Computing an hourly rate

[Electra_Glide]

Well, I made a new contact tonight. The guy builds custom homes and does light commercial. He's looking for a new excavating subcontractor and he wants me to give him an hourly rate that he can use for bidding purposes. Says we'll get together and agree on a firm price for any work, but he wants the hourly rate to use for his bids, so he doesn't have to involve me every time he puts a bid together.

I understand how to compute an hourly rate by adding up all my costs of owning and operating the equipment, plus my "salary", plus my overhead, but I'm wondering how may hours to divide it across. Since I'm just starting out, I don't have a good database to draw from.

For example, let's say my monthly expenses are $2000 per month (remember, this is just an example). There's going to be a big difference if I divide that by 160 hrs. (20 days @ 8 hours a day) as opposed to 80 hrs. (10 days @ 8 hours). Since your hours are variable based on how many hours you work, what's a "reasonable" number to use for this exercise?

Looking for any advice you guys would be willing to share. I'm not asking for guys to offer their hourly rates since I know that's going to vary based on where you're located and your local competition, but if you want to share, I'm not going to stop you... :drinkup .

Thanks in advance...

Joe
Kantz Excavating and Contracting

 

[PSDF350]

I dont have nearly the business savay as most of you guys. But here is how i would figuire it. First figuire out the least amount of hours you figuire you should at the least be able to work equipment. Then figuire out expenses every month (insurance fuel payments and whatnot) so say you Figuire you need to make at least 5k a month and can work maching at least 60 hours a month. 5000 divided by 60 is 83.33 an hour you need to make. Then figuire what salary you need to make for running equipment so say charge 125 an hour. Then anything over 60 hours or whatever # you come up with will be profit for company. Hopefully someone else with more of a business mind will jime in.

 

[Dwan Hall]

First find out how many hours he is offering a month. Then brake down you hourly rate to fit those hours. Tell him if he goes over the set hours 10% or more for the month you will give him a discounnt and if it is under thoes hours by 10% then there will be a surcharge.

 

[CEwriter]

You might find some useful insights in these stories about setting equipment rates. They're written in the context of internal rates used to charge equipment usage costs within a company, but I think some of the concepts apply when using the rate to charge an external customer . . .

http://www.constructionequipment.com/equipexec/ce04ea005.asp

http://www.constructionequipment.com/equipexec/ce04ca005.asp

Have a look at this index of Equipment Executive stories. There may be others that are even more pertinent to your needs.

http://www.constructionequipment.com/equipexec/index.asp

For what it's worth, I can give you national averages for annual hours of usage for most earthmoving equipment. For example, the average backhoe loader works 909 hours per year, the average crawler dozer works 1,110 hours/year, the average hydraulic excavator works 1,194 hours per year. Just let me know which machines you're interested in.

Best of luck,

Larry

 

[badranman]

Hey CEwriter, how about a mini-x and a skidsteer? Thanks.

 

[BKrois]

Well, every town has different hourly machine rates, due to my location, the rates are more expensive than a lot of other places, Here are some examples, these are average prices for machines on hire with an operator

Mini excavators- $65-100 an hour
Backhoes- $75-100 an hour
Skidsteer $60-80 an hour
120/150 Size excavators $125-175 an hour


Not really sure on the bigger machine prices, but theres some to start.