Equipment cost / hourly breakdown...

Discussion in 'Business Operations' started by LwnmwrMan22, Sep 22, 2007.

  1. LwnmwrMan22

    LwnmwrMan22 LawnSite Platinum Member
    Posts: 4,372

    When you have a piece of equipment, do you break it down per hour that you use it?? Or do you break it down per hour / year?

    Say you work roughly 2000 hours / year, whether it's all lawn, lawn and snow, landscaping, whatever.

    Take that it costs you $5,000 for a snow plow, and you plow roughly 250 hours / year, and you keep the plow for 5 years.

    Would you break this down by a hourly rate for the 5 years at 10,000 hours (hours worked for the 5 years) or 1250 hours, for the 5 years that you actually plowed with it??

    Now, say you have a $40,000 truck that you keep for 4 years. Do you then break this down at an 8,000 hourly rate??
     
  2. Stillwater

    Stillwater LawnSite Platinum Member
    Posts: 4,838

    you most likely never have a accurate figure, but it would help to know what are you going to do with the figures.
     
  3. LwnmwrMan22

    LwnmwrMan22 LawnSite Platinum Member
    Posts: 4,372

    I'm just wondering when people bid out a job, whether it be lawn service, bobcat work, snowplowing, do they include ALL equipment they own in that figure, or only equipment that is going to be used for that job??

    Most people know what their overhead is, and that figure COULD be broken down to an hourly figure. OR I suppose some people might break it down to a sq ft price, whichever way......

    Does that figure you're using for a bid, does that include all equipment you're paying for / replacement cost?? Or just the equipment that you're using for that project.

    Does lawn maintenance work get billed out using costs associated with owning a snowplow?? Or do you only charge your snowplowing people the costs associated with owning a snowplow??
     
  4. PlatinumLandCon

    PlatinumLandCon LawnSite Bronze Member
    Posts: 1,315

    I think that's a stretch. I'd charge out equipment that will be used in the bid ONLY. The bills have to be paid at the end of the month BUT if you're having a hard time paying for a piece of equipment, that gives you an idea of the usage time it gets. It could make you decide to eliminate that piece of equipment and go back to renting.
     
  5. LwnmwrMan22

    LwnmwrMan22 LawnSite Platinum Member
    Posts: 4,372

    Basically it boils down to this.

    I work about 1500 hours / year doing lawn maintenance, about 300 hours / year doing snow removal.

    If you were to break down the snowplow cost ($5,000) over 5 years at 300 hours / year, (1500 hours) then your cost per hour is roughly $3+something / hour.

    If you were to break down that $5,000 cost over 5 years using the total 1800 hours that I work, now it breaks down to less than $0.70 / hour. I still have the piece of equipment, it's still sitting there.

    Now, say you have a piece of equipment that's $5,500 (Magnum ride on spreader) but you only use it 100 hours / year. I suppose that means that I break it down to a cost of $11 / hour for the 5 years.
     
  6. topsites

    topsites LawnSite Fanatic
    Posts: 21,653

    No, I first break mine down to annual cost, so:

    How long it lasts + purchase replacement price + maintenance = total cost / years = annual cost.
    Then I can also do total cost / how many times I used it = per use cost.

    I reckon I could break it down further or by the hours, but I don't, I've always used a per use or per lawn formula (vs. per hours).
    Since I don't have hour meters, but I do keep track on the number of jobs, then I let it average itself out.
     
  7. Stillwater

    Stillwater LawnSite Platinum Member
    Posts: 4,838

    I went about this is a hugely different way than everyone else. This is what I did, I thought long and hard of what I want to get out of life,what kind of lifestyle do I want, home, car, truck and what I want to do in my free time. THEN I identified what I "needed" to reach those goals What kind of income do I need. My business plan was written as a road map to those goals. Life is based on time their is only so much usable time in a day so I charge accordingly. I do not pay for anything my customers pay for it by charging for it. I may put up the funds at first but it comes back in droves. Equipment with a replacement cost of less than 20,000 is costed out for either a 12 or 6 month cycle. exhample, My tiny baby little Sthil Arborist chain saw cost between 5 and 6 hundred. so to have customers pay for it in less than 6 months I charge 12.00 per. hour for the saw when the saw is running and this is added to the labor cost. But never itemized. No one can tell you what to charge unless they know your goals, needs and costs, only you can decide what you need to charge. To find out what you need you first need to identify what you want out of life and what will it take to get their.
     
  8. Edgewater

    Edgewater LawnSite Senior Member
    Posts: 457

    for lawn maintenance, I look at it this way.

    EX 10 hrs per day, 165 days per year. I then take a per hour (Or per day) rate for each machine. I then take each individual machine and add them up.

    Once I have included the truck, trailer, ZTR, trimmers, blowers and employee wages, I then know what it cost to operate for every hour of a ten hour day. This includes what is sitting on the trailer. If a machine lasts beyond its expected life, that is a bonus.

    Then add over head and profit and you have the rate your need to charge.
     

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