental company makes on the tractor, so that would need to be deducted from my numbers. But the generally point of the post was to show how side line businesses would really have a hard time generating a real profit. Now, since we already own the tractor, then the cost of the unit is there even if we don't use it. So the numbers are somewhat off in that respect. The "true" profit is likely a negative one at best. To make a living at this one would need a whole lot of hours to cover the MLB. More than any part time operator could generate on a week end. But don't get me wrong, I'm not saying not to do it. Just reminding everyone what the main costs would be. And yes, taxes, insurance, and the government due would make it very had to run a "legal" side line business. /forums/images/graemlins/frown.gif

 

[Carl_NH]

Re: Thinking about rates to charge???

Keith,

Very well thought out and detailed posting, now how about a spreadsheet? Concurrent with the other replies is that competitive pressure requires a certian price point otherwise you will sit and have $0.

Also your analysis of the burdened rate of $35/hr for equipment is at best considered "sunk cost" by most contractors since they already own the HW, when it's not working it is costing $$, so the thought process is HW is $300 per month for 60 months (example)and actual working time is 30 hrs per month, the cost is $10 per hr plus maintanance of $5 per hr so $15 per hr..

The real cost from my experience is getting from site to site as you indicate $20 to transport. This is the biggest time waste factor when doing small jobs. Many jobs need multiple pieces of gear, Excavator, dozer, then tractor and landscape rake for example. If a small job this means at least 3 hours of move in/out time, while the site time is 10-15 hrs. Customers don't realize this time element, that's why most contractors have a minimum charge. Though from the customer perspective " you were on site 3 hours" why the charge for 4 etc.

And as Rick Jay points out the tax liability is not to be ignored.


Carl

 

[icat]

Re: Thinking about rates to charge???

Carl,

Looks like we posted at the same time! /forums/images/graemlins/grin.gif As I mentioned, my "cost analysis" isn't complete. There are a lot of cost NOT included in the totals. Some of the biggies would be liability and health insurance. Let's say you got hurt while doing a job. Would your insurance cover it? Do you even have insurance? What about liability while working? If you're thinking I'll just skip the insurance and be real careful, let me ask you what your net worth is. How much is your house worth? How much do you have in savings? Want to risk it all for a $20 an hour mowing job? /forums/images/graemlins/frown.gif Ouch!

I'd really rather be the "blue bird of happiness" here, but I've already ran the basic numbers and they just don't work out for me. Tempting though. If I come up with a clever way to make it work I'll let you know! /forums/images/graemlins/cool.gif

 

[Carl_NH]

Re: Thinking about rates to charge???

Keith,

Just waking up in the morning creates a $30K annual overhead for 1 person for insurance, vehicles, phones, services and travel then add the necessary tools to do the job. Then add a salary for this one person, then add an employee.

It's fun..


Carl

 

[Anonymous Poster]

Business decision versus \"just do it\"

Appreciate the discussions. Taking a different approach.

No bank would back you walking in, showing them what you want to do, and loaning you much money to quit your day job and buy a CUT to startup. It just doesn't add up to a smart decision in probably 99% of the time.

BUT, if you already have the equipment, you are gonna pay for it somehow out of your own pocket. And you keep your day job so you have health insurance, life insurance, and retirement, you don't need to cover those costs with the side biz.

Yes, I would like to net $50 an hour on the side, but don't think that's realistic. Yes, I could work some Overtime for that much $$, but I sure would rather have some fun on a tractor right now. (That might change, and if it does, quit the biz and/or sell the CUT.)

Doubt that I can put enough hours on the equipment to wear it out that fast.

To me, it's a way to offset the cost of the hardware. If I can cover the cost of maintenance, insurance (and NO employees--can't afford it, just me) and part or all of the hardware, I can come out ok.

Thanks for the exchange of ideas.
Ron

 

[Anonymous Poster]

Re: Business decision versus \"just do it\"

I agree with you RonR. The whole MLB equation goes out the window when you are not hiring out to make income. You are just trying to offset some of the costs of owning your equipment. I look at it more from the standpoint of sweat equity. Just like if you were wiliing to save dollars by buying used equipment that needed your time to fix up vs something that had already been refurbished.

Yeh, you could just work overtime at your day job if it was offered. But that may not be as satisfying and sometimes you just need to be doing something different.

Bottom line is, based on your approach, you are going to be getting the jobs that people are unwilling or unable to pay the rates of the guys who need to worry about the MLB equation. I'm not so sure an "hourly" rate is the way to price the kind of work you intend on doing unless the hours worked in this manner far exceed the hours you put on the equipment outside of the business. Price the job. How much is it worth to the person hiring you. Example:
If the guy has 15 post holes to put in he can do it himself by renting equipment or he can spend all day digging the holes by hand. Don't forget that the rental charge is from the time the guy signs it out of the rental yard to the time he returns it so his hourly useage is eaten away by his travel time. Plus he is going to need to learn how to use the equipment the first time so a 2 hour post hole job could end up costing the guy a days rental. He also has to reserve equipment in advance and hope the weather is good on the day he schedules. So if you price the job at $60 to $75 the guy is probably going to be happy. Assuming you do the job in 1 to 2 hours you'll be happy.

Price your jobs right (value for the customer), do good work on time, be reponsive to your customers and you will have more work than you want just by word of mouth.

Years ago I rented a mini excavator to put in a 130' long waterline. Thought I could save some money doing it myself. Never used one before so there was some learning time. It took me all day between digging, installing the water line and back filling not to mention the hour at both ends to pick up and return the equipment. I could have had the job done in 4 hours if I had hired someone with a backhoe and it probably would not have cost me any more.

Jeff

 

[patrickg]

Re: Business decision versus \"just do it\"

There are a heck of a lot of small buisnesses that don't last three years because they were doomed to failure when they started. There was never a glimmer of hope that there would ever be a real profit, just wishful thinking distorted by self delusion.

In some instances in the past I have used three year old phone books when looking for certain services. If the outfit stilll has the same phone number after three years, they are way ahead of a lot of little startup outfits and aren't so risky to take a chance on.

Years ago I did the economic analyses that showed me my "hourly wage" for siting at a work bench generating soldering flux fumes wiring up electronic kits. I made less than a dollar an hour.... b u t.... I would have bought the amp, receiver, or whatever anway and I enjoyed doing it myself. Similarly, if you have a tractor anyway, the choices are to let it sit idle or use it. If you use it in a "side buisness" it is not unreasonable to only amortize the increased wear/hours and not the whole enchilada. You will need to change fluids more frequently due to increased hours per month, buy tires more often and so forth. You lower the value of a tractor by increasing the number of operated hours!

THIS IS A PART TIME THINGY!! If you have medical etc with your day job, it is not required to add that and similar as a cost. INSURANCE is another matter! Insurance companies have weasels on retainer to look for reasons why they don't have to pay claims. If you are sued, Y O U are sued, not your insurance co. IF they can find an out, THEY WILL. Do not apply wishful or other sloppy thinking to your analysis of insurance needs. The nicest little old lady in the world might still sue you for everything material you have in the world and get it in todays courts. (Remember the award to the idiot who held the hot coffee in her crotch?) Also, find out if your health plan and or insurance from work are in effect if you are working for $ on a different job. You might not like what you find.

Still, with the exception of insurance, the idea of essentially trading your time for tractor equity or pulling value out of your tractor investment by "giving" away some of your time, is not inherently wrong, bad, or dumb. It is a way of reducing cost of ownership, getting some experience, and possibly paying for some implements you'd like to acquire. Just remember that you will be working for a very low real wage. If you don't really enjoy it, it is likely to NOT be a good thing. In many instances, you could flip burgers or do some other part time job and be dollars ahead but not have the prestige of being an owner operator of a company.

Don't get caught in analysis paralysis but consider all the posts on this topic. Everyone had good thoughts. After figuring out that a part time job would pay me enough to buy store bought audio equipment and test gear faster and better than building kits, I built the kits because there was much more at stake than economics. Surely you will do what you want to do and no amount of nay saying here will stop you. At best, we can raise some issues that you should consider so that you proceed from a position of knowledge.

There are authors that are only published in the "vanity press" and have never broke even on a book. A choice that perhaps you and I might not make, yet if the desire to be a published author is great enough the facts can be contorted to support nearly any decision. It is like that for many would be entrepreneurs, especially the ones that can't be contacted with three year old phone listings.

Pat

 

[swnoel]

Re: Thinking about rates to charge???

Kieth,

That's the difference between staying in business and being unemployed or bankrupt.

Charge out the most you can charge and still be competative...

Quality work with good equipment doesn't come cheap.

 

[Anonymous Poster]

Re: Thinking about rates to charge???

My boss's husband does backhoe work and tractor work. He charges a minimum of $500 no matter what, then he adds in other figures depending on the job. I aksed him why he doesn't go by the hour, he said he doesn't like the dealing with people who think that just because he's not on the site means he's not working, when in reality, he may be picking up or hauling away materials. He just looks at the job and says, it will cost this to get this, to do this etc. (being real short here and not trying to go in too deep). He also doesn't go by the hour most of the time because it's hard to judge how long a job will take. He's done jobs that he thought would take a long time and he finished them ahead of shcedule, therefore reducing his income on that job. /forums/images/graemlins/grin.gif I sort of like his idea. Now, there are some jobs where he's had to go by the hour, which kind, I can't remember. I personally am not going to waste time with small jobs once I start, becuase I've got to pay for expenses, self-employement, taxes, equipment, anything that can go wrong with my stuff, whatever other costs are shoved at me for having and starting my own business etc. If my case backhoe is too big to use, then I won't do it is what I'm thinking. Unless it's a large scale (mini scale/mini-trackhoe work) job.

Blake
WA

 

[Rick Jay]

Re: Business decision versus \"just do it\"

RonR,

Hi, I didn't wish to sound negative on your ideas. Rather, I wholeheartedly encourage entrepreneurship wherever possible. There are just so many "little things" these days that complicate simple ideas.

One thing to keep in mind, though. Anytime you dig on a piece of property, be sure to notify the local "utility locating" service to mark the area for buried gas lines, electric lines, communication lines, etc. Here in Massachusetts, it's "Dig Safe". Not sure if they're national or regional.

My understanding is that if you do not notify them and you damage the property of a utility, you are responsible for any repairs. I've heard these repairs can get pretty pricey.

If they mark the area incorrectly, I believe you are mostly absolved of any liability as long as you exercised proper care.

Good Luck. I hope you can make a go of it. If I were you, my biggest concern would be to have plenty of liability insurance, although I have no idea what number actually equates to "plenty". /forums/images/graemlins/crazy.gif

~Rick