Owner/Operator possibly lease to larger company

[Sturgill]

Hello! Quick background- I have a D5k and a Kubota Skidsteer. I am the only employee. Do mostly residential and farm work, clearing, grading, driveway, etc. I ran equipment in the 80s strip mining coal 10yrs. Did 26yrs in automotive factory, got tired and picked up my D5 last yr. I have an opportunity to lease myself and dozer to a larger commercial Excavating company for about 3-4 month project, running their equipment and mine depending on what’s needed. I would also be somewhat of a superintendent to make sure the dirt is moving. Now my question —- how would you guys (owner/operator s) developed a fare lease price?? Hourly, weekly, when I’m running my equipment, or when I’m running their equipment???
Thanks for any input!

 

[Welder Dave]

I would think you would make the most money running your own equipment. I think I'd figure out what kind of wage you need to make as an operator and superintendent and then lease your equipment at a competitive rate the same as if they had to rent the equipment. That way you don't lose money if your equipment sits idle. You get paid as kind of a working foreman using the best machine for the job and are paid the same operator wage. Rentals are usually less per hour based on monthly agreements compared to weekly agreements but maybe some weeks one or both of your machines aren't required. You'd have to figure how much your machines were required and maybe adjust the lease/rental a little bit if the machines were only required say 75% of the time but kept on site for when they may be required. The other factor to consider is if other people will possibly run your machines. Most owners wouldn't want someone else on their machines unless they knew they were good.

 

[Bls repair]

If it was me I would find out how much my equipment was going to be used and how much theirs is going to be used . When you rent from a rental company (day,week,month) you pay if you use it or not.

How much work do you have ,enough to keep busy for this time period? If so will you be losing money by not billing when your machines when not working.

Will you risk losing steady customers by not being available for that period of time?

 

[rondig]

We do a day rate for me..i get that no matter what i do....plus i get dry rate for equipment i bring...they pay fuel and maintenance and insurance..and it NEVER leaves site unless i am running it

 

[jca57jd]

I found myself in a similar place about 7 years ago. I had 2 mini excavators and 2 skid loaders and had a bigger company sub out a lot of there smaller commercial jobs to me for a little over a year. This was mostly working on commercial industrial jobs (power plants, and cell service towers and headquarter offices). At the time I thought it was awesome because I was making good money keeping my equipment busy, and getting good experience managing some bigger job sites. In the end the company I was working for ended up buying more equipment, hiring more operators, and leaving me hanging because they saw more profit that way which I 100 percent respect. I will always look back and be happy about everything that I learned and all the good experience. My best word of advice is to be carful and think it through the best you can because with reward there is always sacrifice. I made good money during that period but since I was always covered up, my original company customers pretty much died because I couldn’t do the additional work of existing customers. In the end it hurt my company pretty good because I had to redevelop my company name and customer database and didn’t have much work for a couple months. As far as money goes, I cut them about a 20% break on my normal residential daily rates as long as both machines were running.

 

[Tugger2]

That steady income is hard to resist as an owner operator sometimes, especially if youve had a slow period. Just remember the overhead you carry as owner of those 2 machines and the customer base you have worked hard to build . Its hard to cover those 2 factors at a superintendants rate ,even a contract supers rate. Its hard to say in your case ,but if you can rent even one of your pieces to them as well that will make it better. That leaves you with the other piece to keep some of your regular customers happy ,if you really like to work 7 days a week. Its the age old problem of a company trying to find good talent to get work done ,they can buy all the iron they want ,but good talent is priceless when they have work. Sometimes they just havent figured that out.

 

[Sturgill]

Thanks for all the insight! This is what I’m thinking—-
D5 rental rate $5200 per month- that’s $32.50 hr. Add $25 or $30 for my wage: $62.50hr. If running my dozer $75hr and they provide fuel. Normally I charge $100hr for dozer with $200 transport fee.
Thoughts???

 

[Welder Dave]

If they hired you with the dozer for 160 hours it would be $16,000 and you pay the fuel. If you rent it at $5200 and run it for that same 160 hours would be $17,200 plus they are paying for the fuel. If you only run it say 100 hours I think you could possibly make less money. You don't want to make less than if you just ran the dozer at $100/hr. and had to pay for the fuel. I don't know how much fuel your dozer uses but maybe charge a flat rate, something like $60-$65/hr. plus the $5200 rental and they pay the fuel. You also need to consider you're the job superintendent and that's worth extra.

 

[Jeckyl1920]

Do they have dozers? Are they trying you out to see if it makes sense to have a dozer? Is this a one off project? Is there future work?

All these questions change things.

Personally, I would assume worst case, a one and done project. That being said, I would aim high, and leave a negotiation option at the end of the job, maybe half way if you are feeling generous.

I would venture in the range Dave said. Maybe start at $5k per week probationary period as this could be a big risk for you and your company. Leave wiggle room, but go no less than $4k per week. Also negotiate your work hours. Don't leave it open ended. Like, 8-10 hours, 5-6 days per week.

If there is one thing I've learned, it is INSANELY easier to get what you want up front, vs starting out for less, and trying to get more later. Once you start at a rate, you can assume that will be your rate forever unless you discount it for a reliable customer.

That discount in mind, you can negotiate by making this first job probationary, with a 10% discount for return business. That could fuel them to try you out at a higher rate, then it's up to you to prove your worth.

 

[check]

The other factor to consider is if other people will possibly run your machines. Most owners wouldn't want someone else on their machines unless they knew they were good.

Leasing your own equipment to someone you are supervising is quite a bit better than leasing it to someone and having no idea what they're doing to it.

I would offer myself including dozer at a set price regardless of whether I'm operating or supervising and allow others to operate my dozer under my supervision while I'm on the clock. One stipulation would be that I am not responsible for supervising their help while I'm operating.

That way they get what they want at full price and you get the most you can. Look at it from their position. They can rent a dozer without operator cheaper than you would offer yours. They want skill and experience, not warm bodies and machines.
If you separate dozer charges from labor, they think "We can rent a dozer from JJ Rental for less than that".
This way it's up to them to keep both you and dozer busy. Most likely there would be many idle hours on the dozer and also you get a break from being jostled around on a D5 8 hours a day.
JMO

 

[colson04]

I would have to bid it as if I was bidding any other work and treat myself as a sub-contractor package. You still have bills (insurance, maintenance, regulatory fees, small business tax, property tax for your shop, etc). Under bidding this might leave you short on your required annual expenses for your non-operating, fixed overhead costs.

If my rate is $100/hr, then that is what I'm billing the big contract for because I market my business (equipment and owner) as a package. Regardless of machine hours accrued because if you were moving dirt for any other customer, they would be getting a bill for $100/hour, plus transport fees.

As was said in a different thread and in this thread, they're hiring you for what you know and specific skills you have. Otherwise, they'd rent the dozer and pick up an operator from somewhere else (union hall?).

Don't under sell yourself and your acquired skill set because this looks like a 'secure' source of income. Worst case is they turn you down, or start negotiations. And if they do say no, then you move on and keep bidding work like normal. This has to work for you financially, or you might not be in business for yourself at the end of the deal.