starting a new excavation business

andrew mackinnon · Feb 24, 2018

Hey all , my wife and I are in the process of opening our own excavation business . I have 7 years experience with oil field , heavy civil and residential excavations and would only target the residential market with our own thing . We have access to fill and gravel in place , my own skills would cover the residential market and I'm able to haul my own gear . We can borrow up to 225,000 but might be able to get started with 200,000 for a pit excavator , tandem truck and possible pup trailer , on site excavator ( 16 ton range) , 25 ton float , company truck , packer and various odds and ends . Our payments through the lender would be upwards of 2400 a month for 10 years and our projected profits looks ok seeing you don't have a major breakdown . My ultimate question is for the business owners out there that started with nothing is it worth the extra stress and financial risk going on your own vs working for someone else . A guy gets tired of earning someone else's assets and equity when I could work toward my own retirement in a sense . Our economy is good here and could handle another contractor . Thanks for the reply's and advise in advance .

cdm123 · Feb 24, 2018

Aaa, it's great being your own boss, working to everyone else's schedule. First in last out. Last one paid and you only have to answer too your clients, banker, several layers of government. If it's what you want, go for it but if you want security and days off.....

andrew mackinnon · Feb 24, 2018

When you put it that way it doesn’t sound overly great lol , also what you said isn’t untrue but there is two sides to every coin too

Birken Vogt · Feb 24, 2018

When I went on my own I used my own capital to start and also had a good friend who needed me to work at his place a fair bit. As the business took off he was able to find other help and I just grew organically with what I could afford. But I run a service business, not an excavation one, so I know the capital costs are different.

andrew mackinnon · Feb 24, 2018

Sure my dad ran his own electrical business for 30 years , I get a lot of info from him but he doesn’t understand excavation too much . Capital cost and start up costs are much higher but our hourly wages covers all that and then some figuring I can haul 15 loads of dirt a week and bill out 20 hours machine time for 6 months of the calinder year we should be good . At those numbers our profits come out to be 29 thousand and change after the expenses are paid for plus figuring 10,000 in repair .

bam1968 · Feb 24, 2018

Yes there are two sides to every coin. I could go on and on about the good and the bad. I went on my own about 10 years ago doing mainly farm type work. I started by renting a dozer for about 6 months before I bought my first one. Since then I have bought, sold and traded a few machines. I currently have 2 medium size dozers, a 20 ton excavator, a 14 yd scraper, support equipment and VERY LITTLE DEBT. The latter being the most important to me anyway. Don't get me wrong, I'm not against borrowing money but I am fairly confident that if I would have borrowed $200,000 on day one 10 yrs ago that I wouldn't be sitting here writing these exact words right now. That being said, it could very well work for you for the type of work you are after in your neck of the woods but it wouldn't have worked for me here. Just my $.02

andrew mackinnon · Feb 24, 2018

This is one thing I’ve pondered quite a bit is renting the on site excavator , here the closest ( and only) rental place is cat and a 316 is almost 9000 a month , so .... a 16 ton machine goes for 150 a hr here so you punch that into my realistic billable hours (20 a week x4 weeks = 12,000) so by the time I pay insurance and fuel im left with nothing

andrew mackinnon · Feb 24, 2018

maybe the rental rate or billable rates are different in your area that makes it make sense but am I missing something to my above comment about renting , sure I'm not on the hook for repair and such but it just seems I'm working for the rental company ?

Birken Vogt · Feb 24, 2018

andrew mackinnon said:
This is one thing I’ve pondered quite a bit is renting the on site excavator , here the closest ( and only) rental place is cat and a 316 is almost 9000 a month , so .... a 16 ton machine goes for 150 a hr here so you punch that into my realistic billable hours (20 a week x4 weeks = 12,000) so by the time I pay insurance and fuel im left with nothing

One thing I like to say is if the business model is that cheap that renting a machine would not still turn a reasonable profit, then it is probably too cheap and you need to raise your rates or beg out of it.

Around here even when the bigs, who have their own large fleets, get a rock bottom bid project for a road or something, half the equipment that shows up is rented from the same place as you would rent it from.

In broader looking at the business plan from post #1, I see a 10 year assumption in there. If the broad economy turns south again, or "the plant" closes down and everybody moves away, what would happen then? No guarantee of work in 10 years or even 1 year.

andrew mackinnon · Feb 24, 2018

All valid points , I actually work for one of 3 competitors in my area ( small town) and I know their rates also I went out and got quotes on a bogus job to find out the others prices so the 160 excavator rate matched the competition and my dirt sales also match so I feel I can’t charge anymore . The majority of our work here is hourly offset by the odd bid job ( demo or new home ) so being mostly hourly may be different than the bigger guys bidding I don’t know . The 10 year deal I feel leaves me room for the company to make a little and in the event I have a major break down ( going to happen ) I can cover it . The loan comes with the option to pay more if I can ( witch I would if I could ) but the economy here is a one horse ride and could **** the bed at any time ( scary part) .

bam1968 · Feb 24, 2018

I chose to rent initially mainly because I wasn't sure how much work I was going to get just starting out and it allowed me to set some money aside for when I did decide to pull the trigger and buy a machine. Since then I have rented a hand full of times when I needed something for a certain job. That being said, from my experience 20 hrs a week on a rented machine doesn't pencil out very well

andrew mackinnon · Feb 24, 2018

The 15 loads and 20 hours are only myself operating and driving until things become more established, I generally bill out at least 35 hours ( sometimes 40 depending on the job out of a 50 hour week ,we do our own labour work and pit work) , at 30 billable hours it would make sense but then I’d need a truck driver and starting out not knowing how much work I’ll have I feel would be a mistake hiring someone in the beginning .... long story short I’m conflicted lol , I totally understand what your saying but I think my point of view also makes sense

Birken Vogt · Feb 24, 2018

Read this thread

https://www.heavyequipmentforums.co...ness-starting-from-the-trunk-of-my-car.67295/

Also these

https://www.heavyequipmentforums.com/threads/equipment-to-start-out.5451/
https://www.heavyequipmentforums.co...t-my-own-excavating-business-questions.33455/

View the results here and change the terms a little bit and you will get even more threads

https://www.google.com/search?q=sit...rted+out&ie=utf-8&oe=utf-8&client=firefox-b-1

andrew mackinnon · Feb 24, 2018

If things looked good for year two I hire a truck driver you could likely bill out 30 hours of machine time instead of 20 and 30 loads of dirt instead of 15 upping your gross income by 36,000 for the excavator and doubleing your gross for the truck by 64800 . Extra fuel , employee wage , matching ei , wear and tear you could surly afford to make extra payments on the 10 year loan maybe paying it off in 5 and still keeping some company money for breakdowns and such

andrew mackinnon · Feb 24, 2018

Birken Vogt said:
Read this thread

https://www.heavyequipmentforums.co...ness-starting-from-the-trunk-of-my-car.67295/

Also these

https://www.heavyequipmentforums.com/threads/equipment-to-start-out.5451/
https://www.heavyequipmentforums.co...t-my-own-excavating-business-questions.33455/

View the results here and change the terms a little bit and you will get even more threads

https://www.google.com/search?q=site:heavyequipmentforums.com+started+out&ie=utf-8&oe=utf-8&client=firefox-b-1

Nice , thanks a lot . Some good points in there .

Junkyard · Feb 24, 2018

Starting from scratch a 200,000 loan might as well be $2,000,000. It'll sink you for sure. Get down to brass tacks and hire out trucking etc. Around here you can hire out the trucking as cheap, sometimes cheaper, than you can own and operate yourself. Buy what gives you an edge and MAKES you money not what keeps you busy.

Doing business without making profit is like eating soup with a fork. You stay busy but you also stay hungry.

Find a niche. Don't do what everybody else is doing. If bids are towards the lower end of profitable why even bother. Don't go borrow $200,000 to buy yourself a job. I wrestle with going back to my own thing all the time. In the 25 or so years I've worked I have done my own thing dang near 20 of them.

No debt. No debt. No debt. Barter, rent, work deals, get creative. It's ok to start with older stuff. In reality I know it's virtually impossible to start without debt. However, if you start with the mindset of avoiding debt and REALLY analyzing each potential purchase for profit soon you will be able to determine what's worth owning, renting or avoiding all together.

You're in business for one reason and one reason only. To MAKE money. Profit. Not break even. It will take time yes. The longer you run lean and mean the better off you'll be in the long run.

andrew mackinnon · Feb 24, 2018

Junkyard said:
Starting from scratch a 200,000 loan might as well be $2,000,000. It'll sink you for sure. Get down to brass tacks and hire out trucking etc. Around here you can hire out the trucking as cheap, sometimes cheaper, than you can own and operate yourself. Buy what gives you an edge and MAKES you money not what keeps you busy.

Doing business without making profit is like eating soup with a fork. You stay busy but you also stay hungry.

Find a niche. Don't do what everybody else is doing. If bids are towards the lower end of profitable why even bother. Don't go borrow $200,000 to buy yourself a job. I wrestle with going back to my own thing all the time. In the 25 or so years I've worked I have done my own thing dang near 20 of them.

No debt. No debt. No debt. Barter, rent, work deals, get creative. It's ok to start with older stuff. In reality I know it's virtually impossible to start without debt. However, if you start with the mindset of avoiding debt and REALLY analyzing each potential purchase for profit soon you will be able to determine what's worth owning, renting or avoiding all together.

You're in business for one reason and one reason only. To MAKE money. Profit. Not break even. It will take time yes. The longer you run lean and mean the better off you'll be in the long run.

Funny I have heard that very same line from my father “ so you’re going to borrow 200,000 for a job “ and .... in a lot of ways you and him aren’t wrong but that job could potentially turn into much more ( or a failure) . Hiring out trucks here isn’t a option cause the only trucks in the area would be my direct completion . I’ve fathomed the idea about a mini just doing small jobs but everyone has a mini and a lot of homeowners have the small kabota tractors here besides your just too limited with a mini in the heavily rocky ground here . I honestly thought 200 k is quite cheap to buy into dirt work considering a new 20 ton machine is that much if not more .

Junkyard · Feb 24, 2018

As far as an excavating business goes you're right it's not much but it's a helluva lot to service debt wise as a new venture. Just because you start small in one niche doesn't mean you stay there. I have several friends doing what you're contemplating. They work together all the time. Surely there are guys that are willing to hire out trucks to help. Around here we have quite a few independent dump truck guys plus the guys that haul out of the quarry for set tonnage rates.

Based on my experience I would not borrow more than I can pay back in 48 months. If that's $50,000 then start there. Make yourself really look at which piece of iron will make you the most $$. Maybe it's a truck to haul for the current guys. Work your a$$ off and get it paid for. Then look at your next piece. An 8 ton excavator would do real well around here for residential work, repairs for water district etc. Maybe there's a piece that will do the same there. Get it bought and repeat the same busting your a$$ to get it paid for. Repeat that cycle a few times and before you know it you've got 4-5 pieces of iron paid for and no debt. I betcha a steak dinner it's done in less than 10 years and it's considerably less stressful than jumping out into $200k worth of debt.

Just because you own a certain piece doesn't mean you have to keep it forever. If it pays it's way then keep it. If there's a piece you get that ends up subsidized by the other iron then it needs to go. Be smart about what you buy. Will it make you money and how hard will it be to get rid of should the need arise.

It's good to have a plan, a dream so to speak, but don't be in a rush to get there. 10 years of smart decisions isn't very long in the grand scheme of things. I betcha a second steak dinner one or two of the guys currently doing what you want to do won't be around in 10 years.....

andrew mackinnon · Feb 24, 2018

Junkyard said:
As far as an excavating business goes you're right it's not much but it's a helluva lot to service debt wise as a new venture. Just because you start small in one niche doesn't mean you stay there. I have several friends doing what you're contemplating. They work together all the time. Surely there are guys that are willing to hire out trucks to help. Around here we have quite a few independent dump truck guys plus the guys that haul out of the quarry for set tonnage rates.

Based on my experience I would not borrow more than I can pay back in 48 months. If that's $50,000 then start there. Make yourself really look at which piece of iron will make you the most $$. Maybe it's a truck to haul for the current guys. Work your a$$ off and get it paid for. Then look at your next piece. An 8 ton excavator would do real well around here for residential work, repairs for water district etc. Maybe there's a piece that will do the same there. Get it bought and repeat the same busting your a$$ to get it paid for. Repeat that cycle a few times and before you know it you've got 4-5 pieces of iron paid for and no debt. I betcha a steak dinner it's done in less than 10 years and it's considerably less stressful than jumping out into $200k worth of debt.

Just because you own a certain piece doesn't mean you have to keep it forever. If it pays it's way then keep it. If there's a piece you get that ends up subsidized by the other iron then it needs to go. Be smart about what you buy. Will it make you money and how hard will it be to get rid of should the need arise.

It's good to have a plan, a dream so to speak, but don't be in a rush to get there. 10 years of smart decisions isn't very long in the grand scheme of things. I betcha a second steak dinner one or two of the guys currently doing what you want to do won't be around in 10 years.....

Funny because the 8 ton machine I’ve really looked hard at , getting a dually and a trailer to haul it and start from there . But the problem arises if you need dirt ( witch you will ) my competition here isn’t going to take away from there own work to help me ( they have the only dirt haulers within 100’s of km’s . So you go by a truck and you’re still limited to smaller jobs with 2/3 of the debt I’d have buying a 160 and be able to tackle most every job in my area . Don’t get me wrong I’m not trying to argue with you at all and the things you say I don’t disagree with , either way I don’t think is wrong nor is there any easy answer .

bam1968 · Feb 24, 2018

In your OP you said that you "have access to fill and gravel in place". Does that mean you already own the ground or that it is accessible in your area to purchase?

starting a new excavation business

Member

Senior Member

Member

Charter Member

Member

Senior Member

Member

Member

Charter Member

Member

Senior Member

Member

Charter Member

Member

Member

Senior Member

Member

Senior Member

Member

Senior Member