Buying a 1 tonne excavator

G day legends!
I am currently 18 years old and thinking I could start a small scale earth moving company.
I'm in the planning stages of considering ways in that I could own and operate a machine. My current thought is that buying a 1 tonne excavator/mini skid steer ( 1 tonne because I would be able to transport this weight on my ute ) would be the way to go. I am Starting an apprenticeship in civil construction in a week so through my job I will learn how to maintain a machine and basics on how to safely operate as well as plenty of shovel work so I will be able to take notes from some pros. I am aiming at a machine for around $15 000 AUD so definitely a lower end machine. When I buy the machine I will buy it outright so I will be under minimal pressure to turn over a dollar. My current thoughts of offering the machine as dry hire throughout the week and having wet hire available on weekends so I get a chance to run my machine.

Ive done some basic maths figuring that I would offer dry hire for $100 - $150 per day or $450 to $550 for a 5 day week. These prices would be well below the big hire companies in my local area. Potentially I would be aiming to make $500 a month which would equal $6 000 a year. I think that sounds pretty reasonable as $6 000 would cover the maintenance and servicing and potentially I would make profit on top. To be 100% honest My aim would be to break even throughout my first year as I know this will be a HUGE learning experience.


I believe I could save the funds to start this project somewhere between 6 - 12 months.

So lads let me know am I onto something? is this a terrible idea? what have I forgotten to consider?


Also I am located in Australia so if my prices seem extremely low or high they are in the Australian dollar.
Cheers!

I think it's a good idea to work up to the purchase as you have planned. You verses a renter running your machine are two different things. If it is an older(budget) machine it will be prone to breakdown if abused, and the renter would expect it to be in good running condition. Your cheaper rates will leave you in a tough, broken, position if you can't afford the fix, which is partially why rental companies charge what they do. I would suggest you rent yourself and the machine out on the weekends. You will get the experience and be able to control what use/abuse your machine sees. You'll be further ahead making a few dollars on the weekends than having to spend what you make and more on the weekends fixing the machine that was broke by others. I believe you will learn a lot from the job you're starting, the costs ,struggles, and rewards that go with owning equipment.
I suggest you aim higher than breaking even, your time and financial investment is worth more than you're putting value. I'm sure other self employed owner/operators can agree that working your butt off for no gain gets real old, and it goes that way sometimes. I know a number of people who have built various successful businesses from their bootstraps as you're planning, great idea, make sure you learn all you can about all the associated costs(insurance?) and competition before you dive in. Best of luck

You'll need insurance and it will be higher if you're renting the machine out to other users. I wouldn't recommend renting to others. Some rental outfits also require the renter to carry their own insurance as well. Most also give the option to buy insurance if they cause damage that exceeds the deposit they put down. If there is a breakdown and the renter refuses to pay, what do you do? It's a very small machine that will have limited applications. How are you going to rent it out during the week if you're at another job? Who's going to put fuel in it and transport it? I think there's a lot of things you haven't considered and trying to do this would be a HUGE distraction from the apprenticeship you're starting. My advice would be to focus 100% on your apprenticeship. People who have side businesses usually do it once they're established. Trying to do it at the same time I think is a recipe for failure.

I agree with 2001c1, hiring out your machine self drive is likely to lead to problems. So many people abuse hire machines and and old excavator needs nursing to get the best out of it and prolong its life. I'm sure you will make more money and have less problems just doing operated hire when you can. Also, set a reasonable rate. If you are to make this into a full time business you will find it difficult to substantially up you rates in the future if you are known for being cheap.
Good luck.
Graham

Yes those are some really good tips. Mid week rental could lead to some serious problems very quickly. The main reason I'm interested in this venture is to get some good solid experience (Mainly being operating, getting some good cab time and logistics of running a business). But also just to own a machine that hopefully pays for itself.
I think compared to most people my age starting uni or spending the same amount of money of a decent car. I think if I play my cards right I could get ahead and have ALOT of fun while doing it.
Really appreciate the replies, Thanks guys!

Welder Dave said:

You'll need insurance and it will be higher if you're renting the machine out to other users. I wouldn't recommend renting to others. Some rental outfits also require the renter to carry their own insurance as well. Most also give the option to buy insurance if they cause damage that exceeds the deposit they put down. If there is a breakdown and the renter refuses to pay, what do you do? It's a very small machine that will have limited applications. How are you going to rent it out during the week if you're at another job? Who's going to put fuel in it and transport it? I think there's a lot of things you haven't considered and trying to do this would be a HUGE distraction from the apprenticeship you're starting. My advice would be to focus 100% on your apprenticeship. People who have side businesses usually do it once they're established. Trying to do it at the same time I think is a recipe for failure.

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Yeah that makes alot of sense. But this isn't a rushed decision. I'm only really in the very early planning stage and am 9 months to a year from saving up the amount that I would need. I'll definitely get a good chance to work out whether it would be too much to take on having an apprenticeship and trying to operate a small business on the side throughout that time. Keeping the machine to wet hire only would mean that I would earn less money but would also not have as meany breakdowns and the machine generally last longer so it would evening out.
But really I am just trying to set some saving goals for the near future and reasons for wanting to achieve them.

You're and ambitious which is good but I think you need to focus attention to your apprenticeship first. What does civil construction involve? Is it operating machines or more on the engineering, surveying and design of construction sites?

A wise man once said don't loan your tools or your wife as they'll all get f#*ked.
Drive the machine yourself on weekends and learn how to operate it skilfully and without damaging it. Do the correct maintenance procedure on everything and learn how to repair the machine and work up a good toolbox.
In my experience for every 10 hours of operation there's about an hour of repairs and maintenance, maybe more on a used machine. Wash the machine, grease it well, check the high wear areas and replace items like leaky hoses etc before they let you down on a job and spray the site in oil.
Try to get work close to home as a lot of people like to support local contractors. Put the word out amongst your friends & contacts and anyone else who'll listen at the pub, parties, work etc that you have the machine and what you can do with it.

If people like and trust you and you do a good job for the money you can't go wrong. If you're learning on the job price accordingly and watch out for buried services!

Where are you located in Australia?
Let us know how you go, with lots of photos, AusDave

Welder Dave said:

You're and ambitious which is good but I think you need to focus attention to your apprenticeship first. What does civil construction involve? Is it operating machines or more on the engineering, surveying and design of construction sites?

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The apprenticeship will be with my local council working in all the different aspects of road building ,maintenance pathways and other stuff along those lines. From what I believe it shouldn't be a particularly difficult apprenticeship but I reckon I will enjoy it. So as long as I have the motivation and energy I think my apprenticeship wouldn't get in the way of something on the side. I'm hoping that this job could take me towards a more permanent operating jobbut you really cant do anything without experience. When I had my interview the guy (Who will be my boss) seem genuinely impressed that I wanted to become an operator and had I had interest in the field of work.

AusDave said:

A wise man once said don't loan your tools or your wife as they'll all get f#*ked.

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This quote is hilarious and so true. Especially when when a machine would be such a big investment for me. I really just want to have my own machine and have someone else pay for my fuel aha. Honestly i'd be totally happy making a couple hundred dollars every couple of weeks. This is really exciting reading that this isn't a terrible idea. But right now I just think this would be so much fun.
Mate i'm located in Newcastle NSW.
I think I might have to post a heap of photos when the time comes.
As Ive gathered you seem to know a bit about machinery Ausdave. Any tips on buying machinery in particular mini excavators? Like i'm not asking for a full essay but just what are the first things you notice and look for? right now I am no where near buying but I just like to look at the prices and dreaming
I've noticed a lot of 2nd hand machinery that seem to have very fresh paint jobs (which look amazing don't get me wrong) but seems a bit suspicious. I'd love to hear any advice!
Cheers Lads

Hi Ethan.
Yes I've bought a lot of secondhand machinery over the years and generally bought well. However I've spent a lot of time researching the market to the point I know a good deal when I see it. Ideally you want a low hour dealer serviced, (or some other reputable service provider), excavator of a well known brand which has sold in high numbers in Australia. This means you should be good for parts and service into the future. If it's really sold in big numbers there may be third party parts suppliers who can supply good parts at reasonable prices. Competition helps in this case.

Good name brands in the 1 tonne range include Kubota, Hitachi, Yanmar and Kobelco. There are sometimes rebadged machines such as Case and New Holland mini excavators may be rebadged Kobelcos. If you come across and older machine it may be worthwhile finding out if parts are available for items such as track drive motor assemblies. Often these were provided by a third party and may discontinue parts support. Because few people check or change the small amount of oil in the drive motor planetary gearcases they can often be worn out or close to worn out. Paint jobs can hide a multitude of sins and you have to look beyond the paint and see whats being covered up. Most of these mini ex's will have Kubota or Yanmar engines. Both are good but I think the Kubota is better.
Generally the Kubota is the premium choice which you'll notice as there are so many about. They're generally well built, perform well and last well if properly maintained. However they are generally dearer because of this.

Just keep looking on Gumtree, eBay and Auction Houses like Slattery's, which have regular auctions at Hexham. And because you'll probably be too excited to make a good purchasing decision when you get excited about a potential machine, take along a mechanic friend who can pick all the faults in the machine which your starry eyes may miss.
Think about going a bit over 1 tonne as it may give you more choice as well as a machine with more capability. A suitable tandem trailer behind the ute will tow a bigger machine OK and you'll need space for buckets and other attachments.
I'm down the Jervis Bay area on the NSW South Coast and like you have heavy equipment because I like doing cool stuff with machinery.
Let us know how you go and if you want to chat, call me on 0411572725
Have fun, AusDave

Ethanu1 you're getting some very good advice in this thread.

Agreeing with the others - there is no way I would buy a machine and rent it out, that is a recipe for hard words, disappointment and financial hardship. AusDave summed it up perfectly.

No one is going to take care of your machine while it is rented. I have a long list of horror stories on rental equipment, not my equipment as I don't rent out bare but just what I've seen rental equipment be exposed to in my 20 years on the job.

It's just human nature not to take the same care with a rental machine as you would a machine you own. I'll be honest, when I rent a machine I don't take care of it the same as one I own and do things with it I wouldn't do with one my own.

If you can swing the purchase price of a machine, go through your apprenticeship working your machine on the weekends and off days yourself, then I would run with it. Experience is the most valuable aspect of this business, the more experience you earn on someone else's dime, such as your apprenticeship, the farther you will be in the process.

There is no telling the dollar figure of bought and paid for experience I've cost myself over the years but with each incident I learned what not to do the next time around. Unfortunately this business is full of surprises and one never stops "learning". The key to being successful in dirt shuffling is to maximize reward and limit risk.

Ausdave that is really good advice and I will take all of that into consideration before I purchase. Cheers mate.

Cm1996 Yeah this thread turned out being a lot more useful that I thought it would be. People would be rough on the poor machine so renting without me there would be a not so good idea.
Yeah thats the way I see it even if I'm not turning over much money the experience would be second to none and the fact it would be fun to have my own machine is whats is all about.

Just need to consider that $15,000 is a lot of money just to have fun with your own machine.

I don't know, if I let my wife get any traction with that line I wouldn't have any big boy toys to play with...

He's only 18 and hasn't had to do any repairs on his own machine yet. That alone is reason to be cautious. LoL

At 18 I was thinking about the next item for the muscle car . LOL !

We will rent out any piece of equipment for a customer , the operator comes with it .