Dollars per hour/rates/ prosperity?

In my post of this AM about the guy that worked for me for $200 for 4 hours of work. I have to ask those that made the comments such as: "I wouldnt start up my equipment for that" and "you got a great deal" and that I got it done for a steal.

Well....Most of you guys arent from Michigan. And I guess that you are quite prosperous that you wouldnt work for $50 per hour when insurance and fuel and time are considered.
Well, $50 per hour is better then nothing, right. I know of machine shops a few years ago that were working for $30/hour cause thats what the market is.....Real sad too isnt it.
I know of 2 excavator businesses that are belly up....Yep, no work. Equipment was sold off and one of the guys I know bought a used septic hauler just to make a buck and hasnt done excavating work in months due to the bad economy. He has 1 FEL/backhoe machine left.....I am talking about the non farm tractor type of equipment that will bring $80 per hour. He had an excavator that digs basements, a skidsteer loader, 2 dozers, a heavy equipment trailer too. The guy that did my work yesterday is the only employee of his construction business and I dont know what his insurance rates are but he used maybe $20 in fuel and he had 30 minutes of drivetime to and from his home. Some of you fellas have it pretty good to turn down a cash job for $50 per hour.

You got a good deal, whats the problem be happy. In my area rubber tired backhoes are getting $100.00/hr. and most charge a 4 hour minimum even if they only work for thirty minutes.

While I think you got a good deal, the guy doing the work was apperently satisfied with what he charged you. If he wasn't, wouldn't he have charged you more? I did a job last week with my backhoe & charged the guy $45.00 an hour. Yep, that was low & I didn't make alot of money, BUT he was a neighbor, not alot of money and It paid for my fuel and some for my time. We were both satisfied with it & it was no one else's business what I charged him. Now, If I would have had to haul it some distance I would've charged more with a min. charge. So I guess what I'm saying is what you & he came to was a fair market value. (what he was willing to charge and what you were willing to pay), be happy, really it's nobody's business but yours. Keith

The point is that if you are in business you must charge enough to cover your costs. Some business have higher costs and must charge more but regardless if you can't cover your costs you can't stay in business for long and I don't care if your a butcher, baker or candlestick maker its all the same.

Up here where were at ,it's $100.00hr plus travel time, min amount set what ever long it takes.Thats why we are rebuilding a crawler. Don't misunderstand, it takes a lot of money to keep up equiptment, insurance,fuel cost ,wear and tear,so I can't afford the cost of excavation needed around this old homestead. If the guy was happy, and it worked out for you, then it O.K. Not every part of the country is cost fixed for the next state. Not uniform at all. Location is what determines the cost of doing business. Any way, you both made out just fine. JMHO. LOU

50/H is probably not an unreasonable figure for a machine that size. Considering it's not a TLB...
At the same time, a full size TLB around here would bring 70-80/H and the amount of work available has nothing to do with it. This place has been one long ongoing depression since 1970 but it still costs to operate equipment. Why would someone depreciate their equipment, working for nothing, just because someone else is willing to work cheaper? As far as I'm concerned, the rate is the rate and if I don't get that... it sits.
If there's nothing to do I'll go somewhere else.

Rod

Can't change the price of equipment, insurance and fuel.
If you don't charge enough you are either working for nothing. Or drawing out equity in your equipment faster than you are paying equipment off.
$50/hr is ok for a "love job" with friends, some relatives and neighbors.

Point is, you buddy didn't "make $200 in 4 hours". He took in $200 in 4 hours, but probably paid out $12 to $15 in fuel. He used a tractor/backhoe that no doubt he had to pay for at some point. There goes $15,000 to $20,000 (at least) And so on.... He "CASH FLOWED" $200....He "made" chump change (at best)

If you believe deep down in your heart that $200 in 4 hours (an probably nothing else the rest of the day) is good money with a piece of equipment that costly, I suggest you head down to your nearest John Deere dealer, buy yourself a new tractor, buy the hoe, then go to a truck dealer and get a suitable truck, buy a trailer, get insurance (only an idiot would operate any sort of excavating business these days WITHOUT liability insurance), pay taxes, and run a LEGAL business. THen bill your customers $50 an hour.

Then, in a few months, send me a sale bill for your bankrupcy sale so I can buy your truck and tractor at pennies on the dollar.

OR....Operate an illegal, under the table business, risk everything you will ever own to operate without insurance, and work for about 1/3rd of what your monthly payments will probably be, all in the name of good will.

Normally I lurk but this time I feel the urge.
Rigth now I'm building a house--not real big just a one story 2500 sq. ft. home with basement.
The concrete guy almost begged for the job; had had no work since October (we poured in April) and was down to his last four or five workers. He needed the cash.
The concrete supplier thought he would charge over a $100/yd; he decided that something was better then nothing when I just stated "OK I'm going to your competitor for under 90/yard.
My framer is about 20% under all the other bids--they called him last week asking for work.
Brick mason the same thing.
I'm with Gun Guru if you can turn down work then you must be doing fine. Don't start your equipment, get fat and lazy the guy that out there hussling and working for less still has $ coming in and more importantly his reputation is growing.
My framer has two builders standing in line asking for bids--he's growing his buisness.

I'm thinking these subcontractors of yours are burning through equity and will not be around in the long term.

Seems that a lot of folks confuse "fixed costs" with "operating costs". The guy has to make the backhoe payment (or suffer the depreciation if its paid for) whether it works or not; ditto the insurance. Sounds like his actual operating costs were about 25 bucks, so he ended up with $175 toward fixed costs and labor. Not a bad day, especially if the alternative was getting nothing.

In tough times, its the guy who scratches for jobs who makes it through. Who knows, if he scratches enough, he might even be able to buy the "I won't move my machine for less than $XXX" guy's machine at the bankruptcy auction!

Too bad our state and federal govs. don't realize this.

The only difference in those two auctions will be the price of the gear...
The guy that had his auction and got it over with will get decent money for the gear. The guy that wore the gear out working for nothing will have his auction when he faces a major repair that he can't afford. Then he will give his junk away...
And before you argue that good gear will sell cheap in a down market... I can tell you that junk sells a LOT cheaper.

Rod

I own and operate a business where I have (currently) 12 tractors doing highway right-of-way, and large acreage mowing. We get opportunities to fill holes in the schedule by taking small jobs. Frequently those job opportunities come up against "Joe down the road" part-time "I have a tractor and want to play with it" wannabe contractors. Let 'em have it. I'm not into "making" $20 while spending $25.

If a few bucks here and there satisfies a person, I'm happy for you. If you want to run it like a professional business, make a solid living, pay for your equipment, and actually turn a consistent, long term PROFIT, chasing pennies while spending dollars isn't the way to go about it. Cost is cost. Breaking the cost into different catagories to rationalize earning less than you make doesn't feed the bulldog.

Every day you take a piece of equipment on a job, you run substantial risk, regardless of who you are. Equipment breaks, accidents happen, lawyers get involved. Run long enough and it finally happens. Just "getting by" catches up in the long run.

Anyone who chooses to operate under the table, or without insurance, license/permits, ect, just for a little pocket change is running FAR MORE risk than operating a legal business. I'm not willing to throw away a lifetime of hard work for $200.

Well said, from another business owner. Everybody is an expert, except those that are actually doing it. Far too many contractors don't understand their operating costs and are priced too low. It's compounded in this economy. I've pulled out of some markets because the pricing is simply below operating costs. If I'm going to lose money on a job simply to cash flow it, it's probably too late in the game to survive.

You're right when I see these people living in $300,000 houses and riding in $50,000 pickups its no wonder they can't run their equipment for a reasonable amount.Some of these types are going to have to get back to reality especially when there is a whole lot of good equipment around these days cheap and people hungry for work and a footer or trench dug with a $5,000 backhoe is just as good as one dug with a $60,000 backhoe.
The days of being fat and lazy when it comes to construction is over.Its the lean,hungry and mean that will survive.
In my case I have a Good running Oliver 1650D that burns less then 2 gal fuel/hr and a 10ft bush hog in very good condition.I have less then $4,000 in the whole outfit.I can beat the brains out of the guys on price with $70,000 tractors and $15,000 hogs and still make more profit per hr. than they do.And when my equipment needs work I do it myself rather than pay the $75 to $100 an hr the dealerships charge.Thats how you survive in a tough economy.

The bigger the risk the bigger the reward can be.Most people that have made alot of money ,have also lost alot of money a time or two.

Excavating done....A lot of it.

Here are the prices of work done on my acreage site in the good times.

Scrape driveway with excavator, 1 day of work, $1000

Case 450 dozer used to lay in 50 yds of fill sand and 80 yds of limestone...$600, 10 hours time

Dig a drainage trench with a Deere Fel/backhoe (Yellow equipment not a farm tractor) $400, took 4 hours.

I can only laugh when I read some of the replies in this thread. In order to even qualify for bidding on the type of work I do, we have to have equipment that will pass insurance specs, as well as OSHA, and then we have to have enough equipment to be able to mow sections in a given time frame. The "$4000 Oliver guy" wouldn't even qualify to bid on this sort of work. If a guy is satisfied with a few bucks along the way, hoping there's a few bucks somewhere else down the road, and has no ambition beyond just "getting by", I'm thrilled for them. Myself? I'm all about being happy AND providing a good life for my family, as well as 25+ employees. No way I'm settling for banking my future on a flippin' lotto ticket. (ie, taxes for those who can't do math)

Too many people confuse working their tail off with ambition.

Last year I hired a guy with a Case 580 4wd backhoe. $55 per hour. I didn't bargin with him, I have used him a couple of times over the years. I just called up and told him to come over when he could. He was there the next morning. The guy has older stuff, used to have a bunch of equipment, and employees. That was before things changed in Michigan. He told me he hadn't had a job in weeks. Lost his house a few years ago, when his wife got cancer. Guys are just doing what they have to, to survive.