Starting out need advice

[Fontes59]

Hey everyone
Im looking into starting my own company this year and want to start small , i already have a few jobs lined up for the summer
I am debating weather i should rent or buy a machine? Ive been looking at rental and buying prices and Im thinking of buying a mini ex and with used machine prices so high im thinking of getting a brand new cat 302 mini ex with 0% financing for 5 years and just renting a skidsteer / tracked wheelbarrow for times i need them or should i just rent everything for the first year?
All opinions welcome

 

[KSSS]

A couple things I would mention.
Prices are high for used right now, but new has gone up as well. My personal experience is that the zero interest deals that OEMs offer are not really free interest. If you ask for a straight deal without the zero interest, the price on the machine is lower. Interest rates are still low right now every where. I have found every time that I save money by taking the lower price for not financing with them and going through another lender. I would ask Cat to run the numbers both ways and decide which is better. The zero interest always gets attention, but its not quite the deal it appears to be.

On buying a new mini ex. The numbers show that mini excavators of all brands, have the least number of warranty repairs done. The number I saw was like 1.7%. The point being, perhaps you could buy a used mini ex and save some money and still have a reliable mini ex. This savings might allow you to buy two used pieces and not have to rent a SSL.

Something to ponder.

 

[Don.S]

What kind of work do you have lined up? I find that size machine is a little too small unless you have something special for it. Its digging depth is 101 inch. So even to dig around foundations for waterproofing or french drains you will be working almost under your self. Id be looking more in the 35 range for a more all around machine. Those very small machines are so cheap to rent that unless you have work that absolutely needs that size every day i would never think of buying one. But thats just my opinion and i am from quebec so what do i know.

 

[Fontes59]

A couple things I would mention.
Prices are high for used right now, but new has gone up as well. My personal experience is that the zero interest deals that OEMs offer are not really free interest. If you ask for a straight deal without the zero interest, the price on the machine is lower. Interest rates are still low right now every where. I have found every time that I save money by taking the lower price for not financing with them and going through another lender. I would ask Cat to run the numbers both ways and decide which is better. The zero interest always gets attention, but its not quite the deal it appears to be.

On buying a new mini ex. The numbers show that mini excavators of all brands, have the least number of warranty repairs done. The number I saw was like 1.7%. The point being, perhaps you could buy a used mini ex and save some money and still have a reliable mini ex. This savings might allow you to buy two used pieces and not have to rent a SSL.

Something to ponder.

New also comes with 5 year warranty included in the price

 

[Fontes59]

What kind of work do you have lined up? I find that size machine is a little too small unless you have something special for it. Its digging depth is 101 inch. So even to dig around foundations for waterproofing or french drains you will be working almost under your self. Id be looking more in the 35 range for a more all around machine. Those very small machines are so cheap to rent that unless you have work that absolutely needs that size every day i would never think of buying one. But thats just my opinion and i am from quebec so what do i know.

I got a few concrete pads to dig out in backyards hence the size of the machine

 

[Don.S]

I would never buy a machine that cant load trucks if i didnt have support equipment that could. How much experience do you have in this line of work? I would say rent a few different size machines for your jobs and go from there.

 

[James Sorochan]

I think KSSS and Don are making some good points to consider Fontes59. Do your research on brands here. Used machines should suffice especially if you are just starting out. Forget about 5 year warranty. It's just like insurance. You give someone your hard earned money and they will try their best to not give any back. Warrantee's are not freely included, you pay. So save that cost and invest it into the machine.

 

[KSSS]

I got a few concrete pads to dig out in backyards hence the size of the machine

The payments will keep coming long after those pads are pulled. May want to consider what part of the market you want go after, and buy the machine that will help you do that. If there is enough long term use for that sized machine, maybe it can make sense to run that size. Personally, I agree that size machine will keep you out of a lot of work as well, but that is why understanding your long term business goals are important.

As far as the 5 year warranty on the new machine, my point is that the machines typically don't break often and if your buying new to get the warranty, the numbers would suggest that your likely overbuying. Getting a business started is a tough gig, there is a reason the vast majority don't make it over 5 years.

 

[Fontes59]

I would never buy a machine that cant load trucks if i didnt have support equipment that could. How much experience do you have in this line of work? I would say rent a few different size machines for your jobs and go from there.

Ive been running equipment for 5+ years
Most experience is in excavting foundations / rough grading

 

[AzIron]

A 302 is damn small to diversify with it fits a very niche market and when your outside those capabilities it's not cost effective

 

[NepeanGC]

I'd agree with the general advice of renting before buying if you don't have a lot of work lined up. Cost of owning new equipment generally works out pretty close to renting if you're not using it at least 3-4 days a week. Not to mention, if you buy, you've gotta pay for that machine even when you need to rent something bigger.

Although you've got equipment experience, what's your business experience? Running an excavator is very different skillset from running the business.

Excavation is a capital intensive sport. If you want to survive long term, it requires a deep understanding of your operational costs, and your desired market, and your exposures. It's very easy to bring in money while simultaneously losing more. Lots of small operators fall in to the trap of robing Peter to pay Paul because they didn't understand the numbers and over leveraged themselves. Don't start that way. Build the business, grow slow.

Fontes59 - Ontario is a big province, where are you located?

 

[Fontes59]

I'd agree with the general advice of renting before buying if you don't have a lot of work lined up. Cost of owning new equipment generally works out pretty close to renting if you're not using it at least 3-4 days a week. Not to mention, if you buy, you've gotta pay for that machine even when you need to rent something bigger.

Although you've got equipment experience, what's your business experience? Running an excavator is very different skillset from running the business.

Excavation is a capital intensive sport. If you want to survive long term, it requires a deep understanding of your operational costs, and your desired market, and your exposures. It's very easy to bring in money while simultaneously losing more. Lots of small operators fall in to the trap of robing Peter to pay Paul because they didn't understand the numbers and over leveraged themselves. Don't start that way. Build the business, grow slow.

Fontes59 - Ontario is a big province, where are you located?

Dont have business experience , most i have is operating / foreman experience
I will be keeping my current job while trying to start my business , my current employer already knows my game plan and is on bored with me working for him full/part time while i start my own thing

Im from cambridge / Kitchener ontario area

I got 1 older concrete guy that always hires out his digging and said i can have whatever digs he gets and it is always residental work then obviously have to look for my own work.
I got an idea of numbers etc im just a guy that hates renting lol thats why i was thinking of buying a trailer and 1 piece of equipment

 

[AzIron]

Over long term rental is a cost burden short term and especially testing the market rental is bullet proof it has little to no risk

 

[KSSS]

You can also look into an RPO (Rent Purchase Option). Rent machine for X number of months and they will put most of the rental spent into the purchase, if you chose to purchase the machine. This is a safe way of renting a piece of equipment if you anticipate you are likely to buy. If you chose not to buy it, it becomes just like any rental.

 

[Fontes59]

You can also look into an RPO (Rent Purchase Option). Rent machine for X number of months and they will put most of the rental spent into the purchase, if you chose to purchase the machine. This is a safe way of renting a piece of equipment if you anticipate you are likely to buy. If you chose not to buy it, it becomes just like any rental.

Ive never heard of that before in canada but i will look into it