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2nd truck or not?

Discussion in 'Commercial Snow Removal' started by Italiano67, Feb 7, 2006.

  1. Italiano67

    Italiano67 Senior Member
    Messages: 645

    I am thinking about adding a pickup next year. Right now I have a 2500 HD that I plow with and usually have a shoveler with. I also have a Vbox salter and I salt 3/4 of my accounts myself. I have 3 other reliable subs with pickups but I really have to fly to finish my jobs and salt theirs also in a timely manner. Right now we have 32 accounts with an average plow time of 7-8 hours. I have another stainless Vbox for a pickup and I just am torn on whether I should buy another truck to help out. I need to make money with the new one but it will sit the rest of the year. I also am not one to buy a old truck to just make it thru because I cant afford it to misfire in a storm.I just dont know if it would be worth it. Maybe some of you have been in this position before. By the way I sub for a bigger lawn care co. that does not have a winter crew close by. I think we could add some more jobs to our list for the new truck. Does another truck add up to more money if not driving it yourself?
  2. plowman350

    plowman350 Senior Member
    Messages: 125

    Same boat

    I'm in the same boat right now, and here is what I have come up with:

    Buying a second truck would be mostly for winter work. There is very little (almost 0) need for a second truck in the summer. Which means this is basically a dedicated plow truck. Because I would be using a secod truck only in the winter, it doesn't make sense to go buy a newer truck and spend $20-30k for a vehicle which gets used 10 times per year.

    So, that leads me to buy an older truck, for say $5000. A $5000 truck plus a $3000 plow equals an $8000 investment. Now add the cost of paying an employee ($15/hr x 10 hrs/event x 10 events = $1500 per year). Now add insurance, you're looking at another $2000 per year.

    Lets assume you can bring in $6000 in PROFIT per truck per year.

    Year 1:
    Total Income accumulated = $6000
    Total Expenditures: $11,500

    Year 2:
    Total Income Accumulated = $12000
    Total Expenditures: $15000 (11,500 + 1500wages + 2000ins)

    Year 3:
    Total Income Accumulated = $18000
    Total Expenditures: $18,500 (15,000 + 1500wages + 2000ins)

    Year 4:
    Total Income Accumulated = $24000
    Total Expenditures: $22000 (18,500 + 1500 wages + 2000ins)

    Year 5:
    Total Income Accumulated = $30000
    Total Expenditures: $25,500 (22,000 + 1500wages + 2000ins)

    This means that in year 5 you broke even. Here's the problem I have: I bought a truck for $5000, which means it was older, and higher mileage. Lets say the truck was 8-10 years old. It takes 5 years to break even. That means that the truck is now 13-15 years old by the time you turn a true profit. By that time, the truck has little or no useful life. What you've done is increase the size of you company, the number of bill, the complications of an employee, and a lot of expenditures just to break even and have a useless truck to show for it.

    These of course are assumptions, but they also ignore fuel cost, workman's comp, liability ins, social security taxes, and most of all INCOME TAXES that you'll have to pay on your profit.

    The more I crunch the numbers the more I realize that you just won't get a fair return from buying an older truck. If you calculate things the same way with a new truck, you run into the same problem, becuase it takes A LOT longer to recover that large cost.

    The only way it makes sense is if i have another profit-making use for the truck when its not snowing. So, for now I either have to find a great deal on a truck, or hire subs if I want to take on more accounts next year.

    Hope this helps......sorry my ramblings went so long, but this is the kind of junk I think about when I'm in bed at night trying to sleep!
  3. SnoFarmer

    SnoFarmer PlowSite Fanatic
    from N,E. MN
    Messages: 9,883

    You have a snowplowing business right?
    You are a legit business man right?
    Remember you can depreciate your vehicles.(taxes)
    Keep all of your receipts for every thing related to your business.
    Think income taxes & deductions.
    Your better off getting a late model truck and plow, some thing with at least 5yr or more years of usable life in it.
  4. Remsen1

    Remsen1 Senior Member
    Messages: 188

    I hear ya, plus you could end up waiting longer for a profit if the winter is really mild like this year so far.
  5. Italiano67

    Italiano67 Senior Member
    Messages: 645

    Thanks for the in depth reply Plowman350. I agree with you on your points and I am thinking also on relying on another driver and shoveler showing up every single time and also the added headache of more accounts to keep happy. Also if you want to go out of town at all there is added stress because of more units involved. The real money is in the salting after the plowing but how much do want to chase that money? Alot of accounts around here start cutting back on salt about 1.5 months into winter because of the cost so how much money is there really left on the table if I dont pusue more accounts? As far as the depreciation goes I have no shortage of those but the income seems to be.
  6. NoFearDeere

    NoFearDeere PlowSite.com Addict
    Messages: 1,724

    I contemplated that idea but decided against it. I have no subs per say....one if I really need him.....and do 30 accounts with about 8 hrs. plow time in a 3" storm. I'm haulin a**!:) I just bought a better truck.
  7. plowman350

    plowman350 Senior Member
    Messages: 125

    taxes, taxes

    Yes, my theory and math example ignore the tax write off of purchasing new equpment. I think that a lot of small business owners give to much weight to the idea of "accumulating tax write offs" to reduce their taxes. A few points to consider:

    1. Ask yourself what your tax rate is. Now that you've thought of it go back to last year's tax return and see if your CPA calculated you Marginal Tax Rate AND your effective tax rate. I bet that when you think of taxes you think in terms of marginal rates. A marginal rate is merely the percentage of taxes you will be paying on the next dollar earned. Nobody ever pays that rate. What is important to you should be your effective tax rate which is typicall about 8% lower!! Your effective tax is the total income taxes paid divided by your total income....that is what you ACTUALLY PAID. Also, that is effectively what you actually save when you are accumulating tax deductions.

    2. Payroll, insurance, and materials are large expenses...... and you should invest your company's money into these items. Marketing, materials, and labor are all going to give you a return on your investment. Equipment is a depreciating asset!! Because equipment is deductible, lots of people will build an arsenal of depreciating equipment. My suggestion is to put your money into products that will become more valuable such advertising to build company recogntion, buy materials (salt, mulch, fert) which you will mark up and sell. We need equipment to do our jobs efficiently, but when it comes to large expenditures we should put our money into things we NEED and will give us a return. Don't buy equipment to reduce your taxes....you're not saving much, not using the equipment enough to justify it, and the equipment becomes worth less each year.

    3. So how do you reduce you tax liability without buying equipment? Run your business only with the necessary equipment which makes you efficient and profitable. Don't ever buy equipment unless the benefits (new markets, increased efficiency) outweigh the costs. At the end of the year you have too much money and want to save on taxes? Purchase a SEP-IRA for yourself or start and individual 401k. Your company can contribute this money towards your retirement. It will be there for you when you retire, you will get the tax deduction you want today, and you won't have a garage full of unnecessary equipment that becomes worth less each year.

    Once again, my long-winded 2 cents.
  8. SnoFarmer

    SnoFarmer PlowSite Fanatic
    from N,E. MN
    Messages: 9,883

    For someone starting out to buy a truck and plow and make it has to get late model truck and plow. Maybe two of them. You drive one and one is a back up truck. Or your wife, kids, etc family, drives the other one. My wife drives a 01, Dodge 2500, and my daughter drives a 99 Dodge 2500 also, it's hers.. this is my back up and both plow as needed.
    Remember you sell service, Will you need a sub to plow for you if you break down?
    Why does he want to plow for you? In most cases he will low-ball you and take your account or your accounts will be wondering how you can afford to hire some to plow?? Anyway..
    So now you have 35K to 40K in two trucks + plows +Sander? and mis,Ins, gear??
    But wait your gust starting out where is all of the money going to come from?? How you financed the deal is your business.
    But your business( it owns the truck) is going to depreciate the value of the plow trucks. You need this write off, you need to save every penny. You need to take advantage of every tax deduction you can.
    When you have used up these trucks how much do you think they will be worth? The same as if you did not take advantage of this..... Nothing...

    You have to make extra money first to able to utilize any type of retirement plan.
  9. cet

    cet PlowSite Fanatic
    Messages: 7,257

    IMO I ould buy a dedicated salt truck. A dually with a V box salter. His job is to chase the plow trucks. With the salter out of your truck you will be faster because you have better vision and the truck isn't working as hard. Also salt is hard on the truck so your truck will last longer without the salter. If the salt guy doesn't have enough work at the beginning of the night then send the shoveller with him and he can also help with the sidewalks.
  10. Italiano67

    Italiano67 Senior Member
    Messages: 645

    I already have a 5 yarder with a tailgate salter. It is alot more involving to chase around town with the dumptruck than being able to go in and plow and shovel, salt and you are out of there. I had a big mall last year that I bought the 5 yarder for but got lowballed this year so it is sitting. Thinking about selling it.
  11. Shortys Beast

    Shortys Beast Junior Member
    Messages: 6

    2nd truck

    Everyone who has responded to you has the right idea. In my case i am running two trucks with plows and salters.I do 5 big business 10 same one and 50 residents homes in two town ships, both trucks are out for 8-12hrs depending on snow. I have 1 full time guy witch is part family to plow for me. If you are running with subs then buy the 2nd truck put a rely able person in it then you would not have to pay for the guy and his truck, it will equally out in the long run.if your business is booming then why not, sometimes you win and some you lose. In the summer i mow lawns one truck is sitting but it is paid for. I also have close friends that own there own business we run hand in hand with each other. Good luck!
  12. Italiano67

    Italiano67 Senior Member
    Messages: 645

    I think I got what you were saying. You say that if i buy a 2nd truck that it will pay for one of the subs pay? That is true in a best case scenario. Well we will see, I am going to take a long hard look at it and from different angles with a brand new base model 2500 HD or a 3-5 year old one with low miles. Everybody keep those ideas or opinions coming. It is so nice to draw on the vast area of knowledge on this site.
  13. fernalddude

    fernalddude PlowSite.com Addict
    Messages: 1,106

    4 plows+4 subs=8

    I was in the same spot a few years ago. I don't mow lawns or any other seasonal jobs just snow removal. Sno farmer is on track with me its not just the profit from snow its also the tax breaks. thats one of the reason's i use older rigs my choice is bronco II's they sit for 9 months but they are in top notch shape and all paid off. It does cost alot of money to have reserve plows but this can all be made up on the big storm. I look for the long return on equipment my oldest rig has been working for 18 seasons so if you take care of them they do last.I guess my point is older does work and they are less than new rigs and it depends on how deep your pockets are if you cant afford it don't buy it. Work with what you have and get the most out of it.
  14. Jpocket

    Jpocket Senior Member
    Messages: 302

    Exaclty what I was thinking. I run two old C-20 Chevy's, in my mind they are the best plow trucks out there anyway, esp. if you have alot of accounts and are just starting out.
  15. jax1013

    jax1013 Senior Member
    Messages: 114


    I have 2001 ram2500 w/ a HD suspension upgrade. Its got about 35,000. I have a blizzard 810 on the front and a 1.5 vpro 8000 . Also a western tailgate1000 swinggate. Last is a 97 jimmy w/6.8 fisher a great daily driver 76000 miles. Call me 917 417 6611 or jax1013@aol.com or jax1013@verizon.net for pix. Disregard prices below b/c I just want to move this stuff...Good luck...Jack