looking to start an excavating company

As much as I hate to agree with PCP he is right, just because you know how to operate equipment doesn't mean you understand how to run a business.

I know lots of guys that are ace forklift operators, but couldn't manage a warehouse to save their life.

I'm not saying don't do it I'm just saying plan it out on paper. While renting everything sounds like a great way to hold onto cash if your not bidding the job correctly your still at a loss.

A lot of guys go under because they have no idea what it truely cost them to run their business.

Moxley-Kidwell said:

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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That is funny! B.S.? I will tell my B.S. story one more time.

Age and what people did 150 years ago has nothing to do with whether or not a person is qualified to do something. Someone stated, it is possible that a person can do something if they work hard enough, but that should be changed to 'may be possible'. Bad advice is to tell a person that he can walk on water (like Jesus did) if he only puts in a little effort. Of course, the brainless idiot thinks he is Jesus and drowns.

I have an A-General Engineering license and my company does excavation and grading work. An excavation contractor needs an education almost equivalent to a civil engineer so that he can deal with different soil types, expansion, reading stakes, calculating cubic yard, making the correct decision regarding what type equipment to use, etc..

I did not say that renting is 'always' the best option, but for a very high percent of contractors renting equipment is the best option and my list of reasons for renting 'large equipment' far outweighs my list for owning equipment.

I currently own a John Deere 410 backhoe, 7 cubic yard dump truck, 28-foot trailer and a skip loader. That is small equipment that is easy store, load onto a trailer and to drive to jobs. In March of 2015, I purchased a beautiful Super 10 dump truck. I sold it after only 30 days when I realized that by the time I had to have a permanent driver on my payroll for a cost of $200 per day and had to pay the insurance, fuel and other costs it costs me only pennies on the dollars to outsource hauling my spoils. It doesn't make sense to own a $140,000 dump truck and to pay an employee to drive it when I can outsource hauling for only $265 per load. I can't do it for that price with my own equipment.

I recently graded a parking lot and hauled away 2,000 cubic yards of soil. The job was $250k. I made one phone call to the rental company and the next morning the tractor was on the job site. The delivery cost was only $199. That is super cheap when I considered that it always takes me no less than 4 hours to load my backhoe on one job site, deliver it to another job site and unload it. Hauling large equipment means you have to have an employee with a Class A license and then you have to worry about accidents and all the highway transportation laws.

The purchase price for the tractor I rented was about $260,000. I paid $8,000 to rent it for one month and never had to worry about paying one more penny for payments, insurance, maintenance, etc. The rental company sent us a ride-on sheeps foot roller and it broke down. Two hours later the rental company had another roller on the job site and I saved several thousand dollars because if I had to stall the job for a few days while my own equipment was being repaired then I would lose $3,000 every day my employees are idle. When I deduct the $6,000 plus I saved by not stalling the job then my $8,000 tractor rental cost was virtually free.

I love to own all the equipment that is practical to own, but when it comes to large equipment I can write a huge list with the cons. I know a lot of fools who purchased $millions worth of equipment that is rusting in a storage yard.

Take a $260,000 tractor and calculate all the costs for financing, insurance, labor to haul, storage, cost to transport and don't forget the costs for the truck and trailer you need to transport the equipment. Only a small percent of the contractors have what it takes commit to half a million dollars and then have the cash flow to make the payments without having to scratch their buns.

My philosophy is; rent equipment until excessive rental costs force you to purchase your own equipment.

SectorSecurity said:

As much as I hate to agree with PCP he is right, just because you know how to operate equipment doesn't mean you understand how to run a business.

I know lots of guys that are ace forklift operators, but couldn't manage a warehouse to save their life.

I'm not saying don't do it I'm just saying plan it out on paper. While renting everything sounds like a great way to hold onto cash if your not bidding the job correctly your still at a loss.

A lot of guys go under because they have no idea what it truely cost them to run their business.

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That is funny. Why would you hate to agree?

You may want to reconsider going out on your own. It's not always as simple as getting a machine moving dirt and counting money.
If you are a really good operator it's sometimes a waste of a good operator to have them out of the equipment doing business stuff. Maybe you could get a raise from your current boss. Or goto a bigger company that you can eventually move up to an office position and learn more about the business end of excavating.
Are you just going to be flooding the market in your area going out on your own? And drive the prices down for everyone? I'm not trying to be rude but 3 years experience is next to nothing. And reading your original post I think your a prime candidate to fail in the first 5 years.
Do I think it's possible for you to succeed in going out on your own? Yes of course it is. I just think the deck is stacked against you. And I think you could make a lot more money and enjoy you twenties if you work for decent companies.....but that's just my opinion man!
Either way I wish you the best!

In my opinion excavating is one of the hardest to start from scratch in construction.
That being said it can be done. I did it when I was forty years old.
I had previously been self employed since my early 20's. I had about 100,000 to invest and was willing to wait as long as it took for the pay back. Took 10 years, every penny reinvested , and many hard learned lessons before my company was stable.

The operating is the easiest part. The book part, numbers, contracts, insurance, employees, banking, contracts, lawyers, reading plans, reading specs, understand what they mean, dealing with other contractors and more is the hard part.

I miss operating a lot because I don't get to do it much anymore, but when I do it is very relaxing and a lot of fun.

jmacd said:

In my opinion excavating is one of the hardest to start from scratch in construction.
That being said it can be done. I did it when I was forty years old.
I had previously been self employed since my early 20's. I had about 100,000 to invest and was willing to wait as long as it took for the pay back. Took 10 years, every penny reinvested , and many hard learned lessons before my company was stable.

The operating is the easiest part. The book part, numbers, contracts, insurance, employees, banking, contracts, lawyers, reading plans, reading specs, understand what they mean, dealing with other contractors and more is the hard part.

I miss operating a lot because I don't get to do it much anymore, but when I do it is very relaxing and a lot of fun.

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I don't especially like operating tractors. The danger of killing someone and striking utilities makes the job intense. Last year, I scraped a tiny piece of rubber off a telephone cable. The phone company told me to install a new conduit over the pipe, take a picture and backfill the trench. I thought I was on East Street until nine months later when the phone company sent me a bill for $21,000 to install a new 1,000 foot cable. There were a few times I will never forget when my bucket came to close to people around excavations. While a a few hours is usually a little bit of fun the intensity, precautions and danger wears me out.

I found that the hardest things to do in the excavation business was abiding by all the laws for installing shoring the correct way. The most common problem we had with shoring is you only know exactly what shoring you need on a job site after you do your digging. We could plan to have shoring that expands to a maximum width of 36 inches and we have to stop the entire job because conditions require that we dig the excavation wider.

I lost a lot of money on a lot of excavation jobs and the most common cause was jobs always run into unforeseen problems and take two to three times longer than estimated. Most often, the cause for job delays was not our fault.

This is the type of serious problem you run into when doing excavation work. We bid a job from blueprints to excavate a hole 40' x 50' x 4' deep for a storm capture system. We did not make a mistake on the depth when we read the blueprints, but what we did not know was that the general contractor wanted to build up (raise) the yard 5 feet on one side before we installed the storm capture system. This contractor could have waited for us to do our work, but he had to move soil from the other side of the property for the building and he had no temporary place to put the soil. Since one wall of our trench was now 9 feet high we had to bring in engineered shoring that cost $42,000 to rent, deliver and set up. Ordering and installing the shoring took 10 days and I had to pay my workers to work with the shoring company at the same time. Then, because the yard was raised 5 feet higher we had another very serious problem with high-voltage overhead wires. The shoring company brought in one crane to the job, but due to the power line problem we had to pay another $16,000 for a 2nd crane to both install and remove the shoring.

The shoring for a 40 x 50 x 9 hole cost $58,000. Luckily, this problem was caused by the general and the owner paid the entire bill, but sometimes we get stuck with bills like these when we don't pay attention to elevation problems that we will encounter. Even though I can read blueprints I find it very difficult to foresee these types of problems every time and all you need is one to wipe out everything you earned for the past several years and hopefully you even have the money to pay when you make a mistake because if you don't you will be sued and maybe even lose your license.

Due to all the intensity, losses and problems I quickly stopped doing the excavation and underground work.

CoreyB said:

Hello my name is Corey I’m 22 years old and I’m looking to go into excavation for myself I been working and doing site work for 5-6 years as a foreman. I do a lot of work on the side and I’m in the middle of what I need to purchase in order to start taking small steps into that direction. I’m just looking what are the steps I can take or if you have any advice for me. I’m not looking to do big commercial work for site work but looking to do drainage, land clearing, leveling and grading stuff like that. Or maybe even getting connected with a builder and being there sub contractor for site work on homes digging foundations, etc.

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You've been a foreman on excavation sites since you were 16 or 17? That doesn't sound legal, much less plausible.

These should get you started:

pcplumber said:

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.

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Spot on. In California you need at least 4 years of experience anyways just to even take your test to begin with.