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Starting a business/independent contractor costs

Discussion in 'Business Fundamentals' started by Firenze, Feb 28, 2005.

  1. Firenze

    Firenze Junior Member
    from MA
    Messages: 2

    Hey guys (and gals),

    I am in the midst of considering getting into the plowing/salting business starting in the 2005/06 season. I am in need of some advice on first steps....

    Here's what I am thinking.....

    I want to purchase a 6-wheel dump truck to house a 5yd. salter calibrated for state requirements as well as a front plow and two wings. My best friend has been plowing for 21-years and thinks the plow (with 2 wings) along with a salter is worth the financial investment for me as there is more opportunity to make serious money and few independent contractors have this type of rig - hence the demand by cities and state DPW's.

    My preliminary business plan is to start out with the above truck for one season until I get established. I'd like to eventually branch out and buy a few basic 4x4 pickups with front plows to use for small business lots, residential drives, etc... Hire a few competent guys at $20 per hour under the table - the usual routine.

    What I'd like some advice about is the actual start up costs of insurance, advertising, maintenance, liability insurance, etc....

    What do you all consider a basic amount I should have in reserve to begin this type of business? I will pay cash for the big truck and go from there... The idea of adding a few pick-ups with plows would start a year or more later. I am just trying to get a basic understanding of what I should expect to lay out in costs besides the truck(s) themselves.

    Besides great customer service, I am really impressed with companies that go the extra step in having matching trucks along with the marketing/advertising issues like matching t-shirts, jackets, custom business cards, etc.... How many of you have gone this extra step? Have you noticed an increase in business or a dedicated client list due in part to how you present yourself as a business.... ?

    Thanks in advance. I know I am asking general questions, but do greatly appreciate everyone's opinions and experiences at starting out.
     
    Last edited: Feb 28, 2005
  2. Mdirrigation

    Mdirrigation Senior Member
    Messages: 408


    There is way more too plowing than just buying a big truck .
     
  3. karl klein

    karl klein Senior Member
    Messages: 557

    any large commercial customer or management company will require proof of workers comp insurance so throw the under the table idea out the window.
     
  4. Mick

    Mick PlowSite.com Veteran
    from Maine
    Messages: 5,546

    I agree with Karl and Mdirrigation. The "under the table" was the biggest red flag. As far as money to start out with, I'd suggest about $5,000 (apparently that is realistic for you). That's after you buy the truck, plow, other equipment, salt, insurance. That's whether you buy new or used. New - you'll still need to make payments, buy fuel etc without any income for perhaps several months, depending on who you contract with. Used - count on initial cost of maintentance & repairs, again potentially without income for several months.

    Cash flow problems is the biggest downfall of many startup companies.
     
  5. johntwist

    johntwist Senior Member
    Messages: 415

    2000 Ram 4x4 $17,000.00 +/-
    New Boss 8' Straight Blade 4,200.00
    Amber Mini Dual Strobe Bar 220.00
    Tube sand for ballast 50.00
    Magnetic Signs for truck 140.00
    Business cards 16.00
    Tax prep software 79.00
    Pre-season tranny service 75.00
    Oil change 19.00
    Rain X products 20.00
    Fire extinguisher 20.00
    Commercial insurance 1,300.00
    Commercial snow removal plates 150.00
    Newspaper ad 100.00
    Replacement strobe bulb 30.00
    Replacement plow kick stand 20.00
    Driveway markers 30.00
    First aid kit 15.00
    Vehicle Inspection Sticker 39.00
    New Windshield wipers 30.00

    Are you beginning to see the picture here? Now I'm just ONE guy who's starting out doing driveways, I haven't even got a lot yet and I can't apply to plow for the State because my truck's a 3/4 ton and they have a 1 ton minimum. I also have not included fuel costs or counted the damage I did to my bumper and cargo box in the big blizzard last month.

    But, it doesn't take Alan Greenspan to figure out I'm going to be in the red for at least another 2 years unless I get some real lucky breaks along with a few more snowy winters in a row, neither which is likely.

    Welcome to the Snow Removal Business!!!! payup
     
  6. Firenze

    Firenze Junior Member
    from MA
    Messages: 2

    Thanks guys.... I appreciate your input.

    To clear one issue up now... I am NOT buying a NEW dump for $100K - far from it..... And no, I do not have THAT kind of cash to play with...

    After the cost of the actual dump truck loaded with all the plows and salter, I will have about $10K left over to use as start-up money. The other 4x4's with plows is a 'down-the-road' plan that is not really thought out at the moment. Just threw it out there as it is something I may well consider down the road.

    For now, I am thinking of doing this as a one-man job and see where things can go from there. The reason for the post is more of an exploratory issue.

    Thanks again guys for insight and the opinions!
     
  7. SnoFarmer

    SnoFarmer PlowSite Fanatic
    from N,E. MN
    Messages: 8,518

    tough topic, so Manny variables, do you know someone who is going to give you an insider deal? not Manny make it starting out big, most good snow removal business start out small, but having said that small for one could be big for some one else.
    for your taxes you only have to show a profit once every 5yr. If your in the red, you spend the money on more equipment and depreciate it on your taxes so you show a loss on your taxes. talk to an CPA or your tax person for some ideas on how to get your business running the way you want it to money & tax wise.
     
  8. crashz

    crashz Senior Member
    Messages: 256

    Hi Firenze!

    Coming from a fellow Mass resident here, and the fact that my father and I have done this, there are even more variables not mentioned above:

    - The State requires min insurance including GL
    - The State will only hire you if your truck has a digital spreader control that will monitor truck speed, spread feed rate, and tonnage spread. I think you can rent them or buy them from your state garage. We actually quit working for the state for this reason. The equipment was expensive to buy nad even worse to rent. And paying the state each month while not getting paid (see below) for work done is not very attractive.
    - Currently there is a war going on between the state and local contractors over the use of GPS tracking in the trucks.
    - Payment is guarranted but very slow. We've waited over 18 months to get paid at one point.
    - The truck you speak of is at least a 33 GVW truck. You will need a CDL and most likely air brake endorments.
    - I assume you have a place to park the truck. By law in needs to be parked in a commercial zone. Depends on the area on how strictly that is enforced.
    - All it takes is a well placed catch basin (this happened to us) to total the truck. Our driver caught the edge of the plow on a catch basin curbstone, wrecking the plow, twisting the frame of the truck, and hospitalizing the driver. Would you have a back up? Your contract would require you to continue service.
    - I would forget buying a bunch of 4x4s. There are so many guys with plows around here, its easier to hire them to plow your accounts. The you don't have to have a big payroll, insurance, fuel, maintence costs. Just hire them as subs.

    With all that said, you can make some good money. Its just a better money maker for big companies that can absorb long periods of non-payment.
     
    Last edited: Mar 2, 2005