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looking to start an excavating company

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tjarmstrong

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Discussion starter · #1 ·
Looking to start an excavating company

Hi, I am 22 years old and live at home will no debt and good credit. I have been working for an excavating company for the past 3 years during summer and winter breaks while attending college. Unfortunately, I did not goes for a degree in business but rather a pursued a degree in geology.
I am looking to start my own excavating company within the next year and would love to gain some expert advice on how to start it up. As I have said before I have worked for an excavating company for the past 3 years and know how operate all kinds of machinery. I also attended a heavy equipment training school in pittsburgh to prepare me for my future endeavors.
I guess my biggest concern is on the business end of things like bidding out jobs or just getting my name out there above all of my competitors. I have enough money saved up to buy the necessities and to to rent everything else. mY father is willing to help me out with a a purchase of 1998 hitachi 270 with 8,000 hours on it. I have a truck and trailer to pull it, while ill be able to rent a dozer whenever it is needed.
 
#2 ·
Excavation is capital intensive and in my opinion high risk. You can spend a lot of money getting tooled up and ready to make money and then the market crashes.

Having the degree is a good start. If you havent taken a business accounting course I would recommend that and maybe a basic business course so you understand the different types of business [llc, s corp, sole prop] etc and how you use those entities to shield your self from risk.

You can study this stuff on your own and pick some of it up hanging out here; but given your age the structure of a classroom might help you stay dialed in. Not saying you have a short attention span or anything, but you need to find a way to study twenty hours a week for 90 days before you start.

The best way to make money is not to lose money! Slow and steady is imo a better way to grow. Some guys grow super fast and knock it out of the park. Most guys take on a mountain of debt and confuse cash flow with profit. At the end of the year they are in debt and they owe 20k in taxes, uh oh one of their clients wont pay a 40k bill and all of a sudden they are in the HOUSE OF PAIN.

Bidding right is always hard, excavation is harder. Their is another young guy on here. First project set him out 20k upside down because he bid it wrong and muddy site conditions wreaked havoc on his plan.
 
#3 ·
All that said, super excited to see a young man ready to grab life by the balls and squeeze. A couple young guys came on here over the years and have come a long long way. Mainly due to their hard work, but also because they were smart and humble enough to come on here and stand on the shoulders of those who came before.

Ive been on the site for seven years. Ive tripled revenue in that time because of what Ive learned here.
 
Discussion starter · #8 ·
business plan

I am in the process of starting one but there are areas that I am at a complete loss. Like I said earlier, the business end is where I am lacking severely, I can operate any type of equipment very effectively, I just was looking for some expert ideas involving a business plan. I know you can or anyone else can't rite my plan up for me but I was hoping for some broad ideas. Thank you all for your input, it is greatly appreciated!
 
Discussion starter · #9 ·
business plan

I am in the process of starting one but there are areas that I am at a complete loss. Like I said earlier, the business end is where I am lacking severely, I can operate any type of equipment very effectively, I just was looking for some expert ideas involving a business plan. I know you can or anyone else can't rite my plan up for me but I was hoping for some broad ideas. Thank you all for your input, it is greatly appreciated!
 
#10 ·
Google some typical business plans and read them. It will help you think of things you might not have considered yet. My business plan was nearly 75 pages after adding all the financial info and forecasts.

Some things worked, and some didn't. Good luck.:thumbsup:
 
#11 ·
tjarmstrong said:
I am in the process of starting one but there are areas that I am at a complete loss. Like I said earlier, the business end is where I am lacking severely, I can operate any type of equipment very effectively, I just was looking for some expert ideas involving a business plan. I know you can or anyone else can't rite my plan up for me but I was hoping for some broad ideas. Thank you all for your input, it is greatly appreciated!
Click to expand...
As others have said. Exacavating is very capital intensive. It is a business with what we call a "high barrier to entry." Meaning it takes a lot to get in, more than most people are willing to pay in blood, sweat, and tears. The good thing is, when you get established you're in the money. Starting an excavating business from scratch you need to have a good firm grasp on "delayed gratification." You will have to keep putting money into the business to build it into something.

My neighbor and business mentor is at the tail end of his business career as an excavator. After working his whole life he has more money than he knows what to do with and his son's are taking the reigns on the business. He just bought a plan and has a hanger and runway in the backyard of the house he just built....but that didn't happen overnight.

Be prepared to work long hours. Excavation is weather dependent and you need to have the bucket in the dirt all you can. If you are willing to work long hours and run the machines past the break even point of your overhead it can be lucrative. If it takes X hours per year to break even on a machine, once you hit your breakeven your direct costs are much lower and your profit margin is much higher. This is wear the sweat equity has to come from in order to grow and purchase new equipment. Remember you are competing with guys who have been in it their whole lives and have all their stuff paid for, but take heart, they don't want to work for free.

I'd recommend starting out with smaller equipment. From what I know having talked business with excavators a good skid steer and mini ex are your highest profit margin machines. They have the lowest cost to purchase and the lowest cost to maintain. Build up from there. Repair, upkeep, and operating costs on things like a D8 or big pan are astronomical.
 
#12 ·
Sorry! I think most of the advice given is not accurate. A person can start their excavating business with absolutely no money by renting equipment. Renting is often the best option since you don't have lay out a ton of cash. You don't have to pay for repairs. You don't have to make payments when you don't need the equipment. When equipment breaks you make a phone call and another machine is delivered within hours vs. waiting days or weeks to fix your own equipment. When renting you can change from one type of equipment to another for very little money rather than being stuck with the wrong equipment on the job. I've seen penniless contractors get accounts to rent equipment because the rental companies have the Preliminary Notices that protect them.

A person can become rich very fast with no money and at the same time an idiot can lose everything he has on one job. The problem I see here is there is no way this 22-year old person knows enough about grading, stake reading, soil types, estimating yardage, shoring, etc. to start a business. It takes more than a few summers and winters to know enough about the trade and then you have to know how to estimate jobs and how to run a business. Most successful people become proficient swimmers in shallow water before jumping head first into the deep end.
 
#19 ·
You might want to think about starting a lot smaller. If you are talking about a true 270 size excavator you better have more than a truck and trailer. That's a lowboy sized machine, at least 40-50K pounds. I think you might be better off to get a mini ex and a skid steer and beat the streets for small grading jobs for builders or homeowners.

With a machine that size you are pretty limited in what you can do. A full size excavator will need support machines to do anything with, either move dirt with a end dump or tri axle truck. Rent on a articulated truck will run 8-10k per month or a tri axle will be $70-80 per hour. You better have plenty of savings to pay for everything. Also with a 8000 hour machine you will need to find a good mechanic, something always happens. Although a Hitachi would be a very good choice, we put 15-16k hours on our 200 before we got rid of it.

Good luck, but take some time to think it through or you might end up with a 50,000 # yard ornament. Operating the machine is the easy part, if you don't know what you a doing in business or bidding you'll lose your a$$. I can't operate half our machines near as good as I can hire someone to, but I know how it should look and how long it should take to get the job done and that is what you will need to know to be successful.

Take some time and take notes of how long it takes to get things done and figure out what your expenses will be. There are plenty of operators that start a business because they can run a machine but they kill the market because they have no idea what kind of money it takes to be profitable. Eventually the go broke and a few actually figure it out. We are doing subcontractor work for a new guy and it takes 90 days to get our $ because he has a bunch of new trucks and equipment but doesn't make enough $ to pay out of operating capital because he give too much money away bidding.
 
#20 ·
Metro is spot on here. The other post is total BS. Rental rates will be at least 2-3 times what it cost to own a machine. We bought a used articulated dump truck and paid $1200 a month for a cheap high hour machine. To rent anything comparable would be 7-8k per month. There are plenty of cases that renting makes the most sense, but it costs a bunch more. Don't even think that you can get a new machine within hours of a breakdown, usually the rental yards have deliveries scheduled out a few days in advance. If you can get something, heavy equipment wise, within hours than you have the best rental yard in America. Most don't even have multiple machines about the same size in the yard.
 
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