Have you a very basic way to work out charge out rate ?

Before I get too serious about buying a machine there are two things that I look at . It should turn over it's own value each year and being realistic about the hours it will do . The other is it's fuel cost can not go above 15% of what it earns . This is just general piece of plant , not one that has specific costs

I would be interested to know if any one else has any simple way's they work out charge out rate . Different parts of the world would be interesting too

I have a spread sheet which I update every year based upon all fixed and variable costs for the machine. Records kept on actual operating cost of each machine for the year. It takes awhile to genterate that kind of data but once you got it you know right where you are.

Gidday Haddy.
Biggest problem down here at present is everyone is chasing work, and alot of people who owe money on machines are cutting prices just to keep going, and hope they can recover next summer. Me i always said i can go broke in the pub, and still have a good machine to sell, ie i don,t work for practise. or nothing.
Other problem here is any idiot can hire machines from porter hire and try there hand at eartmoving. This alone has killed alot of the hourly rate jobs in my area for alot of us one man band contractors; diggers and/or dozers.
Only way any of us are surviving is with contracts, you price a job to best of your ability and go from there. Again i would rather lose a job on a good price, than get it for a ridiculous price.
Couple of other things if your going to be a owner operator; you better be good at mainentce, repairs, welding etc. Plus be your own sorta surveyor, estimator, accountant, banker, and gun operator all rolled into one.
Think your well out with the fuel cost. I need 30% for fuel. But you will get away with less for diggers, esp small ones.
Hourly rates seem to vary with areas, some are good and some are pitifull. One guy who cuts rates kills it for everyone. At least down your way in the pumice you can work in the wet, up here in the clay, all we do is make a mess.
Lastly inmho you don,t want to owe alot of money on gear. Although if you get a contract you have to have good gear too.
Come back with some more plans if you want some more info.
Lastly for our population, is one hell of alot of diggers and trucks out there !
Cheers Merv

Yair . . . I look around and I see blokes with all the good gear and wonder how they manage.

I think I posted here about a local bloke with a tidy 85 Komatsu. Good tractor, I gave him a hand to rebuild the finals and next thing I see him with a new high-track six on an extra twenty bucks an hour. Made no sense to me as he owned the Komatsu free and clear . . . same thing with trucks. My mate with the tidy old thirty grand Flintstone gets the same rate as the fellers in the brand new Volvo's and Kenworths hauling local.

Cheers.

Hi Merv .... I am another one who always reckoned I would rather go broke in the pub !!!! . I'm very lucky down here , I price very little , I have worked for some of my clients for 30 or so years now . Another thing is we have had guys come in using Porter hire , etc and they have f ked it up , in the long run they may have done us a favour . I am back to a one man band this winter and am enjoying it at the moment , but still working in with 2 other contractors . I run a 111A Wabco , Kenworth ( try and keep away from road work with it ) , 14 ton digger and other bits and pieces and at the end of the month my fuel is still approx 15% of turn over . We just did a effluent tank job where truck was working carting away from a digger , a total of 7 km per day , tank of fuel lasted whole 4 days easy . Hope work picks up in your part of the country Merv . Cheers Haddy

I too use a spreadsheet to track operating expenses for each machine I already own as well as it's annual utilization (underused machines have less hours in which to capture fixed/indirect costs) but when it comes to pricing hourly fee for a new machine I do one of the following:

- ask the mfr. For an owning$operating worksheet to figure direct cost, put my labor, overhead and profit on top of that
- inquire with rental houses for their bare rental rate for that machine by the day, triple that to cover fuel, labor, overheads, etc. Divide by 8 or 10 for hourly. I figure their rental rate equals cost of ownership and upkeep only plus their profit. Not the most accurate but gets me a starting point until I have some of my own cost data to use.
- check the AED green book of rental rates similar method as the rental houses.
- when all else fails I figure .11% to .13% of new retail purchase price = hourly rate. Not super accurate for smaller machines like miniex or skidsteer though.
- I almost never ask around for what the other contractors are charging because we have some real yoyo's around here with some crazy ideas about prices. I don't believe in the "it's paid for so I can charge less for it" the way some do because I know you still have to repair it, and one day replace it. I set my prices to make what I need to make, and then I work my butt off to make sure my reputation gets me jobs, not my hourly rates. I prefer contract to hourly anyway.

yep your onto with the truck Haddy. Thats when they DO actually make money here, off road, where the hoist covers more distance than the wheels. lol. Got a 6 wheeler v8 mitsi i charge $100 hr off road [ will go to 90 if its 2 or more weeks work] and 110 on road, and we need that up here on metal roads. 12/14 ton diggers around $120. I don,t have diggers prefer to work with 3 other guys with diggers, and compliment them with D6/D4/ towed scraper/truck work. But am happy to drive diggers for them too so that gives me an advantage over other guys with trucks. Did some maths now, my fuel to charge out rate on the D4E and D6D is 25%, old gear drive D4 on drawbar work is only 15% tho.
Another problem we have is city contractors come up here if there own work drys up, but the terrain usually takes them alot longer than they bargained on
Yeah am with you too scrub puller, the gear thats paid for is the one that makes you the money !
Another thing a old time contractor told me 30 years ago was. Put your money into something other than all new machines too son. Otherwise one day all you,ll have is a mountain of scrap steel. He was refering to get some land for forestry or farming, etc.
Cheers boys merv

$100 hr off road here too Merv , $120 on road , $150 minimum with 1969 (year) 3 axle trailer but I usually charge by the ton and can get better than hourly rate .
You are right too about land as it is hard to make money on anything that hasn't got capital gain ( Oversea's readers , Capital gain is not taxed in NZ )

muddauber said:

when all else fails I figure .11% to .13% of new retail purchase price = hourly rate. Not super accurate for smaller machines like miniex or skidsteer though.

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Thanks Muddauber , Interesting , to me any way . Haddy

muddauber said:

I set my prices to make what I need to make, and then I work my butt off to make sure my reputation gets me jobs, not my hourly rates. .

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I do the same and has worked for me , Haddy

This is a very rudimentary method that I used to use for a quick and dirty charge out rate.

Take monthly rental rate (if you were to rent a machine). Divide the result by 176 which will give you an hourly rate. To this you need to add per hour costs for fuel, operator, insurance and profit.

Example: A dozer you own, or rent, rents from a rental house for $ 7500.00 per month.

$ 7500 divided by 176 = $ 43.00 per hour. Add fuel $ 25.00, insurance $ 15.00, operator $ 30.00, and profit
$ 20.00, equals a rental rate of $ 133.00 per hour. You will have to determine your own fuel, ins., operator and
profit numbers.

Again, this is a quick and dirty way of coming up with a rate for a machine. After computing, you have to determine if
it is competitive in the marketplace.

Best way is to track costs of machines as others have mentioned and you should come up with some pretty good numbers after you get some history.

This is a very rudimentary method that I used to use for a quick and dirty charge out rate.

Take monthly rental rate for your machine as if you were to rent it from a rental house.
Divide the rental rate by 176 which will give you an hourly rate. To this you need to add per hour costs for fuel, operator, insurance and profit.

Example: A dozer you own, or rent, rents from a rental house for $ 7500.00 per month.

$ 7500 divided by 176 = $ 43.00 per hour. Add fuel $ 25.00, insurance $ 15.00, operator $ 30.00, and profit
$ 20.00, equals a rental rate of $ 133.00 per hour. You will have to determine your own fuel, ins., operator and
profit numbers.

Again, this is a quick and dirty way of coming up with a rate for a machine. After computing, you have to determine if
it is competitive in the marketplace.

Best way is to track costs of machines as others have mentioned and you should come up with some pretty good numbers after you get some history.

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