Hey Guys!
How does everyone go about calculating a “rental” rate for your tools and equipment. For example, if you are doing a project and know you will be using your table saw, chop saw, etc. do you add a per project amount, percentage, etc. for the “use” of that tool. How are you calculating that number too? Local rental rates? Cost divided by years of expected life?
Appreciate hearing what others are doing.
Thanks!
Replies
hmmm... if you get a job ... you are usually required to have the tools to perform that job... part of being of value... is your skill set and tools required to perform those skills...
when you take your car to be repaired ... don't you expect them to have the tools to fix it... or do you want them to go out a "rent a wrench" to remove your oil drain plug... and bill you for it'ds rental...
p:)
That should be built into your overhead.
http://www.quittintime.com/ View Image
I don't follow you either. Your standard arsenal of tools are part of you doing your job at either your hourly rate or fixed fee. The car repair analogy above is a good one.
If you have to rent something special, not normally used by an individual in your trade then that's different. For example, if your doing foundation work and find maybe a Bobcat might be better for spreading gravel, then that rental cost might be discussed with the client ("Well, wthout the Bobcat it's going to take me 20 hours. With it, it will take 5") so the client will see some direct benefit for him too in bottom line $$ saved.
Runnerguy
Edited 4/8/2009 6:57 pm ET by runnerguy
standard arsenal of tools are part of you doing your job
100% agree, even as a 'despicable' DIY, I'll buy about any tool before I even consider renting one.* If you need a tool once, buy it used or cheap new if cant find used, you will be glad. Even if from HF. Or even big items like buying your own bobcat, or backhoe, or dozer, or telehandler, or etc......ESP if it is tax deductible! Do you rent a car anytime you need to go someplace?
*PS - designing and building something like a well drilling rig really only does pay a little over minimum wage in the hours one spends, but think of the knowlege learned? . Also found out when I travelled 2000 miles to put a new HP onto Mom's house that NOBODY carries rental vacuum pumps! (at least in Central IL) - buy used on ebay and you got a vacuum pump at Mom's house 'forever' at less than 2X rental rate if a rental was to be had.
BTW, did you get the jist that rentals are for suckers?
The only thing I pass on a rental charge for is something that is of a specialty tool that I do not own.
Lifts, floor sander, jack hammer and compressor are examples. Some forms of staging in excess of what I already have, is another.
Unless you charge way lower than what you could with the proper equipment, an upcharge for rental is probably not fair to the customer. Rental costs are way more than you could alot even with simple depreciation.
Your name is kid builder, but you list your age as 36. Something doesn't jive unless you're fathering a large family.
A Great Place for Information, Comraderie, and a Sucker Punch.
Remodeling Contractor just outside the Glass City.
http://www.quittintime.com/
Hey Calvin,
Thanks for always being helpful in here, you've had many great posts that have benefited me!
Yes, the name...I am actually knocking on the door of 40 (yes, I am in denial), but actually started in the business when I was in Junior High School, so yes, always got the rep around these parts as a "kid". Sometimes I'm not sure it's a good rep to have though unless they are talking about looks, that I'm okay with!
Glad you explained yourself...your post started having me remember this Archy I did jobs for way back when on his investment houses. He was a nightmare...At the end of a real big job I did for him he wanted to charge me for the electric I used in the house....lol.
http://www.cliffordrenovations.com
http://www.ramdass.org
Andy ,
How much did that cost ya !!
Andy ,
How much did that cost ya !!
You really don't wanna hear another one of my long winded stories do ya....lol?
Long story short...that job was many many many moons ago when I was working exclusivly for the Iranians in Kings Point Long Island...right near the Merchant Marine Academy about 40 min from NYC on the North Shore of LI. Was pretty much when I first started doing big jobs. The Iranians...as I put it...held me hostage...lol. Iranian Jews to boot...just after the Shaw of Iran was .......well you you remember that whole thing...I don't wanna go into it. They used to talk half in Iranian and half in Hebrew and little did they know I could understand quite a bit of Hebrew but I never let on....anyway...oh yeh...long story short...lol...They'd pass me from one relative to another once the job was done. this went on for several years. Iranian archys, Iranian HO's, Iranian attorneys...and lil ol me...anyway.....I finally learned and that Iranian Archy was the last job I did for any of em... I escaped and went further east....Eastern Long Island that is...lol.
Mannnnnnnnn can I tell you stories 'bout those daze with those people...whewwwwwwww. There were times they lierally brought me to tears...no shid! What training that was...whewwwwwwwwwww. And John McCain thinks he had it hard...Bwahahahahaha
http://www.cliffordrenovations.com
http://www.ramdass.org
I read your post differently from how some of the others have. I think (but could be wrong) that what you're asking is how we account for paying for our tools in relation to how we bill our customers. If you're asking if we literally charge our customers "rent" for the tools we own, then I'd imagine the answer is a unanimous "he11 no". As someone else said, that should be part of your overhead. How to figure that? What do you spend each year on tools/maintenance? Take that number and divide it up by how many hours you'll work in a year. That's your tool overhead to add into your hourly rate (or however you bill).
Like others, the only time I'll charge a tool rental to a customer is if it's something I wouldn't normally be "expected" to own. A specialty tool outside of my normal scope of work. Things that come to mind are a boom truck, crane service, perhaps extensive staging, etc. And it's always part of the bid... perhaps mentioned, never line itemed (unless pressed), and rolled into my bottom line.
If you even try to bill out each of your "normal" personal tools used on a job at rental shop rates you'll run out of work pretty quick if you're working for homeowners. And you'll be laughed at (or worse) if you try to pull that with a GC as a sub.
If you know you need to a rent a machine to do a job then why can't you add the rent and maybe a markup on the rent to your estimate without disclosing it? You put your telehandler payment into your bid as overhead. You don't tell your customer what your payment is. It's in there as your cost to do the job. What am I missing here?
You're not missing anything. It's just how I do my thing. We all got our 'systems'.View Image
I think I know where you're coming from, having read in "How to run a remodeling business" books. I've seen where they write about charging xx amount for the more expensive tools you'll be using on the job. But reality dictates that it's just not a practical way to do your billing. There is a basic set of tools you own and maintain, and some of them have to be replace over time. Best practice is to consider what the total package costs you and count that as your overhead. Even if you don't use your table saw on one job, you still have to own one. And nit-picking about how much you use a tool on each individual job will so complicate your billing, you would have to add the time figuring it all out as overhead as well.
When I rent a tools, I consider it a part of the overhead for that particular job. The tools I already own are part of the overhead of doing business.
~ Ted W ~
Cheap Tools! - MyToolbox.net
See my work - TedsCarpentry.com
Sorry guys, I think I didn't communicate what I was looking for very well.
What I was trying to compare is esentially how you guys 'depreciate' your tools, particularilly the big ticket items when figuring your overhead. I know for accounting/tax purposes construction tools have 5 year depreciation "life", however, as we all know you beat on a roto hammer all day every day, and I don't think you're getting 5 years out of it!
I completely agree on the fact that I, as a professional contractor, I need to have the complement of tools required to do the job with the exception of items like the bobcat, etc. and other 'time savers'.
By the way...I have always been a big beliver in the "buy the right tool for the job", etc. versus renting it repeatedly, however, where do you guys generally draw that line? How many projects for COULD you benefit from for example a Bobcat before you would seriously consider buying one...just curious!
Thanks again!
The easy answer is buy the tool that makes you money or makes the job easier. You need to fine tune that by deciding how much it benefits v. how long the payoff.
Tool purchase affects your cost of doing business as you already know. However, new tool doesn't necessarily mean higher wages or bigger margin. You still can only charge so much b/4 the price exceeds the project cost. This is more true especially in this economy.
Lets not forget either that replacement repair and maintanence costs should be accounted for in your doing business costs. Not only do you have to pay off the initial purchase, you need to provide the money to keep in business.
Best of luck.A Great Place for Information, Comraderie, and a Sucker Punch.
Remodeling Contractor just outside the Glass City.
http://www.quittintime.com/
"The easy answer is buy the tool that makes you money or makes the job easier. You need to fine tune that by deciding how much it benefits v. how long the payoff."
even though this is the Biz section I'll lapse into a bit of personal theory here ...
I told Cath years ago ... any tool that will help me got home half hour earlier ... or have a bit more bounce in my step ... on Friday afternoon ...
is well worth the money I paid for it ... as long as I have that money on hand.
I'll buy any tool that makes my life easier.
Jeff Buck Construction
Artistry In Carpentry
Pittsburgh Pa
tools have 5 year depreciation>>>>>>>>>>>
Don't do that, expense them and write off the year you buy. There is a limit, I personally have never reached it. Shoot expense your vehicles, just remember to recapture the amount you sell it for when done. The IRS looks for that. Ask me how I know!
Yeah, the Sec. 179 deduction, I've definitely taken advantage. I think the limit is like $150k/yr...and I am a LONG way from buying that many toys, I mean tools!!
oh man... if you HAVE to "justify" buy'n a tool you are on the wrong forum...
hell i'm not even a contractor and i have 2 skid loaders (bobcats) several tractors and attachments that look like a rental yard... if you have a place to keep it... and can afford to buy it... and think you will ever use it... then it is a justifiable purchase :)
p
And don't forget FUN too!!! There are 'benefits' to being older =)
I have a rough rule of thumb for buying vs. renting.
If I need a tool only once, I rent.
If I need it twice, I rent, and start looking for deals.
If I need it a third time, I buy it.
Of course, there's certain tools that I've bought that I never really needed, and others I've bought because I thought it was cool. <G>