Your equipment is eating the margin
The machine is paid for, so the jobs use it at no charge. Then the transmission goes and the year is gone.
Ownership, maintenance, fuel, and transport cost money whether or not anybody charges them to a job. When equipment isn't charged out, the jobs that used it look profitable and the jobs that didn't look worse than they are. You then bid the next one off numbers that were never right, so every decision downstream of that repeats the same error.
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.
Other problems step 02 solves
Other things that go wrong
Contractors who had this
What owners ask
How to charge equipment to construction jobs?
The machine is paid for, so the jobs use it at no charge. Then the transmission goes and the year is gone. Ownership, maintenance, fuel, and transport cost money whether or not anybody charges them to a job. When equipment isn't charged out, the jobs that used it look profitable and the jobs that didn't look worse than they are. You then bid the next one off numbers that were never right, so every decision downstream of that repeats the same error.
Which part of the system fixes this?
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's drawn from chapter 2 of CONTROL: The Construction Financial Operating System.
Is this normal for my trade?
Across the 48 trades that publish a figure, net profit at $1M–$5M averages 7% before taxes. If you're well under that and this page describes your month, the two are usually the same story. The published average tells you where the pack is, and your own job costing tells you where you are, which is the number that pays payroll.
Where do I start?
Build one internal hourly rate per machine covering ownership, maintenance, fuel, and transport.
Can I fix this without touching anything else?
You can try, and it doesn't hold. Step 02 depends on step 01, job cost structure. Install it ahead of that and it produces numbers the field won't trust, which is worse than the problem you started with.
Wrote CONTROL, the 8 step system behind these figures. More about the author.