The rental of machinery includes bulldozers, backhoes, large dump diesel engines, loaders and other large buildings and equipment business. When a rental business operating heavy equipment, rates are determined based on the owner’s desired benefit over two to four years. To determine what types of benefits it provides, the costs of maintaining the equipment must be considered, taking into account the depreciation of the equipment over time. The amount of the value of equipment depreciates over time, the rate should be calculated in planning as an expense (also called “responsibility”.
- Visit the local government office in the county where each piece of heavy equipment has its registration taxes and questions about the acquisition or purchase of a list showing the three years of depreciation of the same make and model that will rent. Since literally thousands of different county governments are around the United States (and the provincial governments of Canada), the depreciation rates are highly dependent on how the local government determines the valuation of such machines.
- Visit several auctions of heavy equipment where equipment similar to yours are sold after three to five years of use and record the final selling prices. Between step 1 and this step, you have two numbers value for each machine type: a depreciation schedule of the government and a price based auction after three to five years of use. For the rest of this article, a maximum of 5 years rent will be assumed by way of example.
- Sum depreciation government based on the final auction price after five years for each machine and then divides the sum of the two numbers by two. Suppose the machine sold for $ 100,000 in new sales floor. If the depreciation of the government after five years showed a loss in value of $ 40,000 after five years and is selling machine in auctions by an average of $ 70,000 after five years, then we have two numbers: US $ 60,000 value after five years according to the government and the value of $ 70,000 after five years in accordance with the current auction rates. Adding the two together amounts to US $ 130,000 if divided by two giving a final average value of $ 65,000 after five years of use. Subtract the $ 100,000 US $ 35,000 machines is depreciated over five years on average.
- Calculate rates for hours of use, so the machine is amortized over five years and the average pay for depreciation using the above figures. In Step 3, the new total cost of the machine was $ 100,000 and the average total depreciation over five years was US $ 35,000. Adjust the start speed per hour so after five years, the machine will generate US $ 135,000. Thus, the responsibility of depreciation became income. When the machine is sold after five years, the final sale prices will also income, because the responsibility of depreciation has refused.
- Determine the total cost of employees and expenses of the business operations and then this final figure includes costs for business. These expenses should be planned to “go to the customer” if the depreciation-denial strategy described in this guide is used, as this will prevent your rental prices to be competitive. Instead, use the receipts for purchases and maintenance, tax deductions at the end of each year to reduce the amount of taxes you must pay.
- Establishe a preliminary rental price based on the machine you have to pay for your new price in five years, plus the impairment loss. In this example, $ 135,000 is the desired amount of more than five years, and then adds an income of 60 percent extra on top of this to have a cash flow to purchase parts for the repair and the payment of wages the employees. In this example, there is an additional US $ 81,000. For five years, the total to be collected at this point is US $ 216,000, which is US $ 116,000 more than the cost of a new machine at the dealership at the time of purchase. This percentage should be changed based on the number of employees and what the agreed salary per year.
- Set personal cost of living wages for a period of five years for you and your family and add them to the figure of five years of US $ 216,000. This is where rental prices must be balanced to be competitive with what other rental companies are renting heavy equipment for its units. In a way, this will determine how you’re going to live in this kind of business. A good percentage of the cost of living, however, it should be about 20 percent of total annual five done before. Thus, 20 percent of US $ 216,000 is US $ 43,200 of annual income. In five years, an additional US $ 216,000 is added for a total of $ 432,000 over five years.
- Setting the hourly rental brings the final amount in five years. A good estimate is to keep the machine rented 200 hours per week, or 800 hours per month, allowing weekends are excluded. For five years, this will be around 48,000 hours. If the machine is rented for US $ 10.00 per hour to the hours leased, if successful, will generate US $ 480,000 during the period of five years. Adjust to US $ 20.00 per hour if the machines just try to rent half of the required hours.
Tips & Warnings
- The estimates here are very conservative and somewhat rigid. A rental company of heavy equipment may have a greater number of employees or fewer employees. In addition, maintenance costs can vary in different areas and these differences have to be considered in a way that the business still generates the desired level of revenue. In the real world, to pay all costs while still making the desired benefit may require an hourly rate of rent between US $ 50.00 and US $ 100.00 per hour in some cases. Serve your business interests to establish your closing prices (as long as competitive) to what others are renting similar machines in a given area.
- This article and the final breakdown of the rental cost per hour is a conservative business that makes a living renting more than one machine at a time instead of one. However, this breakdown for example must scale to your desires, regardless of the number of machines in the fleet.
- Know your costs of doing business and discover all the big and little things in your final hours chosen. Add to insurance costs of the machine, office equipment and computers, fuel costs, insurance workers’ compensation for the employee (s), taxes in accordance with state and federal codes for your desired income taxes, etc. Every business is unique and all things must be taken into account. Consider hiring an accountant to help you make your business profitable.
- The annual gain is, in its most basic form, the operator desired gain added on top of total costs, liabilities and taxes.