Mowing How to figure Rate Per Hour

[Rhino172]

I'm new to this forum but was wanting to know if someone that is running a legitimate bush hogging business could explain to me how they come up with an hourly rate to cover expenses, their hourly wage, taxes, insurance, depreciation in equipment, etc. I just started doing this on the side and I want to be an honest person but I also want to make money. Someone's help would be greatly appreciated. My equipment is a New Holland TC45 FWD, rhino172 6ft cutter, dodge ram 2500 diesel, 18ft bumper pull 12000# GVWR.

Thanks

 

[smstonypoint]

Ag.economics departments at the various land-grants provide information regarding estimation of the costs of owning and operating farm machinery. Here are two examples.

Estimating Farm Machinery Costs | Ag Decision Maker

http://faculty.apec.umn.edu/wlazarus/documents/machdata.pdf

Note that liability insurance for commercial purposes would need to be added.

The IRS standard mileage rate for business (56 cents per mile in 2014) is an estimate of the average total costs (ownership + operating, excluding labor) for autos, vans, and light trucks. You could use that value as a starting point in estimating your transport costs.

Steve

 

[Rhino172]

Steve
Thanks for the info. I came up with $50 an hour for the tractor and my wage. Have not included cutter yet or transportation fee. Next question if you were to hire someone how would that be figured in so that you make your wage plus can pay them say $12.00 an hour, without over pricing yourself.

Thanks again

 

[LD1]

This will be long, but it is a long and complex issue:

First, you need to figure all maintenance on the tractor. Service intervals, etc. And my numbers are assuming no major breakdowns for 6000hrs.

My engine oil and filter get changed ever 100hrs, and cost $50. So thats 0.50/hr

Hydraulics get done every 200hrs, and cost $100, so thats 0.50/hr

Air filter and fuel filters, misc grease, gear oil for bushhog, ...another 0.50/hr

Tires. Figure fronts are good for 600hrs and cost $400 to replace...0.67/hr
Rears are good for 1200 and are $600 to replace...........................0.50/hr

Bushhog maintenace, blades, bolts, etc. Maybe $100 worth every 200hrs....0.50/hr

Fuel. Mine sips 1gal/hr. So $4/gal....................................................$4/hr.

Now the tractor. Figuring at 6000hrs, my $20000 equip will likely be bout worthless. At least have to assume that in the business world, because at 6000hrs, cost of repairs may exceed the value, and would be looking for full replacement anyway. So....just owning the tractor and using it....3.33/hr

Add them all up, and we are at $10.50/hr just for running the equipment. So its clear the guys that are charging $25/hr or whatever beer money, arent making squat.

Then you have to figure truck expense. The IRS # is pretty close, but a little low IMO for a diesel, and a trailer. To include towing and the trailer, you are closer to $1 per mile for expense. plus your time. So if you average 45mph towing to and from the job, and pay yourself $20/hr to drive, you would need $65/hr just to drive there and back.

Your cost per hour for business insurance is going to vary. The insurance is a fixed cost. But the more hours you work, the lower that number becomes. If your insurance is $1000/year it aint gonna matter weather you work 100hours or 1000hrs, your insurance is still going to be $1000. but cost per hour goes from $10/hr to $1 per hour.

I'll continue in another post...

 

[mikehaugen]

I would say take what your normal wage would be and subtract employee cost (true cost, not what you pay hpurly) for your new wage... charge the same. I don't think it's reasonable to expect the same personal wage having someone else do the work as if you did the work.

Of course you would also have to figure workmans comp expenses and/or any benefits you decide to offer. I would assume your insurance would also increase if you hired on. I have heard figures anywhere from 50-100% more than payroll for other expenses.

 

[LD1]

Continued....

At the end of the day, it is nice to know a ballpark of what you need to make per hour. But I dont bid the job like that. I dont bid by the acre either. Just give a flat estimate and stick to it.

My target is $50-$60 per hour. And that isnt job time. That is from the time I leave my house till the time I return. I would expect yours to be close. And that works out to paying myself 25-30 per hour.

If you want to hire an employee, you really cannot raise the rate to the customer. cause they dont care weather its you out there mowing or an employee. Just because you send an employee shouldnt cost them more. It should make YOU profit less. Cause the idea behind an employee is to free you up to do OTHER things to make business grow. So instead of you making $25-30/hr to mow, you make $10-15 for doing nothing. With 10 employes, you could in theory make 100-150/hr for doing nothing.....

Back to the job bidding. IF you tell someone $60/hr, and that is from the time I leave my house till the time I return, I doubt you will get many customers. People just have a way of flipping out when they hear hourly rates that are double and triple what their "day job" is.

I dont bid by the acre either, cause they are all different. 1 acre of overgrown lawn around a forcelosed house, with septic covers, well, trees, hidden bicycles, etc takes far longer per acre to mow than a 10 acre open field with knee-waste high weeds.

After awhile, you will get good about assesing a job, acreage, and know how long it is going to take you. Take that # times your $50-60/hr, and give them a flat rate. I just did one yesterday. 6 acres+/-, 45 minute drive. I knew it would take 2.5-3 hours or so to mow. So 2.5-3 hrs + 1.5hrs travel = 4 or 4.5hrs. I charged a flat $250.

Mowing 6 acres for $250 sounds a whole lot better than telling someone you have to pay me $60 per hour for mowing AND travel.....

 

[LD1]

One more note. Not sure what you expect to be mowing, but I would be looking to get a heavier duty cutter.

What you have will be fine if you only plan on mowing open pastures that are maintained yearly. But there will be many jobs with saplings, briar thickets, etc that is really more than your cutter is made to do on a daily basis.

 

[mikehaugen]

Now the tractor. Figuring at 6000hrs, my $20000 equip will likely be bout worthless. At least have to assume that in the business world, because at 6000hrs, cost of repairs may exceed the value, and would be looking for full replacement anyway. So....just owning the tractor and using it....3.33/hr

Don't forget that what ld1 posted only pays for what you already have. If you want to get and stay out of debt and be able to grow, you should double this figure so you have money to buy again when this one wears out.

Btw ld1... do you consider 6000 a reasonable life expectancy for a cut without major repair? My estimate was 5000 but was only an estimate. I know you've been doing this a while and would trust trust your guess more than minen

 

[LD1]

The 6000 is strictly just a guess. And I figure its pretty close. I do have a kubota which is known for good long lasting engines, but they are all different, and how they are maintained and used is all different. So its a big unknown until something actually happens

But in the grand scheme of things, even if it only goes 4000hrs, it only makes a $1.67/hr difference. And when targeting $50-$60/hr for business, theres no point in splitting hairs.

So figuring the maintenance, tires, etc at the intervals I mentioned, with fuel and all, $10-$11/hr for operating a tractor (and that includes the 20k cost) at the end of 6000 hours, I have 60,000-66,000 invested.

But charging 50-60/hr, the gross will be 300,000-360,000.

I guess what I am saying, is that the equipment and fuel for the equipment is a relatively small cost in this business with this sized equipment. Tow vehicles, trailers, tires, insurance and maintenance for them....that is a bigger expense than the tractor that actually gets the job done.

 

[smstonypoint]

Steve
Thanks for the info. I came up with $50 an hour for the tractor and my wage. Have not included cutter yet or transportation fee. Next question if you were to hire someone how would that be figured in so that you make your wage plus can pay them say $12.00 an hour, without over pricing yourself.

Thanks again

If you were to hire someone, you would include their wage + associated employer costs (FICA, worker compensation insurance, etc.) in your operating costs. The price you charge above your total costs would then be the return to your management and the risks you have assumed.

Steve

 

[smstonypoint]

Now the tractor. Figuring at 6000hrs, my $20000 equip will likely be bout worthless. At least have to assume that in the business world, because at 6000hrs, cost of repairs may exceed the value, and would be looking for full replacement anyway. So....just owning the tractor and using it....3.33/hr

Don't forget that what ld1 posted only pays for what you already have. If you want to get and stay out of debt and be able to grow, you should double this figure so you have money to buy again when this one wears out.

LD1 did include depreciation ($3.33/hr.), so he is pricing in replacement. However, he did not include the opportunity cost of the funds tied up in his equipment as an ownership cost. Assuming an initial investment of $20,000 and zero salvage value, he has an average investment of $10,000. If he can earn an annual return of X%, he has an annual opportunity cost of X% * $10,000 in that investment.

Steve

 

[Rocky Hoffler]

The previous post all contain good info. I do work my tractor for hire saw a sign posted on the side of road pasture mowing 25 dollars an acre so if this person can mow 2 acres an hour they make 50 bucks pretty simple math. but I don't think they will stay in business very long at this rate. My point is there is always some one who will do it cheaper. but don't set your self up to fail. Whatever you charge if by the hour or job price you need to keep half for equipment repairs and replacement then buy fuel and pay yourself out of rest so if you figure you need to make 30 dollars an hour and fuel is 5 dollars an hour at least 70 dollars an hour. if bidding by job especially if it is new to you figure how many hours it will take to do job and traveland then add to that because it seems as though it always takes longer than figured. If you get every job you bid on you are probably too cheap.

 

[smstonypoint]

Of course you would also have to figure workmans comp expenses and/or any benefits you decide to offer. I would assume your insurance would also increase if you hired on. I have heard figures anywhere from 50-100% more than payroll for other expenses.

In June, private employers had employee benefit expenses (including insurance, FICA, paid vacations, etc.) that averaged $0.43 for every $1 of wages.

Employer Costs for Employee Compensation news release text

Steve

 

[LD1]

If you get every job you bid on you are probably too cheap.

Good point right there.

I get 50-60% of the jobs I bid. And thats about perfect. Anymore And I wouldnt have time to get them done in the days I have available.

Size of equipment and how good you are with it also comes into play.

I do one job that is 10.5 acres in the form of 3 different horsepastures. Takes me ~5hrs to do the job and 1hr each way travel. I bid $400. Same as the guy she used to have do it but he was older and retired. He was using an old ford (probably N series) and a 5' cutter. With it being 3 pastures, vs a wide open field, there is alot mmanuvering. And the N's were limited on their speed as they didnt have a good gear selection. It took him over 10 hrs to do the job. So another reason not to bid by the hour. Cause while I am at 57 per hour (400/7), if his travel were the same as mine, he would be at (400/12) $33/hr. So even though his equipment cost is less, its hard to get at $25-$30/hr to pay himself a decent wage for profit.

So having good equipment and knowing how to use it is very important if you want to succeed.

 

[Rhino172]

Hey I want some opinions on this, I recently did a 19.54 acre job for a radio company, they have asked me to maintain plus spray around guide wires, building, etc. I gave them a price of $1500 a visit to maintain it. Does this sound like its way to high. Keep in mind I don't have a batwing bush hog yet, so I'm mowing with a 6 foot cutter. Averaging around 1.5 acres an hour. Let me have all your opinions.

Thanks

 

[LD1]

Sounds high to me, but then again I dont know what you are into with the spraying. So I can only speak to the mowing side of it...

20 acres +/-......what kind of conditions is it? When is the last time it has been cut?? If this is the first cutting in a few years, then yes it is going to be slow going the first time. But if it is something they want done a few times a year, you should be able to average closer to 2.5-3 acres per hour with a 6' cutter.

General rule....cutter width x MPH /10 gives you acres per hour. 6' cutter @ 5 MPH / 10 should be 3 acres per hour.

To only average 1.5, is averaging 2.5mph, which is sloooowwww. Like foraging through 10' high weeds/briars/saplings slooooow.

So......if I was bidding 20 acres, assuming a few mowings per season and fairly smooth ground and not a ton of things to mow around....6-7 hours. Assuming 1hr each way travel time (with loading and unloading)....8-9 hours.

So my bid would be somewhere around $500. But thats assuming optimal conditions. And frequent mows. Then add whatever you charge for spray.

Even if this was a first cutting and took 2x's too long, That still wouldnt put my bid over $1000

 

[LD1]

Forgot to ask, You said you recently did the 20 acres and they asked you to maintain it.....what did you charge the first time and how long did that take you?

 

[smstonypoint]

Hey I want some opinions on this, I recently did a 19.54 acre job for a radio company, they have asked me to maintain plus spray around guide wires, building, etc. I gave them a price of $1500 a visit to maintain it. Does this sound like its way to high. Keep in mind I don't have a batwing bush hog yet, so I'm mowing with a 6 foot cutter. Averaging around 1.5 acres an hour. Let me have all your opinions.

Thanks

How far do you have to travel?

Steve

 

[Rhino172]

Ld1 just curious, how much do you profit after you take out all your expenses etc. say on the 10.5 acre job for $400. If you don't want to share that info I understand. Again thanks for your input and everybody else's

 

[LD1]

The 10.5 acre job took 4.5 hours of seat time on the tractor.

Using my above # of $10.5/hr to run my tractor...It cost me ~$50 to run the tractor.

It was a 72 mile round trip. Figuring $1/mile for wear/tear (about double what IRS claims), thats $72 wear and tear and fuel on truck/trailer.

So $400-72-50=$278 profit. Total time including travel was 6.5 hrs. So i made ~42-43 per hour.

I know I didnt figure insurance in and all that. Like I said, the more jobs you do, the cheaper the insurance figure is PER JOB. So I look at it this way....I make 43/hr and pay for my own insurance. Still pretty good numbers IMO. Now if I only did $2000 worth of work a year, and insurance was $1000, it would be a different story. But get enough work, and the cost of insurance is peanuts.