Your Breaker Burns Tool Steel That Overhead Pays For
A hammer chews $9,000 of tool steel on one teardown and the job that ate it never sees a dollar of the cost. The margin looks fine and the bank account disagrees.
A high-reach excavator comes out of a thin national rental fleet, so when the one you need is booked or down you wait weeks or pay a premium plus a second lowbed. That pushes owners toward buying iron, and owned iron has a payment, insurance, and depreciation that go into overhead no matter which job is running. A breaker also burns a wear item measured in thousands of dollars over a few job weeks, which is a cost category a framer or a plumber never has to allocate at all.
The size of it
Job margins read clean while the real machine burden hides in overhead, so the reports never match the bank. Every bid built on that unreconciled hourly rate is 20 to 40% light on equipment.
Charge the machine to the job by the hour at a rate that includes wear parts, then reconcile that rate against real spend at least twice a year. Demolition consumes iron harder than any other earthwork use: breaker tool steel and bushings, shear blades, pulverizer jaw teeth, undercarriage, cylinder rods, and hoses all wear in proportion to hours on one specific job. Those parts get bought reactively and coded to shop supplies or overhead, so the job that consumed them reads profitable while the company has no cash. On top of that, the payment, insurance, and depreciation on owned iron live in overhead as a fixed monthly, so your estimator is bidding an hourly number that has never been tied back to real spend. Owners typically bid equipment 20 to 40% under what the fleet costs to run.
Three moves, in order
Step 02: Equipment cost basis
A correct internal rate per machine covering ownership, maintenance, fuel, and transport, charged to the projects that used it.
What else costs demolition contractors money
The same mechanism in other trades
What demolition owners ask
How do I charge real equipment cost per hour to a demolition job?
A hammer chews $9,000 of tool steel on one teardown and the job that ate it never sees a dollar of the cost. The margin looks fine and the bank account disagrees.
What does it cost?
Job margins read clean while the real machine burden hides in overhead, so the reports never match the bank. Every bid built on that unreconciled hourly rate is 20 to 40% light on equipment.
What do I do first?
Pull twelve months of parts, tires, undercarriage, tool steel, and repair invoices by machine, add loan payments, insurance, and fuel, and divide by that machine's meter hours. That's your real rate.
What are demolition contractors supposed to be making?
Demolition runs 20% gross margin, 16% overhead and 4% net profit before taxes at $1M–$5M. The all-trade average is 7%, so this trade is 3 points below it. The CFOS target is 10%.
Which part of the system fixes it?
The step is number 02, equipment cost basis. A correct internal rate per machine covering ownership, maintenance, fuel, and transport, charged to the projects that used it. It comes from chapter 2 of CONTROL: The Construction Financial Operating System.
Everything on this page is something you can install yourself, andCONTROL is the order to do it in. If you would rather buy the finished result, SPM The Construction CFO does this work for demolition contractors as a service. It is a separate firm, Sulphur Prairie Management, LLC, run by the same author.
Wrote CONTROL, the 8 step system behind these figures. More about the author.