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Cost Analysis

Discussion in 'Business Fundamentals' started by Rampart Ranger, Dec 3, 2006.

  1. Rampart Ranger

    Rampart Ranger Senior Member
    Messages: 165

    I keep seeing folks lowballing bids, and others requesting subs for less than I think a fella can make a living at ($65-75 per hr for truck, plow, operator).

    Subs - IF you can actually work for these rates...
    Contractors - IF you can actually run your own equipment and pay your own people at these rates...

    Please post a cost analysis justifying this!
     
  2. 06 F-150 4x4

    06 F-150 4x4 Junior Member
    Messages: 2

    I hate to tell you this but around our area in mount pleasant michigan all the plowing contractors charge around $70/hour/operator/truck and still we seem to make money. probably not as much as you but in our area there are many people competeing against one another for plow jobs.
     
  3. carcrz

    carcrz Senior Member
    Messages: 295

    $75 an hour as owner/operator. I am making good money and definitely a profit after the truck payment, but like anything else I always end up wanting more payup
     
  4. Rampart Ranger

    Rampart Ranger Senior Member
    Messages: 165

    That's fine, guys. If you can justify those rates...

    I still haven't seen the proof - NUMBERS - including all costs.

    To work for less than cost... :nono:
     
  5. hickslawns

    hickslawns Senior Member
    Messages: 617

    Costs are what you make them. How do you know what everybody else's costs are? No offense, but I would never plow in your 02 Stroke with an 8.5 MVP plow. You probably get more snow than we do also. I have one 03 Chevy (truck payment $120/month) with an 8.5 Meyer straight blade (paid for) and the rest of my trucks are 20+ years old and paid cash for them. All 7 plows and 4 spreaders paid for in cash. 2001 Honda Fourman with plow paid for. Snow blowers paid for. Liquid de-icing units paid for as we built them. Keep in mind we do maintain them all well, but our costs are much cheaper. Just bought a (rebuilt) brake caliper for one truck today for $15. How much is the brake caliper on your truck? Buy a new truck at $30k+, with new blade at $3k-6k and pay $3/gal gas, insurance, payroll, etc. and I don't think you could make it on $65/hour in our area. Maybe in areas with major snow, but not with an average of only 5 snows over 2" in our area. Minimal truck payments for me, dependable equipment, lower repair costs, most repairs done in house, and good preventative maintenance is how we do it. As far as the new trucks and blades plowing for $50-60/hr I do agree with you. When you build your own liquid de-icers, fabricate your own skidloader plows, and make your own repairs it helps. Basically what I am saying is dependent upon other people's locations, amounts of snow, range of accounts, capital outlay, and other related expenses being known by you, I do not believe you can accurately make a blanket statement judging what people on here charge. By the way, a lot of guys like to expand on the truth. Some of them may make less, some may make more, many do not honestly know what their expenses are or what a profit and loss statement is. Many others do, and do well at the hourly rates they mention. It is up to you to wade thru the quagmire of internet opinions.
     
    Last edited: Dec 7, 2006
  6. rgrimes945

    rgrimes945 Senior Member
    Messages: 134

    At Last

    Hi There,
    Someone that is looking at plowing thru my eyes! I have done the same thing using older Chevy GMC trucks w/ Fisher plows and Henderson salters we only use them a very few times a year but when it snows I become VERY popular in the area I'm in. I'd be interested in how you did your brine solution machie, thats my next years project. A few pics and maybe some pricing for that aspect of the business. Hicks I commend you on the approach you have taken to cut costs.

    Ray Grimes
     
  7. Rampart Ranger

    Rampart Ranger Senior Member
    Messages: 165

    Hicks,

    It is not my intention to offend, or to judge.

    You are correct in that every operation will have varying costs.

    I am simply trying to point out that ALL equipment (paid off or not) must at some point be repaired/replaced. Long term cost analysis will provide for not only repair, but replacement - plus ALL other costs such as fuel, maintenance, labor (GOOD help is hard to keep on poor wages), materials, insurance, advertising, taxes, etc.

    If pricing does not cover all of this, and provide for a reasonable profit - one is pursuing a hobby, not operating a business. Or perhaps one is using snow removal as a "loss leader" or a tax write off for one's primary business.

    As I said, no offense intended. I just wonder how some folks manage (maybe they are just better managers than I).
     
  8. framer1901

    framer1901 Senior Member
    Messages: 812

    This hourly rate bugs the crap outa me. Our area is low as compared to others and we'd always like to make more. But just say:

    25% of a 30,000 truck over 5 years = 1500
    100% of 4,000 plow over 5 years = 800
    maintainence = 750
    Fuel = this would vary by number of events
    Insurance = 25% of the yearly policy = 250
    I'm sure I missed other things

    What it comes down to is the number of EVENTS divided by costs.

    The thing is guys that plow ten times per year are gonna charge more than guys that plow 20 times per year, not twice as much, but definetly more.
     
  9. LLM Ann Arbor

    LLM Ann Arbor Senior Member
    Messages: 876

    $60.00 an hour x 9 hours of work each event for a 2 inch snowfall = 540
    $ 300 of my own work.
    Thats a total of $840 per basic event for 10 hours work.

    Thats $84 dollars an hour

    Insurance on my truck costs me 3 dollars a day or 12 cents an hour

    My truck burns 3 gallons per hour or less when plowing...lets call it $10 an hour.

    Truck pmt $50.00 a week,,,without getting in to amortizing

    Insurance for the business is 100 a month or 23 dollars a week or 3.33 per day.

    If it snowed once a week Id make 840 -30(fuel) - 23 (bus ins) - 23(truck ins) - 50 (truck pmt) = $714 for 10 hours work which is obviously 71 dollars an hour.

    How is that not profitable?

    If it snowed three times a week I wouldnt have to work in the summer.

    If it doesn't snow I go broke.


    Let it Snow.
     
    Last edited: Dec 8, 2006
  10. LLM Ann Arbor

    LLM Ann Arbor Senior Member
    Messages: 876

    And remember guys....theres 4.3 weeks in a month.

    ;)
     
  11. bigjeeping

    bigjeeping Senior Member
    Messages: 675

    I think it's fair to say we all have different pricing strategies and what may work for one person may not work another... but one thing is for sure: we are all getting paid pretty good for sitting in a toasty truck and playing in the snow!
     
  12. jcesar

    jcesar Senior Member
    from Mi
    Messages: 492

    Hey 06 f150....
    Where in Mt pleasant are you getting 70 per hour? I want a job:nod: I am gonna have to argue that point!!
    That is why I dont plow in Mt Pleasant, which is 20 min from me
     
  13. Snowman19

    Snowman19 Senior Member
    Messages: 323

    Around here subs will jump at $50-75 and hour.
     
  14. Rampart Ranger

    Rampart Ranger Senior Member
    Messages: 165

    Gents here is the point!

    While costs WILL VARY from place to place, the idea is the same. One MUST RECOVER COST PLUS MAKE A REASONABLE PROFIT TO STAY IN BUSINESS!

    Those who do not calculate and charge for ALL costs + profit are contributing to running us all out of business. For your own sake, and mine, CHARGE THE ACTUAL COST OF DOING BUSINESS + 10-20% PROFIT.

    Else we all go broke!:(
     
  15. LLM Ann Arbor

    LLM Ann Arbor Senior Member
    Messages: 876


    You need a new calculator. If I marked up 10 to 20% Id be subbing for 15 dollars an hour and doing resis for lunch money.
     
  16. Runner

    Runner Senior Member
    Messages: 957

    One thing you have to figure though, is that you are paying insurance on your truck on not just those weeks you are plowing,...so that all has to be averaged in. Also, your business insurance,...is the same thing. Then, there is your truck payment. The fuel,...all you would figure their, is the amount over and above what you would normally use...in otherf words, just what you use while plowing. So, if you are going to break those down into a single weeks portion, you also have to take your plow events, total those, and divide THOSE by 52. THIS will give you a better idea of your costs, gross, and net.
     
  17. LLM Ann Arbor

    LLM Ann Arbor Senior Member
    Messages: 876

    Yeah but I also do full service lawn care as well.

    So....the trucks theoretically in use all year, except that it wont snow to save my butt.
     
  18. bterry

    bterry Senior Member
    Messages: 183

    The biggest thing that some people here are missing, yet LLM and others have eluded to, is that roughly 95% (or more) of the people that plow snow are doing it with thier personal vehicle. They still need to make the truck, personal vehicle insurance, and maintenance payments anyway.

    So the only things that should be included are those directly related to work plowing. IMO those things would be gas, alittle extra maintenance, and cost of the plow:
    Plow - $4000/5yrs/10 storms/10hrs per storm = $8/hr
    Maintenance = $700/yr/10 storms/10 hrs per storm = $7/hr
    Gas = $10/hr (LLM's number)

    Total = $25/hr
    Sub at even $50/hr
    Profit = $25/hr, I know a few people that would be pretty happy with this.

    For those (like myself) who's business buys the vehicles - it's an entirely different story.
     
  19. LLM Ann Arbor

    LLM Ann Arbor Senior Member
    Messages: 876

    Honestly I dont figure my vehicle costs. Thats the first time I really have. Fire away. But i dont go by the add up your vehicle costs and add a certain percentage on top.

    I charge basic industry average standard prices, and with that I know the profit will be great if the work is done and there. Right now my profit is lower than Id like because the work isn't there and I know Im getting beat up without actually doing the math, and in summer its lower than I want because as a 1 year old company (Sole Prop) my plate isn't full.


    But if you figure costs and add a specific percentage it better be like 1000 percent, or like I said.....youll be doing snow for lunch money. Lawns basically the same although there are additional expenses in Lawn....its actually more expensive to do, and the average basic industry standard is lower. I do figure my Fertilizing/Weed control prices a little closer using my price and a certain percentage but really....again. I charge what the market will bare and know the profits there.

    Thats why theres a lot here that do snow only and dont mess with time consuming labor intensive equipment prohibitive lawn care.(mowing)

    But without doing math. I know that Ill make good money once the plate is full and the snow flies.
     
    Last edited: Dec 9, 2006
  20. bigjeeping

    bigjeeping Senior Member
    Messages: 675

    When cornered: stick to your guns and calculate rates based on $300/hour.

    5 minutes of plowing (e.g. 1 drive) = $25