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  1. #1
    Join Date
    Dec 2007
    Location
    Cortez, Co
    Posts
    312

    Default Big ticket items

    There are some expensive items that most GC's do not own but rent as needed. Such as scaffolding (not a few frames but enough to stage a whole house), a large compressor to run a 90 lb. hammer, or maybe a Bobcat.

    Normally if I did a job that needed to be scaffolded I would have the company come out and it would be a line item on the job. Pay for erection and rental on the equipment. Let's assume that I owned that equipment for whatever reason. But I only needed it on every fourth job.

    Would you figure a cost to rent yourself the equipment (labor being accounted for elsewhere) on the jobs that you used it? Or would cost be in your overhead that you applied to every job?

    Hope that's clear,

    John

  2. #2
    Join Date
    Dec 2005
    Location
    Michigan
    Posts
    7,457

    Default Re: Big ticket items

    It's clear except the purpose of the question.

    If you are asking "how do I run my accounting internally?", then it's up to you and your accountant, i.e. you amortize it and that figures into your overall overhead. Or you can set up a separate company that owns the asset and rents it to your construction company.

    If the question is "how much do I charge the customer?", then it's up to you to figure out the most efficient way to run the business. You simply have to figure out if it's cheaper in the long run to own or rent.

  3. #3
    Join Date
    Oct 2006
    Location
    Greensboro, NC
    Posts
    1,538

    Default Re: Big ticket items

    You have to decide where the cut off is. If you have a bobcat or sky - jack that you purchased for a job or two and is sitting, yes, price out the prevailing rental rate for it whether in your proposal or a line item in the bill.

    Sounds like the equip is sitting. If it was in service most days you would increase the crew / work item rate to pay for its ongoing upkeep. If you did not....? An electrician does work in a whse will charge 60 a day for the sky - jack even if he owns it.
    Steve

    "Get three coffins ready" - A Fistful of Dollars 1964

    http://youtu.be/KZ_7br_3y54

  4. #4
    Join Date
    Nov 2004
    Location
    Boston, MA
    Posts
    4,738

    Default Re: Big ticket items

    I can you tell how my father-in-law and his brother-in-law built their company.

    They bought cheap equipment at auction and such, then formed another company that owns it, then they lease it to their concrete company.

    They pay cash for equipment, they own millions of dollars worth of equipment, their pumpers they bought new from a dealer, they own 3 large boom pump trucks- a million dollars right there.

    Many pieces of equipment still has the name of the company that went out of business on it, crossed out.

    They buy office equipment, large printers and such. They own so much equipment, my FIL just bought $250k in forms, the list goes on.

    Everything is owned outright, old school style.

    They are in an elite league of "EARNING" what they own, the massive empire they built starting with a wheel barrow in my opinion far out weighs the opinion of any fancy shoed accountant.

    Hard work, patience, own it outright and built the company over time.
    "First we finish the game, then we’ll deal with the Armada!"

    Sir Frances Drake

  5. #5
    Join Date
    Jun 2004
    Location
    Friday Harbor, San Juan Island, Washington
    Posts
    13,029

    Default Re: Big ticket items

    John, it seems like your question is about getting paid for owning expensive equipment that most other guys rent. If your competitors are going to rent stuff and charge the customer for it as a line item (like you probably used to do before you owned it), how can you charge the same amount and divert the would-be rental money to yourself?

    I can relate--I own a lot of scaffolding and my customers don't have to watch me drive to the rental place to pick it up, then charge them for the time and costs of doing so. I own other stuff that other contractors don't even seem to know about, and use it on my jobs to benefit myself and my customers.

    I guess the answer is, when you make a large purchase, you do so with a plan for recouping the cost. If you are doing fixed price work, presumably you can simply put in line items for equipment you provide to the job, at the rental rate. That's what I do for scaffolding. If you're working cost plus, it's harder, because clients may be resistant to seeing charges for company-owned equipment on the job. I sometimes add them anyway, and tell people that they can either pay for mine or I can go rent some at a higher cost. Of course, whatever you are using for markup should honestly account for all the costs you have, in either pricing scenario.
    Bailer Hill Construction, Inc. - Friday Harbor, WA
    Website - Facebook

  6. #6
    Join Date
    Dec 2006
    Location
    Upstream
    Posts
    10,019

    Default Re: Big ticket items

    Timely article in the latest ENR on this very topic.

    http://enr.construction.com/products...-STOPSHOPS.asp
    Richie Poor

    See no evil, hear no evil, speak no evil, value engineer your unit prices.

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