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What does your plow truck really cost you?

Discussion in 'Commercial Snow Removal' started by grandview, Nov 4, 2011.

  1. grandview

    grandview PlowSite Fanatic
    Messages: 14,609

    There's been a little discussion lately about costs of running plow trucks doesn't matter new or old. For myself I break the year down to 2 seasons,snow and landscape.Guys feel that they have to charge so much per hour to cover their truck cost ,which you should do.But sometimes you need to break it down even more as to the cost of that truck. In my case I plow around 25-35 times per season.But some guys might only plow 5-10 times per season or over 35 times. So lets work with if you have a payment theory. Lets say for ex. your payment is 500.00 a month.Your season runs about 5 months,so your cost of the truck is 2500.00 for the plow season .In my case 2500/25 =100.00 each time I go out ,and if I'm out for 10 hrs my hourly cost is 10.00 per hour for the truck payment.So guys who go out less their cost is more even if we all had the same payment.Of course you add your other costs .So I guess what I'm trying to get at is a guy can make the same amount of money at 40 an hr as the guy charging 100 an hr. So are they lowballers or price gougers? Yes ,no?:confused:
     
  2. bradlewislawnca

    bradlewislawnca Member
    Messages: 59

    Ohh boy. You assume with that math that payment is all you have. I like the IRS model of .58 per mile. That being said it doesn't work plowing. But payments are for 6 years? The truck has salvage value. You should be taking the salvage value after the amount depreciated is taken into account. That being said my 2500 costs $35,000 I think. I hope it'll last 150,000 mile or 10 years and I hope there are no major repairs. So minimally I am looking at 15000 miles a year and plowing season is like at most 3000 miles. That would mean it's roughly 1600 to run my truck plowing... The IRS number is trying to calculate insurance depreciation and maintenance. But then again the only costs for a landscaper or other contractor that should matter is marginal costs. Because insurance should be on your truck plowing or not.

    From that point of view you should look at gas costs and maintenance. Aaa has maintenance costs at .20 a mile and I get at best 12 miles a gallon so .30 a mile?

    http://www.edmunds.com/chevrolet/silverado-2500hd/2011/tco.html?style=101305489

    There is the Cost to really operate my truck. I guess it is $14 for 15kmi or .90 per mile in y1. At 3000 plowing that puts me at $2700. That number includes $5k for insurance and taxes which should not be considered in a marginal point of view. So I would use $9k for 15k. That would mean that per mile I am .60 per mile. That being said it'll cost me$1800 to plow with my truck. $1000 for liability insurance on all of my trucks and then labor. Not bad considering I do a lot more per truck than that...
     
  3. downtoearthnh

    downtoearthnh Senior Member
    Messages: 121

    And while your looking at costs to plow, consider the cost of the plow itself and its maintenance, which might add another 10% on to the total costs.
     
  4. BORIS

    BORIS Senior Member
    Messages: 170

    If you pay cash for all of it you will be farther ahead in the end
     
  5. bradlewislawnca

    bradlewislawnca Member
    Messages: 59

    Boris,

    Wrong. In all biz decisions you have to consider wacc( weighted average cost of capital). If you don't and you invest into the biz you fail to gain a return on investment when you don't consider how much you should get in return for the money you invest. That being said, a $5000 investment into a plow should either return you x dollars extra on top of the $5k over the life of the plow because you gave up the option to put that money in the stock market or the (or sometimes nothing). Just because you pay cash does not make your costs lower. There is always opportunity cost.
     
  6. grandview

    grandview PlowSite Fanatic
    Messages: 14,609

    I know what you saying, I'm just using that as an ex. As said,I use mine for landscaping to ,so the cost is spread over the year. Is your GL only for plowing or the whole year?
     
    Last edited: Nov 4, 2011
  7. bradlewislawnca

    bradlewislawnca Member
    Messages: 59

    Plowing endorsement. Assuming my level. Whole policy is much higher.
     
  8. bradlewislawnca

    bradlewislawnca Member
    Messages: 59

    I realize I might have gone on a tangent. I like finance. ;)
     
  9. grandview

    grandview PlowSite Fanatic
    Messages: 14,609

    In my nustshell I was just saying some guys want to put all their expenses in a short period of time .And if they are a per push it makes their rate even higher.Some forget they use it as a daily driver and dump personal time into also.
     
  10. JCByrd24

    JCByrd24 Senior Member
    from Maine
    Messages: 232

    You are correct that a guy can make the same amount of money charging $40/hr vs $100 and no they are not all low ballers and price gougers. If they are legitimately insured for the service they're providing, and the clients are comfortable with their service and confident in their ability to provide that service they are fine. The thing is that no one really determines what they charge at the end of the day, the market does. Someone may so I won't work for less than x...but ultimately that could leave them not working which is usually worse than working for a little bit less than x. So the challenge is to keep your operating expenses down so that you can get paid what the market will bear and still make money. As an extreme case, consider two guys plowing 10 residential drives per storm. The guy driving a brand new king ranch diesel with brand new vee plow cannot charge what he needs to cover the cost of his truck, because he won't get any business. The guy driving a 5 year old truck with straight blade will out bid him everytime. Or, maybe they both get 10 drives, and get paid $50 per drive, the guy with the older truck is the only one making money. Good business is balancing expenses with income, and if you make bad decisions by buying equipment that is too expensive, you will not be successful. On the flip side, if you don't invest properly in good enough equipment and are breaking down or leaving the customer unsatisfied, you will also not be successful.
     
  11. BORIS

    BORIS Senior Member
    Messages: 170

    If you pay $5000 cash for a plow and it does not snow or you get a loan for the $5000 and pay for the plow and it does not snow there is a difference in my book. I can assure you that the cash deal will be a better investment. Not that i know anything but i do know that it would be hard to make a payment with no cash flow if snow is all you depend on,
     
  12. Harold Finch

    Harold Finch Member
    Messages: 88

    You missed his point Borris. Even with your example- Say it didnt snow and you financed the plow for 5k. You would still have the 5k cash in your bank-make the payments with that until it does snow. Using up your "cash" is often a bad idea.
     
  13. BORIS

    BORIS Senior Member
    Messages: 170

    What about the interest that you paid to the bank for the privilege to use there money? I think that if you have the cash for something in the bank that you need why would pay the bank money. It just seems stupid to me. I think you are maby missing my point but that is why we all run our operations differently. JCByrd24 is very correct and is kind of making my point.
     
  14. alldayrj

    alldayrj PlowSite.com Addict
    Messages: 1,097

    because that 5k could also be earning you interest in the bank if you dont spend it up front. microeconomics 101 which sometimes doesnt work in the real world ex: today with terrible interest rates.

    also, you can often get a period without interest in todays economy, which is when its helpful to still have tha cash in the bank when a nice sander pops up on craigslist for 1500 cash
     
  15. THEGOLDPRO

    THEGOLDPRO PlowSite Veteran
    Messages: 3,136

    Ill have to ask my mom.
     
  16. buildinon

    buildinon Senior Member
    Messages: 583

    In my experience, as I use some trucks for just plowing and some for year round construction / plowing I break it down in a manner like the following.

    cost of unit per hour
    cost to replace per hour
    insurance per hour
    cost of maintainence per hour
    cost of fuel per hour

    There are a few smaller things I add in, but that is the basics. Now there are 2080 working hours per year when breaking it down 40 hr per week @ 52 weeks. The year round vehicles I spread out their cost over that. The snow only units I break down by my avg yearly hours used to predict for the next season. As well I ushually add a percentage due to rising costs. It varies year to year depending.
    When I get paid for the work I do on either year round work or seasonal, I put the money into diffrent accts, that are designated for their own purposes.

    Truck Replacement / Maintainence Acct
    Insurance Acct
    Fuel (I have a fuel acct because I use a fleet vehicle gas card and all records are maintained that way)
    Payroll

    Now I know this won't work for everyone, as some just don't have the liquid funds to be able to be able to place money and leave it in one place until needed. But I made it work for me. By doing this when the time comes I ushually pay cash for the new equipment, wheter new or used, and am able to get a better deal and don't have to worry about payments. As well with having the money there, I don't have to scramble around worrying about how I am going to pay for something when an unexpected cost comes up.
     
  17. KBTConst

    KBTConst Senior Member
    Messages: 426

    Another great thread from GV!
     
  18. second income

    second income Member
    Messages: 82

    In a nut shell you need to be aware of your costs so you aren,t getting beat but you should never be charging much less than the market rate in your service area. We are business to make PROFITS for the rainy days not merely exist
     
  19. second income

    second income Member
    Messages: 82

    Sorry for the typos in the last post my fingers are too big for this damn Blackberry
     
  20. second income

    second income Member
    Messages: 82

    In a nut shell you need to be aware of your costs so you aren,t getting beat but you should never be charging much less than the market rate in your service area. We are business to make PROFITS for the rainy days not merely exist