Originally Posted by 32vld
Keep track of all the money you spend and the hours that you worked. You will then have your hourly costs.
As you record your costs keep them separate with a running total. This way you can see how much money you spent on fuel for your equipment. Then get the hourly costs.
Same with maintenance. Record oil, filters, plugs, line. Then you can get hourly maintenance costs.
Then you need to factor in replacement truck, trailer, mower, hand helds, then new equipment to expand the services that you offer, into your hourly cost.
Truck costs $35,000. Average truck life 10 years. You work 40 hour week, for 35 weeks = 1,400 hours x 10 years. That comes to $2.50 hour truck cost.
Right off the bat you have a $2.50 hr cost.
Then a $10,000 mower that will last 10 years. Another $.72 hr.
License, insurance, advertising, all have to be factored in.
You know that you will have to buy 2 sets of tires for the truck and the trailer before you buy a new truck and trailer then those costs have to be factored into you hourly costs.
Takes time to learn costs. One reason you do not know for sure if you will need two sets of tires or three sets.
Then as I have pointed out costs there will always be other costs that you did not realize. Then costs that you underestimated.
You will get a handle on your costs though it takes time.
What is left over is your net/salary. It becomes a sad day when you thought you were clearing $30 a hour until your real costs are learnt.
er ummm uhhh yea… except I wouldn't count on that 10,000 mower investment to go 10 years. Especially not without significant repair and maintenance cost.
Until you've been in business that long you wont have the records for what those costs are.
So it's far better to recover the cost of the 10,000 mower inside the term of what the loan would have been (doesn't matter if you took a loan or not)
So that's 3-4 years.
divide that 10,000 into the next three years…. that doesn't mean get ri of your machine, just keep recovering at the same rate and that's about when repairs start coming up.
Tax wise an asset is fully depreciated in 7 years…
So if you recover at the same rate for 3 years, and then do it again for the next 4…it will likely cover your repair costs until your machine has been 100% depreciated.
Probably buy new on year 5 or 6, keeping the old one as a back up until year 7.