Hi guys, some of you might've seen my other post about how much business to expect for a forestry mulching business in PA with one man and a T770/mulching head. The two key assumptions to my financial plan are 1) that I can consistently work for 30-40 hours weel run time and 2) that people are actually willing to pay $1400/day for work. Following up with those questions, I thought I'd share the actual financial model so you guys could see what I'm planning here. If you're not much for financial statements here's what I'm really asking: 1. I'm figuring $12-15k per year for maintenance. Teeth, breakdowns, hoses, etc. Sound about right? 2. Fuel comes from the specs sheet from the machine, figuring 5gph of diesel at $3.50/gal 3. Commercial auto insurance at $1200/year and liability insurance at $1000/year 4. What do you pay yours guys? I planned for $18/hr but that sounds low for an equipment operator. Side note: If anyone wants financial advise, I'll give it free of charge. It's what I get paid to do, but willing to give it out for free if you guys will help me figure out these numbers? Regards, Matt Pro Forma Income Statement: Cash flows, EBITDA, and margins: Expenses as a percentage of gross expense: Pro Forma Balance Sheet:
I have been doing contract mulching on and off for about 12 years. Just finished a small job a few weeks ago. I have not really studied your numbers in detail, but, I know you are low on hourly pay. I would go up to $25.00/hour. Generally looks pretty good.
I'm not in the mulching business, and I'm not one for these types of financial forms, but here goes. In my experience, the liability insurance is based on your gross revenue. The more work you do, the more exposure the insurance company has. They adjust their rates accordingly. I'm not sure if your hoping to work for big construction firms, or just some farmer, but where you show on year six doing $300,000 worth of work, and only paying out $1,000 in insurance isn't realistic at all. Figure 10% of revenue to cover insurance. Big contractors are going to make you carry big liability policies, and they pay (sometimes). You show a second year of billing 32 hours per week and paying yourself $86,000 a year to do that. And you want to pay someone else $18/ hour to do the same job. Then in the last three years, you want to pay that employee for only 25, 28 and 30 hours, each week. No one is going to work that, they can't live on 30 hours a week. You'll never make it work paying yourself those kind of wages starting out. If the job your doing is worth $18 wages to someone else, do you think you can pay yourself $53/hour to do the same job? If you need $86,000/ year to live on, and year 2 is your full time start up, I hope you have a backup i.e.: someone who is going to bail you out. For the week when you only bill 10 hours. Or two weeks in a row like that. Or a month. You show growth, is this because the need for mulching is going to go up? Are you taking work from someone else? Do you have a in with several big landowners or contractors that have a need that's going up in the next 6 years? Do you have a intimate knowledge of the mulching game and how to do a great job, at a quick pace, better than anyone else does? Are you going to have to go farther and farther away to get more work? Starting out, you aren't going to get the same rates as the guys that have been doing it for years, that everyone knows and uses. You are going to have to get the work by being cheaper or faster or better. Sounds like you don't have much experience, so I'm guessing faster and better aren't going to be your selling points. I read this that you have $24,000 you are putting in as paid in capital the first year, then no added investment, and at the end of 6 years you got $375,879 in total equity built up in the business. Off of one skid loader full time and one more at 1/2 time? I don't think you are being realistic. Because its never as easy as your 6 years looks on paper. Let me go at this a different way. I can keep a crane rental business running. It's never easy, with cash just rolling in the door and I have no idea how to spend it all, but I've always been able to pay the banker and make payroll. But I've been in construction for quite a while, and I know how to get things done with a crane. Have I seen and done everything?, by no means. But I've got a certain level of experience. That's why they call me. So if you're sitting across a desk from me, convince me that the mulching game is where you can make money. I don't care what the forms say, what are you bringing to the table that is going to make this work. In reality, your 6 year estimate means very little to me, because they are just pie in the sky. 70% growth- 30% growth, steady 9% growth, I'm telling you the year is going to come when its a 20% deduction. I've seen guys as operators that could pour coffee with a skid steer bucket. But they can't handle the business and paperwork side. They have a hard time making it, because they are too busy out with the equipment. I've seen really sharp business guys, make it in the construction game, because they hire the right people, and have the paper work side down. But really it takes a combination of both. What's your skill? I'm sounding awfully pessimistic here, and I'm sorry about that. Owning your own business is the american dream, and I love doing what I do. But I guess I think the numbers and growth you show are way out of line, and I think you're going to need something else besides just this to make $, unless/ until you are the mulching expert in your area.
In this area, the going rate for mulching seems to be around $400.00/acre. This rate is with an experienced operator, mulching about 4 acres/8 hour day. This does not include tax or hauling to and from the job. Your machine, in thick conditions, probably will not mulch over 2 acres/day, maybe up to 3 in moderate conditions. Repairs on any mulcher are constant, time consuming, and generally expensive. You probably need to rethink your numbers, and plan for the worst case conditions just to be safe. I do not want to sound negative, but I do not want to ever own a mulcher. Leasing as needed has worked for me, and allowed me to make a little money in the process.
Having helped a friend start a mulching business from scratch I can tell you this much..... They break stuff all the time. He’s got a brand new Fecon, well it’s not now with a 1,000 hours or so, and he’s always fixing stuff. Never major stuff but he’s always got 4-6 hours a week tending to it. It does seem to be a business that’s catching on. I won’t say what he does but it’s areas I never considered. I helped with basic business plan, talked him out of brand new and leasing his first machine and I think that alone saved his arse. Of course I spent time helping him keep the used one working. I’d start a business like that while I worked somewhere else. They’re maintenance intense machines and it gets monotonous....but it supplies me with lots of firewood! Haha.
Crane Operator, Thanks for your response...That's exactly the kind of feedback I'm looking for. Big post so I'll bold the keep takeaways for other readers. I built the model in excel to see what assumptions would rise to the surface and I have a few...you definitely raise a few more questions to be answered so thanks for that. Some bullets from your answers: Copy all on the wages. This was something I was concerned about in my initial assumptions...In retrospect I think you're right. On paper I can split the work any which way but in reality no one's going to work for a company that they can't put food on the table from. Mowingman suggested $25/hr. Is that in line with what you think? As far as backup goes, I do have several contingencies. I think of them more as drogue chutes vs parachutes. I've been fortunate to put away a decent chunk of change and would prefer not to dip in, but it's there if I need it. Regarding growth...This is a major piece of research that I'm missing. I have no idea what the market looks like for forestry mulching services. I've heard of guys getting $1500/day, I know new machines start around $110k so someone has to be paying for them, and when I priced out rentals for a forestry mulching head around me the going rate was over a grand and one of the more popular shops is charging $1450/day just for the head. I have no concrete idea on what the market components look like...ROW, new construction, pasture reclamation, lot clearing, or whatever else? I'm sure the market's a blend of all that but all I have is anecdotal evidence. If people are paying $1450/day (literally, $1,457 for the day rate rental at one place) just to rent the mulching head, without the machine, fuel, delivery, or the operator, then I'd imagine it would make more sense to pay me $1450/day to get the whole job done. The reason I think I'll be able to profit by including everything for the same price the rental house charges for the head is because the rental shop has to carry tons of inventory, has significant overhead, and probably views mulching heads as high-demand rentals that people abuse; In my case specialization would breed efficiency and I wouldn't have the overhead of all the other rental equipment to pay for. These are all things I have to fill into my business plan, but from a business perspective the numbers are where I'm most comfortable so I figured that's where I would start just to see if this could even pencil out. To me, step one is to ask " can this be profitable?" Step 2 is "does the market support my assumptions?" That's where I need the most help from people with more experience than I have. Step 3 would be to design a business model (a product) to test those assumptions in the market...and step 4 is to observe and iterate on the product to improve. I based this business model on a combination of lean startup methods adapted from software engineering and John Boyd's OODA loop...Observe, Orient, Decide, Act. Regarding total equity...This is where I need the experience and advice. On paper everything looks great, but generally speaking I've been successful with my other endeavors because I've overcompensated for lower experience with more conservative numbers. In this case, I'm just not sure where "conservative" starts. The increase in equity is driven primarily by the large cash balance that accrues by the end of year 6...But the free cash flows are REALLY just a function of how much I bring in minus how much I pay out, so it really all comes back down to the two big questions; Can I generate that much business at those rates, and do my expenses make sense? I know those numbers look optimistic, I just don't know where to put things in to make them more conservative and could use some advice/help there. You gave me a piece of the second answer...Liability insurance, so thanks again for that. K ey takeaways from your post; More liability insurance, higher wage for employees, and I think the most valuable piece of all is that I can probably find someone who can operate a machine better than me, which would free me up to focus on growing the business , which is ultimately how a business makes money...By driving and improving a profitable growth engine. Thanks again, Matt
Mowingman, Awesome, thanks for that. So roughly $1600/day sounds about in line with what I've heard...From $1250-$1800/day. Having lived in south Texas (Kingsville) I remember what the brush looked like down there. That stuff looks perfect for a mulcher. Right now I'm figuring 1 hr of maintenance for every 12 hours of run-time, but I should probably make that more conservative based on what I'm hearing. You think maybe 1hr maint/9 hrs run time? Junkyard, What areas is your buddy clearing? There's only so many uses for land out there and "nothings new under the sun" as they say...Only so many reasons to clear a property.
Most of his work has been clearing ahead of developers and on a coal mine ahead of the stripping. Lots of it he can do quicker that they can push, pile and burn.
I usually spend one hour/8 or 9 hour day on just routine maint. Things like fueling, greasing, cleaning filters, cleaning inside the cab, etc. Repairs can eat up more hours daily, and that can be a big unknown. some days, nothing goes wrong. Other days, you may have to replace teeth, change out filters, repair hydraulic lines. That all eats up time. Heaven forbid you have a rotor bearing go out, or bust a hydraulic line way down under the seat somewhere. It can be a crapshoot for sure. I really think if you could do a few rentals up front, it would be helpful to your estimating. Then, maybe you could do a rent-to-own on the setup you want.
That's solid advice, thanks there. So the initial plan is to pick up jobs and get them done over the weekends...T320s, 770s, and CAT 297s-299s are all available local for rent at a reasonable rate however like I mentioned, the mulching heads are pricey per day, so I would shoot to buy a used mulching head and rent the machine. With that setup I could be in it for the cost of a used head and larger trailer. I'm thinking about $30k-$32k there, low 20's for the used head and 7k for a new trailer, a thousand or two for spares to get me started. At those levels I can buy the trailer, finance the head, and if things don't work out in a year then I don't have much to sell off. I've got a call in to a local Bobcat dealer but haven't heard back yet (over the weekend). How much different are the finance vs lease payments? Thanks, Matt
*Similar to your suggestion but I think the sticking point with renting everything is going to be the cost of renting the mulcher.
Quick question for you then since you have the maintenance time pretty figured out. Do you think your maintenance costs are higher than $13k/year per machine?
Skid Pro can sell you a brand new mulcher head for less than $20k. I purchased a new one from them, great piece of equipment. Mulchers should be matched to the flow rate and pressure of a specific hydraulic system. If you rent a machine and a head, they may not be matched. This will affect your performance. This may skew your numbers. $7k for a new trailer? I paid $12k for mine and thought I got it relatively cheap. It is a 26k gvwr dump trailer. Be sure to get a machine with high flow hydraulics and a high flow head if you are going to do this for a living.
I see a couple of items that I would question. My background is in maintenance, repair, value and marketing of used iron. I can't see in your number where you have accounted for big ticket repairs. The most obvious outside of the head is the undercarriage. Compact track loaders burn through tracks and hard parts to no end. I ran the numbers on the smaller units, MTLs 247 - 287, a few years ago and it was more expensive per hour than a D8R. Granted those machines had the ASV type undercarriage and the CTL units have a bit different and more robust set up but cost per hour will be somewhere between $10 and $15 per hour. Generally you will need to figure track replacement about every 1,000 hours. Complete replacement on a CTL bottom at around 2,000 hours. No one that I know of recommends MTL machines anymore. I have rarely seen one of those run more than 1,000 hours and they would need a complete bottom replaced. Another item is fire suppression. Mulching makes dust and in the summer it is dry dust with lots of fine combustible material. You will need to allow for hours per week of blowing out coolers and making sure there is no build up of combustibles in the engine compartments. In my area insurance companies are looking hard at requiring fire suppression systems on machines that acquire a history of fires. You are also likely to have to consider adding guarding to the base machine. Steel screen and guards around the operator are a must when crashing through the woods. Last item is depreciation. There is book depreciation and market depreciation. The market values on CTL machines drops pretty fast if they are only used for a bucket machine. Install a mulcher and run it a few thousand hours and the markets will treat the machine like it worked in a dairy. Your $100,000 new machine will have a market value at the end of five years somewhere in the teens or less. In essence, don't count on any residual value at time of replacement. On the west coast of the US we are living with continual smoke pollution from forest fires so I think the mulching business has the chance of becoming a growth industry. Unfortunately the green movement will make the claims that mulching the underbrush is only trading forest fires, which they consider a natural occurrence, for diesel smoke.
Thanks for that. How is skid pro with replacement parts, any warranty service, and what teeth can you run with that? Cost for replacement teeth? Trailers...I just looked at deck-overs, 20' 20k gvwr. Do you use your dump for anything beside the machine? Might not be a bad idea. How much of that 26k is the trailer itself?
As I said, I am not in the business, so mine gets relatively little use. I think I got a year warranty with the mulching head. The teeth are about $12 each, but their setup uses a bunch more teeth than other units. I do not know if they have different styles of teeth available. I have no interest in this company, I have just bought 2 attachments from them and am impressed with their product and service. Contact [email protected] The trailer is a little over 10k empty. I usually haul several attachments as well as my 287b. The CAT is supposed to be 10,400# by itself, so I am likely near legal limit when I have 4 or 5 attachments in there with it. I do use the dump trailer to haul garbage that I load with my loader. Once again, no interest in the company, just like their product: https://texaspridetrailers.com/product/dump-trailer-gooseneck-deckover-26000-lb-gvwr/ I bought the 8' x 20' with 6' sides, heavy duty floor, and loading ramps for $11,995 new, have to pick up in TX or pay shipping.
P.S. I have a bucket, grapple rake, trencher, auger, backhoe, mulcher, and hydraulic adjustable forks for mine. I have trouble understanding why you want to limit yourself to only mulching when a skid steer is such a versatile platform. I do wish you luck and am not trying to tell you your business, just putting ideas out there. I am in FL. I buy distressed mobile homes, remodel them and use them for rentals. I have to clear overgrown lots, haul garbage, dig the occasional trench for water lines, and dig up a septic tank or drain field here and there. I may put 200 hrs./yr. on my machine but find it invaluable. I don't know how I did without it before.
Thanks for the skidpro advice. I reached out and he got right back to me. Super responsive. I was looking at the Texas Pride stuff for trailers as well, pretty good prices. I think the 20' deckovers were about 8k? I bought my last trailer from one of the small places in NC and will probably go that route again. I have to rerun the bumbers but if I can get a mulcher for 20k vice 30k, that trims expense quite a bit. Looking to do that, buy a new trailer, and rent the carrier. Looks like T320s, the model that the T770 replaced, are renting for 245/day by me which isnt too bad considering there's no maintenance and the entire cost is a tax-deductible expense.
Wrt only going the mulching route, I wouldnt be opposed to branching out, but right now I think the rest thing to do is to pick a single industry and focus on it. If I put myself out there with everyone else offering those services then I have to compete in a commoditized industry. It seems like mulching is a niche industry, which means there are inefficiencies to be exploited.
Repair costs are really going to depend on the hours you run, and the conditions you are running in. I like the comments by John C. about the repair costs. Repair cost is one reason I like the idea of renting up front. You can look over a period of time, and see what is failing, and what the rental company is having to do on a regular basis in the way of repairs. This will help your long term cost planning.
Good point. I ballparked 12.8k running 34hrs a week, 8 months of the year. That was mostly a wag although about 6k of that is likely teeth alone. The remaining 6k would be for all other PM, repairs, and tracks fund. Seems a little light?
So just an update to this thread, I've retooled the model a bit to remove owner salary, increase liability expense, increase employee wages, increase maintenance costs, and now instead of renting everything for the first year and doing it all myself, I'll buy the mulching head, rent the carrier, and hire someone to operate. I think this does a couple things for me; If I buy used, I'll have a little less risk in the equipment since the assumption there is that someone else has taken the initial hit. By hiring someone to operate I can still work my day job, so there's less risk to my livelihood, but the real benefit there is that I can focus on building the business instead of operating machinery. T320s by me are 245/day, and mulching heads are $1450. The rental price of the head is out of the question. In the end, making these changes looks to be a little more profitable. I'll post the updated model shortly. If anyone wants the excel file I can also share that, for those that want to plug in their own numbers.
Here are the updated pro-forma financials... Income Statement: EBITDA/FCF Worksheet: Income, Margin, and Expense ratios: Balance Sheet:
Owner's Equity, CapEx, and Depreciation Schedules: Principle and Interest Payment Schedules: Regards, Matt
One error found in the expense ratios table...I double-counted payroll. Note that the expense ratios is a table comparing each expense as a percentage of gross expenses, whereas the table above gives ratios like fuel for travel as a percent of revenue. I assumed that the more business I do, the more I'll drive...whereas with the expense ratios, it's good to see how much each line item contributes to your total costs...Looks like Salary, machinery payments, fuel for the machinery, and maintenance make up 75% of the total costs. Regards, Matt
I guess I would be interested to know what a monthly rental would be for the loader. Very few people I know rent equipment by the day, unless its a one day only use. I occasionally rent a 10 k telehandler for a job where I can't get a crane into a location. Typically any rent over two days is close to a weeks rent. Two to three weeks of weekly rent is usually equal to a month's rent. I would also look into renting the mulcher by the month vs a day. Typically the larger rental houses really don't like renting by the day, they make it very expensive. I'd look at a monthly, or a leasing cost like mowingman does. There's no way I could pay what the daily rental rate is on a crane, then rent it out to customers with a operator, the numbers don't work. Another part to me that still doesn't make sense- where are you going to find someone that you want out running your $100,000 worth of equipment (truck, trailer, loader, mulch head)? Sure you might be paying $25 a hour. But that's not what he costs you. Workmans comp, unemployment, payroll taxes, etc.. And now you have the business starting out with him working only 16 hours a week for the first year? That's a hobby, not employment. Good operators aren't easy to find, you just can't plug in anyone, and certainly not someone who is only going to work 16 hours a week- would you work for that? None of the employment figures you have here make any sense. The fourth year you show a second employee and neither one working more than 25 hours? No business runs this way- why would yours? Specialization doesn't always breed efficiency- ian from florida makes the case on this point- he keeps busy because he has numerous attachments for his machine and knows how to use them. He doesn't sit still because "well- there's no mulching work right now". He uses the other attachments to do other jobs. And the rental company isn't using the "mulcher rate" to pay for all of the other equipment. They know what the mulcher heads cost, and people rent them because they are going to tear them up- especially someone who only wants to rent it for a day or two- hence the high price. A expensive piece of equipment to rent and repair means high daily rate. That sounds great in a interview in "entreprenuer" magazine, or in a self help book. I'm not sure it really applies here. I have however heard it said- do what you know. If you don't know, hire people that do and stay out of their way. People hire me because I can do the job they need done faster, safer, better and cheaper than they can do it themselves. I hire engine work done- because a guy that does it everyday, can do it better faster and cheaper than I can. I would hire a parking lot done at my yard, because a guy who is good with a dozer can do it better and faster and cheaper than I can do it myself. A farmer may buy his own dozer to clean waterways, because he has time, and the dozer may cost less than having the work done, because of him being able to spend the time himself to do it- it doesn't have to be done to make a profit, he can do it on his own cheaper (in his mind) himself. I buy milk at the store because its faster, better, and cheaper than owning a cow. But I guess I don't find that this chart means any more to me than the last one. You seem to want to show the "profit" available in the mulching game, and I don't deny that there's money to be made there. I just don't see how your particular chart, makes the case that its the game you should be in, when you don't know anything about mulching- except that they are really expensive to rent for the day, and they charge a lot to do it. That doesn't mean you can't become the mulching expert in your area. Or hire the mulching expert. I'm just not seeing anything here that would make me want to invest my $ in you doing it, so why would a banker? And if a banker wouldn't loan you the money to do it, why would you want to invest your own $ in it, unless you don't have to have the $, which is why its important what your wife does, or if you have a uncle/ brother/ father in law that will come in and bail you out if it doesn't work, or- that you are wealthy enough yourself that it doesn't matter. IF you are wealthy enough it doesn't matter, then I guess it doesn't matter what the charts say- because it doesn't matter if it works or not. Buy it and try it.
Thanks for taking the time to write everything out. The whole point of this post was to get some hard numbers to figure out if this is worth it. You'd probably be giving me just as much crap if I said "Hey I think there's a big market out there, so I'm going to just lease a machine and see what happens without planning anything"...It would just be different stuff. Monthly rate for the skidsteer = $3,355, or about 14 days worth of rentals using the same place with the $245 daily rate. I got no idea what kind of work is out there. I threw a few ads up on craigslist and people called me. Is there work out there? Yes. Is there enough work to bring someone on full-time and lease a machine? I have no idea. What percentage of work can be done with a rotary brush cutter for $700/day vs mulcher work for $1400? Again, no idea, but that's pretty important because I can pay the bills on $1400/day. Not so at the lower rate. So I plan for daily rates because the payment on a used truck/trailer and mulching head is a lot less than the payment for all of that PLUS a lease on an $85k machine, and I can't just drop a lease like I could sell off a truck and trailer. Is there a guy out there that wants to work a couple days on the weekend, or wants to fill holes in his schedules because he works four 10's and wants to make it five? Probably. Do I know who he is yet? No. If you're paying someone $25/hr, what's your all-in cost? What do YOU pay for WC, payroll, and unemployment? I'll plug them into the spreadsheet. It's free advice, but it's not super helpful to say "your numbers are wrong" and then not throw me some numbers to plug in. What are your costs to keep someone employed? Even a percentage is fine...2x, 3x the hourly rate. The whole point of the chart is to see how the numbers work out...Cause if they're red numbers, then I'll find something else to do...Best case is the numbers are all black. Second best case is the numbers are all red, and I find something else. Worst case is the numbers are black on paper and red in real life...And that's why I'm asking you all for real-world numbers, and to point out anything I might've missed. I'm making another assumption here...That the land clearing companies that are clearing miles of right-of-way every day with four excavators, 2 Bandit chippers, and half a dozen dedicated forestry machines plus trucks and 20 guys aren't the same companies that are going to come out and cut you a horse trail around your 10-acre farm...Same industry, but very different markets. Did those companies start that way? Surely not. Would it be great to run two CTLs with mulchers all day every day, and pay my guys 26/hr for 40 hour weeks, with a backlog of work out 5 weeks, and plan for that from the start? Sure...But you'd probably tell me that's just as unrealistic as paying someone to mulch horse trails and brushy pastures for part-time loader work. All I'm trying to do here is figure out some real-world numbers to get an idea. No plan survives first contact anyway.
Hey that all being said, the next time I'm in Missouri I'll buy you a beer and you can teach me the crane business!
You should be contacting your state for costs on industrial insurance and taxes for real numbers. You apparently are not going to have any fringe benefits such as medical, dental or retirement. Are you going to supply your operator with any kind of tools? What about providing for his travel time to and from job sites? Back when I ran shops with $18 per hour wages the loaded rate was about $40 per hour. That was state industrial insurance, cheap medical policy, no retirement or 401K matching and one week of vacation after the first year and two weeks after the third year. Mechanics had to supply all their own tools and there was no tool replacement policy. I forgot, the employee paid half their state industrial insurance. Service charge out rate back then was about $60 per hour. Within a few years the rate went to $90 per hour and now it's about $140 for a wrench to insert a key in the door lock of the service truck. Maybe you should talk to the local Operating Engineers Union to check on their rates. It might give you more insight.
Wages vary vastly by area. By me- the 25 would be pretty high wages. In silicon valley, or most of california, or chicago, probably pittsburgh or philly, you couldn't afford to eat. Union or non union makes a big difference too. That said, I kind of figure whatever I'm paying someone on their check, cost me about double that. If you're paying full health insurance, retirement, pension, union scale, figure another third more. I'm not busting your chops here, sorry if it seems like that. If you want to use the crane business as a example, I'm not sure I'd be the one to teach you. But I'll just put this out there, because it might help you. I could make more $ tomorrow, in my weekly check my "business" pays to me, if I went back to working union working for someone else. Now I choose what I pay myself, so that's no ones fault but my own. But my business does pay for itself. The cranes, the shop property, insurance etc, which is building equity- ultimately for me. I may die with nothing but a bunch of worn out cranes, but I'll have fun doing it. My kids can fend for themselves hopefully by that time. But, and here's the big one, I know cranes. I know how to rig stuff, set the cranes up, get into a bad spot, and have all kinds of $ invested in stuff that lays around my shop and I use once a year. I grew up in construction. And I tinker around with rebuilding trucks. And sometimes equipment moving projects, and do a little hauling. Do our own mechanic work as much as we can. I don't take days off. My kids talk about our 1 family vacation. I enjoy what I do and I probably do it too much. And most guys I know in the construction industry that are small businesses put in hours even more than I do. So I guess what I'm trying to say, I'm more concerned on your knowledge, and financial situation, than I am about the numbers in your chart. Because that information, will ultimately determine your bottom line. If you can afford to buy the mulcher, and loader, and pay the repair bills, and either have the $ yourself, or can live really cheap, you can make it, if you know the business. If you start a crane business tomorrow, with no knowledge, its going to be really tough, unless you've got a lot of other peoples money to play with. There's publicly traded crane companies and some owned by private equity firms (some of the largest are) and they just hire the experts, and play the numbers. And the biggest ones have all been in and out of bankruptcy. But I can't help you with those kind of financial game numbers. Right now, I have a peterbilt truck in my shop that's getting a motor swapped. The next stall over sets my biggest crane, which has been down for three weeks, and probably will be for another three weeks while I'm waiting for parts from New Zealand. I've got a pickup broken down out in Oklahoma, that I tore up saturday, that I'm going to go get tomorrow and haul home, to rebuild the transfer case, and maybe the transmission too. I've got a truck in the back yard, that I'm going to turn back into a dump truck, that I spent today looking for a used bed to put on it. And that's just in between/ extra stuff, to the everyday crane stuff. And I guess I don't know how to put all that in your statement? A small business- I've always found- the owner/ boss, really needs to know what he's talking about , or your wasting time and money. Which is fine if you have a lot of money to start with. Can you fix the loader or mulcher if its broke/ makes a big difference on repair bills. Can you tell a customer where you can and can't get a mulcher machine, and bid a job and make $? Bury the mulcher in a swamp or tear the head up on a stand of black locust and lose a week of work and/or a big wrecker and repair bill and its now a ugly month. If you hand a customer a bill for twice the amount of time that you told him it would take, that's the last time you will work for him, or anyone he knows. I wish it was easier for me to give you a better answer, and say "yes your chart works", or "no it doesn't" but I guess I think the business is more complicated than the flow chart, and I don't have enough info to give you a accurate number. Because I don't know what kind of losses you can stand, and what knowledge you bring. If on the first job you do, you tear a track off the loader on a buried fence post. Can you pay the rental house for the track? If you shell the gearbox on the mulcher, or the hydraulic motor, and there's a $15,000 repair bill on it- on the very first job. Can you handle that? What if the very first week, the two year old diesel truck drops a piston, the loader goes down, and the gearbox breaks? Have you got another $25,000? What if you hire someone, who doesn't really know what he's doing (because you don't really either) and he rolls the rental loader, and ruins it and the mower? Can you handle the $80,000? It can be a lesson in the school of hard knocks, and I guess I'm more interested in your knowledge of that school, than what your chart shows for six years from now.
That's fair...All good insight, and it's appreciated because sometimes you can't quantify the best advice. Money-wise I'm not bad-off...got a good job now and have managed to put some away. I can't say I've really had to deal with the school of hard knocks, spent 8 years in the Marine Corps but that was just a lot of fun, got out and went back to school which is how I ended up at my current job. It's fairly easy work to manage but I work 70 hours/week and for awhile I've been thinking that if I have to work this much, I might as well work for myself where the effort I put in actually pays off for me instead of the company I work for. I think you've got good points about misfortune...But I also think those are things all small businesses starting up have to face. There's always that risk. Right now my entire livelihood is decided by one person. I could do the best job in the work at work, but if my boss thinks I'm not worth it there goes my entire livelihood and I'm on the street over a single person's decision, and I have very little control over that for a bunch of reasons I won't get into so as not to sidetrack this thread. I hear you though...my father in law has a small tri-axle hauling company. Hit a deer one day and wrecked 20k in radiators/intercoolers/everything else on the front of the motor cause the deer went straight through the grill. Never saw it coming. You've gotta bend over to pick up the dollar...Just hope you're not bending over at the wrong time, in the wrong place, in front of the wrong dude. So the rough plan is to NOT quit the day job...Rent a machine, finance the mulcher used or start with a $7k rotary brush cutter instead of a 27k mulcher, buy a used truck and trailer because I can carry the payments on all that if I buy smart...Cut brush and mulch on the weekends for Joe homeowner with 5 or 6 acres, and hire someone part time if I can find him to work the weekdays when I'm stuck behind a desk, and figure it out. No one wants to figure things out anymore...they just want to watch other people figure it out on youtube. Ironic, yes, because I'm asking for advice on the internet. But basically, I'm trying to get to a 70% solution with numbers so I can make the first decision. If it works? Then I'll grow the business. If I have too much work for the weekend days and I can't find someone to work the weekdays, and it looks like I have the volume then I'll look at quitting my day job or putting someone behind the machine full time with a leased piece of equipment. But if I can't? Then I'll just take down the ads, sell off the equipment, and stay put at my job for awhile. There's risk here but what I'm really trying to do is build something to test the market, so I can answer the question of whether or not I should dump in a bunch of coin. Once I have an answer there, then I'll start answering the other questions as they come up...Where to find bigger jobs, where to expand, what new markets to get into...Expand the services to stump grinding, and whatnot.
I read threw this, very interesting but what caught my eye was the rental machine. The fear of tearing it up and being stuck with the bill. United rentals rents equipment with a option of RPP. Rental protection plan covers the unknown, I'm not sure of the specifics . I know that rental we cover all the maintenance . Damaged hoses on the equipment side is covered, tracks,etc .There is a deductible but its way cheaper then what I have seen damaged.
Thats definitely a consideration. I got quoets this week for new machines, both to buy and to lease, plus cost of renting and then buying used. One of the things they sent me was a preventative maintenance schedule...so I took the prices, stripped off the labor, and plugged them into my model. The PM including teeth, tracks, and undercarriage comes to about 6k annually per 500 hrs (this is for a mulcher).
Now granted, this is for parts and fluids from a dealer, so they probably have more markup than you would normally see, but it's the first set of big numbers I"ve gotten in awhile so I went with it. It's also the most conservative data I've found. All this to say, under some Bobcat rentals oure responsible for damages and fluid levels...so no hyd oil changes, but topping it off is your job. For 10% of the rental price they offered waived damages up to $1000, then a thousand dollar deductible from damages between 1k and 2k, and then over 2k you paid a deductible plus 50%. Without the actuarial tables (past average damages), its hard to ay if its a good deal. Probabilistically, your chances of exploding on day 10 of a rental are the same as day 1, but the probability of you paying for the bill if you rent it for 10 days of the month are much higher than if you rent it for one, assuming its fully rented by someone else for the rest of the time. On the other hand, you pay a flat 10% markup on the rental contract, so it's possible you could break even. I can figure this out for you guys if you want, just not at 1130pm. One final note...regarding the lase or buy debate, when maintenance is include, over a 5 year lifespan there's only about 2k difference between leasing for 2 years and then exercising your option to buy the machine, versus outright buying a new machine. The narror winner is the purchaser on payments alone. I didnt consider resale since in both cases, at debt maturity you're the owner of the same equipment and you can resell it in both cases. Where you really come out ahead is when the rental yard lets you rent monthly, and then applies 80% of your rental payments as the downpayment. I was given a price of about 60k for a machine with 600 hours. If I had rented at $2900/month for a year, the principal value of the loan works out to around 35k. Amortized over 60 months, the payment was pretty low! If your business has the cash flow to support tha rental payment initially, thats the way to go because you save about 10k at the end. Finally, I did a study on the resale values of used machinery. For a T770, theres no surprise that year and hours together directly influence the price of the machine...but with a hundred listings, when I adjusted for te hours, seting them to 0 (i.e. a new machine), the calculated prie was around 75k. Since all the machines had different options package, I assumed they averaged out. Bottom line: a machine with 0 hours should sell for 75k in the secondary market, and whatever you pay over that is pretty much what you lose driving it off the lot. Give or take.
Appologize for typos, sending frm my phone
Tldr: rent to own if youve got good cash flow, dont pay more than 75k for a new T770, and maintenance on a mulcher is expensive BEFORE you break anything!
I find it hard to believe leasing is any different between equipment and autos. With autos, every part of the lease is negotiable: hours you can have on the clock, initial value, value at end of lease, purchase option at end of lease. Also, when leasing, you only pay interest on the value you use, not the entire initial value. In your case, leasing appears to be your best option. Lease for 1-3 years and negotiate the purchase price at the end of the lease. If the business fails, your lease eds and you do not exercise your option to purchase. If the business is good, exercise the purchase option (or no because you decided you wanted a new or different machine).
Noticed this mentioned above, and it is a great comment. Loss or damage to the rental machine can cost you a lot of money, among other things. The places I rent from require I have an insurance policy to cover any loss or damage to the rental. OR, I have to pay extra for their "Loss or Damage" waiver. I ALWAYS pay the extra fee for their loss/damage waver. It is well worth the price. Some years ago, we had rented a Fecon mulcher. The landowner told me he wanted a certain area of very thick brush cleared. I walked the area as best as was possible, but still hit a concrete and cast iron sewer manhole cover. It tore the mulching head up to the tune of about $16,000. That repair only cost me a $1000.00 deductable, as I had paid for the loss/damage waver. Just another cost of doing business.
TLDR: Leasing for two years buying on a 3-year loan, and then selling at 3500 hours after five years is your best option and will save you about $9,100 bucks. I went back and actually looked at my spreadsheet. I was a little off just going by memory. I calculated the resale prices using about a hundred price/year/hour combinations pulled from various machinery dealers and then applied a multiple linear regression model to calculate fair values based on you using your machine 700 hours per year on average. 7 year-old machine with 4900 hours = $19,129 fair market value 5 year-old machine with 3500 hours = $35,124 fair market value To calculate present values and account for the time-value of money I assumed that rather than buy the equipment, you could just plug your money in 10-year US Treasury bonds, which historically have been considered the "risk-free" investment and are commonly used as a benchmark in finance. I used 2.89% (although in the name of accuracy, today's yield is 2.86%). More on this below. I assumed you got favorable rates on your loans...3.250%. Yes, I know most times you can get 0% interest financing, but not everyone has an 800 credit score. I would show you the actual quote but the numbers are set up using a date formula that removes them and tells you you need an update after several days. They lock their sheets with a password so I can't even remove it. Luckily I did copy the information over to excel before the quote expired: Side note: Now you guys have the lease factor numbers, so you can calculate your own lease payments on any Bobcat CTL by multiplying the lease factor times the sale price if you know it. Three cases here...In case 1, you lease a machine for two years and then buy it for $39,681. Your loan is 5 years, and at the end of seven years you sell the piece of equipment for $19,129 with 4900 hours on it. In case 2, you buy the machine outright for $84,429, tax not included, and make payments for five years. You sell it at the end of year 5 for $35,124 with 3500 hours on it. In case 3, I figured it would be better to show a lease and purchase option over a five year span since a seven-year old CTL might get to be pretty beat up. From both nominal and real cash flow perspectives, this actually looks to be your best option. You lease it for two years then exercise your option to buy. You make payments on it for three years and then sell it at the end of year five. If you want to know what you'll pay in any given year cash-wise, look at the row titled "Nominal cash flows by year". If you want to know what everything is actually going to COST you, adjusted for time and considering that you could've just dumped your money somewhere else (the opportunity cost), look at the bolded line titled "Real cash flow (NPV)". One final note - I didn't include maintenance because all cases have the same maintenance expense. PM is covered a few posts up. I also didn't include tax...You won't pay sales tax on the lease, but you'll pay property tax to the state. When you buy the machine outright I'm assuming you'll have to pay sales tax. Thankfully, you can deduct other tax on a one-for-one basis prior to calculating net income.
Gentlemen, I think we've hammered out the cost of financing the actual machine. Fuel expense can be figured out from tables but for practicality I've just gone with 5gph at local prices. That seems to be the consensus. I also think preventative maintenance has been worked out pretty well. Is there anyone with direct experience on major replacements and repairs? How much is the big stuff going to cost? I think if we can get that piece figured out and I can build another part of the spreadsheet, I'll post it for all to view and we can get a little closer to the true cost of ownership. I think this thread is turning into something that would be pretty helpful for a lot of CTL/skidsteer owner/operators and when it's all said and done I'll be happy to share my model with everyone for them to modify to their own needs. Anyone have some good data on major repairs? Maybe for a longer period like a year? Thanks, Matt
A one machine business won't sustain 2 wages (yours and operators) so it comes down to doing EVERYTHING yourself, finding work, fixing and cleaning machine and operating it. Having a wife or partner who is sympathetic to your cause is a huge plus. I have been in the mulching game for over 12 years and it's one of the hardest jobs I have ever done and at times the most rewarding. But Boy Oh Boy some days you wonder why you got outa bed. Ive smashed bearings and bearing housings, bent rotors (2), had hydraulic pump fail at less than 1900 hours. Then there,s track wear, rubber or steel,( Iv'e owned both). belts tearing, idler failures etc,etc. I consider myself to be a careful operator but in the mulching game the unknowns on the ground are huge, old truck and tractor parts, farm equipment are all fair game and they usually win, It's like they wait to ambush you and are never seen when you look at the job. Hummed I'm not trying to put you off buying or renting mulching equipment but to make you awear it's not all beer and skittles and business plans can be blown up in seconds.
Tones, I appreciate that. It must be worth it for you if you do it? What's the best and worst parts? If you could do it over what would you do different? What areas would you focus on, and what type of work is your ideal job? Thanks for the input!
ROW work has been a good earner even though there's alot of hoops to jump through over here. Doing ROW work you are working in areas that have all ready been cleared and for the most part are clear of junk. Looking back the biggest mistake was buying a new piece of junk and hopping that every time it broke down it would be the last. I should have sent it back and spent the repair money on lawyers. The best is having new client with a new to them lump of dirt that needs clearing and in their eyes looks impossible. I then go in and under state the quality and over state the price and do the opposite. That way the money is always on the gate post and someone else is advertising my business. I love the look on their faces when they see for the first time the land they have purchased.
Thats awesome...that would be a very cool feeling I imagine. I had a taste of that on one of the house flips I did...I used the same agent for the buy and sell side, and very much enjoyed the look on his face when he saw how the place turned out...I would love to see that on the scale you work on. How did you get into ROW clearing? Is it maintenance, or the initial clearing that you do? If maintenance, how often do utilities need that work? Assuming here it's every couple years. Do they also ask for herbicide application?
Here in Australia ROW maintenance clearing is a hard nut to crack and is let out to a contractor for set areas. Contract period is usually 3 years with the mulching taking about 1 year. I don't do tree work and leave that to others, the main reasons are that I don't have employees, don't have the experience and the public liability premiums treble + I'm to bloody old. Everything you do here requires a ticket of some sort, spraying, chainsaw close access tree trimming, first aid etc etc. I really like KISS. Some job pics on Facebook, CTC Mulching
Lots of good info in here from guys that know. Most men that own and use these machines have a higher level of skill than an ordinary worker. It takes a lot of common sense and learing the hard way, - not to over do what your equipment is capable of.. Normally getting things stuck, breaking any and everything sometimes every day you use it. I hired a guy that owned a dump truck and a skid steer to help me and guess what. The first day in my truck while I was in the loader he came with in a hairs breath of rolling my truck or just bending the dump cylinders. HE got pissed because I screamed for him to STOP... DONT MOVE THE LOAD UP OR DOWN STOP.. Dont scream at me he says I know what I am doing Get the hell out of my truck or shut up and do it my way... I would never ever buy this type machinery for the large amounts of money you are considering spending just stepping into this. IF your experience level is what I read as in none, I would bet you $1000.00 up front that you will not be able to turn a profit and it will cost you to own it. It takes learning the equipment and growing into the equipment. It takes years and years to get to the level you are considering and it also takes the ability to preform all the tasks that go along with it. Most dont have it all down. They might be able to sit in the seat but they cant fix it... This means you will need a mechanic and he will be your new best friend and you will just need to start an account with him.... You will also have to wait for him to show up which will slow down your profit making abilities. And rain and machines dont like to mix and you will loose more time and it goes on... And the guys that really make it dont do this 8 hours a day, the day goes on until you are ready for the next day.. Like it could be a 16 hour day or you miss the next days work and so on... And if you get serious you get a backup for all the trucks and machines to not miss work and to pull you out and to recover the broken bits ... and then you cant sleep because the back up is now on the front line.. every lost hour is one you dont get back .. As in providing any useful information for your pricing.. What happens when a 20k repair hits and it will. I am looking at 2 15k under carriage jobs i need right now... And you say let me get a few more hours out of this garbage because it is all garbage and it all wears out and it all breaks and even the paint wears off.. to shiny steel that is then eaten by rust.. I am good with numbers but I could not put down a spread sheet with any value to it. It is just a guess. And there will be so many hours spent by someone other than you, moving the machine, fueling the machine, greasing the machine, fixing the machine, finding parts for the machine, crying about the machine ( well maybe only in my case) cussing the machine and then wondering where is the next job and when... and then wondering when can I get a month off to catch up on every thing that goes into running the machine... But when it all comes together it can and does make money but I would guess 30 to 40 dollars an hour for machine operating cost and that is if you fix it yourself.... and that is not even for a mulching machine that thing must run at WOT and it is just waiting to break itself...
So, one more question: You weren't interested in the diversity that a skid steer provides. You want to focus on mulching. Why are you planning to buy a skid steer and mulcher head? Why don't you just buy a forestry mulcher?
Doesn't need to be that big ^^^^^^^^^^^^^^^:
lots of really good info here where i live you will never see a mulching head there is no use for them so take this opinion for what it cost you. your going to need to be busyier than 500 hours your first year or you wont break even especially if you hire a mechanic for breakdowns. you need to look at some kind of diversity as far as skid steer work outside of mulching that will help with cash flow and if you think mulching is a big market i bet doing small cleanup or other skid steer type work is even more abundant, its not full time just enough to make ends meet. by the end of your second full year in you will be doing well if your making wage for yourself or a little better. these type of business is not for the faint of heart and you have to be prepared for a major set back maybe 2 or 3 in a row. its like crane op said its not that your going to make more money working for yourself over working for someone else its the long game your playing that 15 years down the road you have something to show for it. 10 hour days will be your normal. You will also need tools a compressor all the support stuff somewhere to store everything when its not used, it all adds up really fast. when it comes to spread sheets and projections assumptions and speculation until you personally have some miles under you to answer those questions it wont be accurate for your operation. as my dad has always told me figures always lie and liars always figure. its a great target but dont take that spread sheet as gospel truth. i use excel to figure hourly break down for expenses but i am always updating the history of it. as for as billing and getting paid whats your plan to charge by the hour by the acre or by the job will the money be up front upon completion or net 30 and what happens when someone is 2 weeks or a month late paying you or doesnt pay you at all can you afford that (and it will happen) can you afford to hold 2 months worth of operating expenses with out money coming in. also one other thing to consider is travel time to and from jobs and mob costs as well as what you will be using to haul your equipment with the big skid steers are not light and if you have one or 2 attachments you can end up overweight or needing a cdl and that creates another area of attention i have 2 backhoes out everyday and a miniex part time if we run 5 days a week i have to work 6 just to service and thats not because anything broke thats just to b ready for the next week 10 to 14 hours a day is the norm for us. and i will say this if i didnt do most of my own wrenching i couldn't afford to be in business and i have almost as much money in trucks trailers tools and the shop type stuff as i do backhoes
in my area a guy does this his been doing it for two years. out of the two years he has had 5 months without work and it dint look good for him but through some miracle he was able to pull through just bought a new excavator also. one way you can do this is take on a partner and both of you work it when you can that way you do it 50/50 you can keep it busy plus if you start they can buy into your company and give you some sort of capital.
Hey guys, Thanks for all the replies...been very busy with a number of things so haven't had a chance to check the website, and for some reason I stopped getting notifications to my email that the thread had been updated. Georgia Iron...It's just a machine. Skill required yes, but not rocket science. I've been running skid steers for about 5 years helping out around the in-laws business. Not perfect, but not bad. Can't be any harder than landing a jet on an aircraft carrier and I have just a little experience doing that, so I'm not too concerned about the operating part. Re: Operating costs...At 5gph fuel consumption looking at $18/hr in diesel alone. The all-in cost I figured for fixed and variable costs per hour of operation is about $100/hr in year two. Higher if renting in year 1. Mechanics...Been rebuilding engines my whole life, wrench on all my vehicles, and my best friend's been a Cat mechanic and welder for 14 years and we've already worked out a deal. Could I turn wrenches in a pinch? Sure. But I have a couple options there. AzIron...Great advice, thanks for that. No matter which way you slice it you need a CDL A for these machines...Trailer's used for commercial purposes and it's more than 10k pounds so a CDL A is required. T770 comes in at 10.5k without attachment alone. No way around that one. I need a CDL, and anyone driving the truck/trailer needs one too. Ianjoub...I've been thinking more and more about other uses. There are a lot of fence companies around me. A 12" hi-flow auger would do some work! I've used the std flow augers and you can drill some holes with those. Possible to partner/sub out to them for the holes if they dont already have machinery, or market to homeowners wh owant to do their own fences to save money (which is what I did with my 700' of split rail). Father-in-law's trucking company has a few commercial snow accounts and looking to expand, so there might be space for a snow blower attachment for the smaller commercial lots. The other factor is price...The large frame CTLs with attachments are just less expensive than the purpose built forestry mulchers. I can throw a stump grinder on there and make a few bucks as a value-add service for residential customers. I'm warming to the idea of being more flexible although I still think its important for a business to really focus on one core product line initially. Better to be known as THE guy in the area for at least one thing before splitting off and being that guy that does a little of everything somewhat decent. Catwelder...I found an owner/operator that got sick of the business, sold all his stuff, and works for a golf course now doing their maintenance on the course with their own machines. We talked a lot, and I think if I did it I would partner with him. He offered to work a couple days a week for $23/hr. Doesn't want too much because he likes his free time but he used to work for a land clearing company before buying his own stuff, has a CDL, and knows how tough it is to keep machinery running. If I partnered with anyone, it would be paying him for his experience on the operations side. Mutually beneficial - He pulls my ass out of some sticky situations, and I keep feeding him sidework on my machine. As far as a money partner, no way. I've got that one all figured out and I don't think I'm going to find someone that goes into the business numbers better than I can. I knew a guy that was way smarter than I was at this stuff and his whole point when he talked to people was to ask How do you know if you need a partner? His answer: If you can do it all yourself, you don't. But I probably can't, so it would be great to find someone that knows what theyre doing that would be interested in helping out for a side job.
As I read through your posts. It seemed that you stated you would be buying a nice new machine and equipment to start a mulching business that you were going to pay someone else to run it for you. You have your "Day job". And will you guys check my numbers and give me a few pointers. Now. I see you have your mechanic picked out, and your operator and driver ready and your check book ready. Are you planning to start a company to put all this in so if your new driver plows over someone going down the road you don't loose all your personal wealth? So I guess you have your company ready also... Your comment on operations tells me all I need to know... Who is driving this now? YOU or you new driver. Maybe both. You have discounted the importance of that. Who provides the training for driving this potential rolling killing machine. Your not concerned about someone else operating your machine? You better be.. it WILL make you loose sleep at night. Maybe you missed the part about an experienced owner/operator trying to roll my dump truck on the first week at work right under my nose. I dont know to many guys that do this that are working another job relying on someone to do this for them. Now that I think about it I dont know any.. Most owners are directly and heavily involved. Maybe not in the seat but working to keeping it/them working.. Even the ones that are so rich and they have 1000's of machines, they have men watching every crew.. I guess if you find the right worker it could work, but more than likely he will require you to make him a partner.. so then you now become the bank and your funding this project.. If you said I am going into this 100% and I am going to do it all myself I would think your odds to succeed would increase greatly. I would think it is a great idea but I still would recommend used equipment to hold you operating cost down. Based on your current idea, I would find something else safer to invest in... The short and the long of it is this. You will figure it out and if your math and understanding of how it works is off it more than likely will cost you $10 of thousand of dollars. I just put simple math to buying equipment. How many hours will I need to sit in a machine before it is paid for? Then anything after that is profit... In your plan it will take years.. A lot can and will happen.. If you can net $50.00 per hour on your rig. 150,000/50 = 3000 hours / 40 hours a week is 75 good weeks of running.. before you start making money.. That is a lot of seat time and that would scare me... Be sure to update us on your venture as you move forward. I wish you the best of luck.
id like to add new is not the only way to go you can buy something used with everything on it for half the price
The difference between this and landing on a carrier: The hundreds of hours of training that taxpayers all paid for, then coupled with the fact that if anything breaks, uncle sam doesn't mind paying to fix it. Anything your employee breaks, they don't worry about it, any more than you worried about uncle sam paying for something. I guess we're just trying to be upfront with the potential costs involved with equipment, and that things do go wrong, and all the spreadsheets in the world mean very little. But it sounds like you're getting everything lined up with mechanic and operator. So good luck. Just because I'll throw this in as food for thought: HeavyEquipmentForums When you read the ebay ad, it burned in 2014, he's been paying off the note since then, or the insurance company finally settled. Reading between the lines, he ate the cost. I went and set up a rented mini ex several years ago, inexperienced operator rented it (landscaper), boom up too steep on a sidehill and laid it over, the rental company charged him the full damages to the machine and he took a bankruptcy over it. He's still working as a landscaper, but I'm sure it wasn't easy.
That's really what I was looking for and some guys gave some numbers, but it doesn't seem like there are very many people out there that can say "it costs me $86.72 per hour to run machine x on average"...Or are willing to. What I've found all around on the other forums is that guys know they make money, or they know they're having a tough time making money, but it seems like not a lot of guys really have a good handle on how profitable their businesses are or maybe they're just not willing to share. That's one of the things I'm thinking about...Renting for a few months and then buying the piece of equipment used. Where I'm at, 10 days of work/month would justify a monthly rental...Would give me time to get things going before a major commitment. The other thing about buying used that's good is that at least with CTLs, the machines lose about $10k in value the minute you drive them off the lot. Everything else is very closely related to year and hours (unsurprisingly). I've heard it both ways right here in this thread...Some guys say go out and find someone who knows what he's doing and use him for an operator, someone else said find someone who knows what he's doing and let him tell you how to do things, and you're saying I'm better off doing this 100% myself. Just goes to show that there's more than one way to skin a cat and if you ask three people for their opinion, you'll get three answers. Also just want to clear this up...I'll be running the machine primarily, with someone filling in when needed. There's no plan to be an absentee owner, or the bank, or just funding this project. I appreciate what you're trying to do because that's what I asked for. What I'M trying to do here is plan for those things. That's not me saying "Well I'm going to set aside $8k for a crane to come out and right my machine, and 15k for the repairs to the dumptruck, and 10k for whatever"...It's me saying "Alright, three people spent about 11 grand on big things, so I'll add 11k to my yearly costs as an allowance for major F ups." Then I'm going to take all the quotes and hard numbers I have, add in all the maybes/buts/allowances/ and divide it all up to get a cost per hour. That's really all I'm trying to do...boil this stuff down to a cost per hour to figure out if this is a profitable business or if I should just use my money for something else. Please don't get hung up on the spreadsheet...It's just a way to put all the information in one spot.
Time to stop talking about it and just go do what you want to do.
I think you're right about that.
I went out and did it on my own I rent all my stuff since the hurricane is here ive got a mini and a skid rented and a dump truck rented. I got about 20 calls for jobs which I figure I might get about 5 of them which will pay for the rental. honestly no risk no reward im gonna be buying a used mid size excavator next year plus the dump truck. I might be full time into it or might be part time still it just depends on how this year goes and how next year starts. guessing your number on paper and your actual numbers two very different things. I assumed id make a certain amount this year and ive went over that and still have 3 months left. writing it on paper doesn't mean it will happen might make you wanna jump into faster but paper is just paper you gotta go out and work for it.
It will be interesting to see how reality matches up to your projections. Let me know how it goes, as I'm looking at going a similar route, but for work on my own property. Good advice here, even if your root question was not answered. Consider talking with some of the operators near your area, see if they will share their rates as you don't want to undercut them, and rates are seemingly very location dependent. How heavy is the competition in your area? Talk with some local contractors - how do they get lots cleared and can you save them money by avoiding hauling, burning, etc. Work the other facets of your business plan while filling in the equipment blanks, and maybe accept that nobody can tell you because it changes so much from month to month as Murphy visits. Do you have a significant other, and what is their risk tolerance? Are there any operators in the area getting on in years and looking to take on an "apprentice"? Maybe YOU are the weekend $25/hour guy for a year or two while you learn the ropes. Check on the bulletin board at the local builder's supply (the real one, not just the consumer one). Ask around, as a well known, skilled operator might not feel the need to advertise. If you are on YouTube check out Clevinger Forest Services - he was a helo pilot so you might talk the same talk. Good luck. (Change, adapt, improvise and overcome!)
Also if I did not mention this before, the answer might be to find the right 80 year old guy and buy him out, machine, client list, phone number and whatnot. Or even help him out as the sort of apprentice that will take over the business eventually.
Its easy to write down projections of this and that but they rarely amount to reality. I recently started a mulching business about a year ago, buying wht appeared to be good equipment. A year later im nearly bankrupt, my contract took 3 times longer to complete due to mechanical brekdowns and **** poor manufacturers support. A skid steer is a toy when it come to mulching and it will be very difficult for you to turn a profit because those small machimes eat parts like nobodys business. My machines are large purpose built or converted units. I havent even worked this season due to repairs and backorders of parts. Wish you the best in your endeavor.
Thanks for posting that daveyclimber, I hope things turn around for you. Its never fun when things don't work out the way you would like, and it really stinks when the things that go wrong are out of your own control.
But mulching trees sure is a lot of fun.
This has been an interesting read. I’m curious how it has worked out?
What brand of dedicated machines do you have ? The 2 best days that I owned one was the day I purchased it and the day I sold it.
I got to agree with the downsiders here for a couple reasons. 1st, before we even read this is not a one man operation, this looks good for someone already in the biz with a trailer to start with. I am all for specialization and efficiency but you got to get there first.
I have seen some business sprout from a single piece or 2 and I would be willing to bet most of they wouldnt have penciled out at the start. Some guys got a gift, some work really hard, some luck, some timing etc. I kind of got sideswiped in some sense and never really went back to my career as I should have at some point. I was too busy,, ha. Then I thought I could coast, that might not have been such a good idea. I might have to start over, I think I might operate most of it out of the back of a pickup for the most part.
Me too. I've always found those ProForma things nothing more than BS compared to real life and only used for getting money from lenders. Unless you work like a dog, manage your money like every penny is your last and always be ready, both mentally and monetarily, for the worst possible scenario to hit, few can survive this business. I'm on my 24th year of working solo and my 24th year of mulching. Do I miss my employees and the associated paperwork? Almost never. It has not been easy but I enjoy what I do and that is what kept me going. It's been a hell of a learning experience. The rewards are customer appreciation when they see what a value that I can add to their property and, most importantly, freedom. Freedom to be self reliant and live the way I want to, not at someone else's beck & call. If you tire easily from endless maintenance, perpetual repairs or eternally long days, this is not the business for you to consider. There are easier ways to earn a living but you won't catch me surfing a desk any more than I have to. I can't count how many have tried to get into this business just to find out they don't have the persistence and mental fortitude to make it work. They come with visions of grandeur and leave with one of life's most expensive educations.
If you think mulching is spendy & draining, I have a couple towers I will sell ya!
Great thread. I would be nice if "Hummed46" would check back in about how it went the last 6 years since he asked for advice. Honest disclosure is badly lacking in startups. People love to discuss their startups but they will almost never give actual numbers to go by. In truth, almost none of us are in local competition with any other so there's no real reason not to share the facts. Having read this thread I think the downer comments are justified, a free dose of reality when you need it. Hummed46 needs to be aware mulching is not a likely business to succeed in general and if it does, it will be from working his ass off and wanting it badly enough to take whatever life gives. Heavy equipment services are never a good side business. The idea of being a white collar worker running one by remote control is silly. I started my one-man-show bobcat business a few years ago and everything stated above as far as reality checks is dead on true. Do not hire a driver because you cannot afford their learning curve if they ram your mulcher or truck into something, or get themselves in the ER on your dime. Be an owner operator until you know the ropes well, and even then be onsite every couple of hours seeing what's going on. Running a preliminary spreadsheet is silly, you have no idea what the real numbers are. Wait for that until you have a year's data to plug in. Buy your machines used and spin wrenches yourself. This is not a good business to hire out to workers or dealer service departments. The first year is the hardest for any small business. You will probably want to quit even if you do a fairly good job the first year. Write down your lessons learned. I wrote down about 35 lessons learned the first year so I would understand them thoroughly and not repeat my failures. The exercise helped enormously. In this connection, the single biggest lesson I learned was YOU take the most risk not the customer.
I'm curious as well. I'm getting ready to take the plunge but not as a business though it might as well be. Where I live, there's no rentals available. I picked up a Terex PT-100F at an auction with 2000 hrs on it. Previous owner passed away in the middle of changing the engine. Missing parts etc but I got it dirt cheap. I've spent almost a year rebuilding it and now am looking for a mulcher. Like I said, I'm not going to operate a business but I have 200 acres, about half wooded that are over crowded needing thinning, edges that need pushed back to reclaim pasture and a 10 acre patch that used to be pasture now thick with cedars ranging from 10 to 50 feet. I couldn't afford to hire someone so I'm going to mulch it myself. I'm a cheapskate so I already got the CTL cheap and can do my own maintenance. I'm in the middle of nowhere so after research, the drum mulchers make a pretty finished product and don't throw as much as far but they are more expensive to maintain so I'm planning on going with a disc mulcher instead. They are faster, break down less and cheaper to buy. I have about $15k in my CTL after all my repairs. I'm hoping to get a Diamond 60" piston pump disc for under $18k. (I just missed 2 recently) I'm just trying to figure how much I'm going to be spending on repairs etc. I can't find much info, especially on the disc mulchers. Seems like teeth are the only thing anyone talks about as far as maintenance unlike the drum guys who say 1000 hours and you have to do bearings etc. I'm also wondering if I could run knives on the top and outside of the disc but run carbides on the bottom. This way I can cut trees, suck them in the top like usual where they basically explode but then the carbides on the bottom would last longer for back dragging, taking down the stumps etc. I'm just afraid I'm going to get in over my head and might be better off selling the CTL and accept the land has been like this for years before I got it and stay solvent.
I am interested to see what these bring next Sat. 10/12 10-13160 (Equip.-Implement misc.) Seller:Private/Dealer GIYI GY-72 PRO QUICK CO | Heavy Construction Equipment Construction Equipment Attachments | Online Auctions | Proxibid GIYI GY-72 PRO QUICK CONNECT SKID STEER MULCHER ATTACHMENT (Seller says never used.) Serial#:GY-72240888 Hydraulic unknown if operates. **Full payment due next business day! Please read terms of sale before bidding** tmauction.proxibid.com 10-13166 (Equip.-Implement misc.) Seller:Private/Dealer GIYI GY-72X QUICK CONNE | Heavy Construction Equipment Construction Equipment Attachments | Online Auctions | Proxibid GIYI GY-72X QUICK CONNECT SKID STEER MULCHER ATTACHMENT (Seller says never used.) Hydraulic unknown if operates. **Full payment due next business day! Please read terms of sale before bidding** tmauction.proxibid.com
I would stick with a well known brand name mulcher. Something like a Fecon, or FAE. You will need teeth and lots of parts. So, stick with a brand where parts and teeth are readily available. I am sure those listed for the auction are some of the best that Chinese prisoners can make. Getting parts may be tough though.
I bought a Skid Pro mulcher years ago, made in USA. I thought it was a good implement and far less expensive than the big name brands. Dick Machinskey (*) was my rep there. Great guy to deal with.
I agree with mowerman. From everyone I talked to, they said stay away from the non-name brand mulchers. There's a good deal on a FAE drum near me. Great model with all the bells and whistles (bite limiter etc) but it has 1000 hrs on it and I read they are about due for rebuilding about then which can run $10k. Drums seem to be Fecon, FAE, Denise CEMAF. Discs Diamond and CID. I see a lot of cheap Bobcats, Deere and CAT drums. I read Bobcat is just good relabeled Fecon but they modified it so you have to use expensive Bobcat teeth. I can't find who makes the Deere ones. Unfortunate since I have 5 Deere dealers around my location. Since this morning, now I'm starting to wonder if I could get by with a Danuser Intimidator tree puller. Slower and I'd be back to burn piles but less stress on the CTL, less fuel burn since I wouldn't be full throttle all day and no stumps when I'm done. If nothing else, it would keep me busy until I found a bargain on the mulcher I want.