[ACIntegrity]

Me and another guy are going to be doing some jobs together, I'll be providing labor and he will be providing equipment (welder, tractor, skid steer) and the like to do some barn building, pipe fencing etc. He more or less will be selling the job and allowing the use of his stuff.

We are trying to figure out how to fairly calculate the equipment usage into the rate or bid. I usually rent equipment as needed, he has it at our disposal. We are not sure if we should charge "x" per hour for equipment or a flat rate per job for use etc.

Rentals are a lot more than owning your stuff but you have to figure for wear and tear, maintenance and all that for your own equipment. I'm thinking to depreciate the equipment over 5 years and use that to figure a rate to charge into each job that the equipment is used in.

Right now, I have "x" amount allocated in my OH each year for tool replacement since my tools for light construction generally will last about 3 years, if that. This stuff should last longer and isn't depreciated the same on taxes as smaller equipment. We are kinda at a loss on this one.

Basically he wants to make sure that we cover the wear and tear on his stuff.

 

[Metro M & L]

If he has the capital equipment and makes the sales it sounds to me like you are an employee or sub at best. I'm amazed he's negotiating with you. Normally the person with his cards makes the rules, take em or leave em. On the other hand I can see that barn building, if you are good at it and have a proven track record, would be a negotiable asset. That being said, if I were in your shoes I would use ALL of the profit from the work you do with him to buy your own equipment and study his sales process as carefully and subtly as possible. Partnerships, in general, fail, all the time. Especially vague, unbalanced ones, like you have described so far.

 

[Metro M & L]

I think you guys would get along better if you paid him a commission and rented the equipment from him. The process and time table would be set by you. When you break the machine, your rental agreement will outline how much you are responsible to pay him. Otherwise, your partner will resent you everytime a hose breaks. Like wise you will resent him for setting schedules that you can't meet and micro managing how you're performing the work.

 

[ACIntegrity]

I think you guys would get along better if you paid him a commission and rented the equipment from him. The process and time table would be set by you. When you break the machine, your rental agreement will outline how much you are responsible to pay him. Otherwise, your partner will resent you everytime a hose breaks. Like wise you will resent him for setting schedules that you can't meet and micro managing how you're performing the work.

That's more or less how it is planned to work. He sells it and schedules it with me, so the timetable is still in my hands. He will get a commission and be done with it.
I guess we are trying to figure out a fair way to pay for the equipment usage without a flat out rental by me. It is different because the equipment will only be utilized by me when I'm working otherwise it will sit at his ranch and not get used. So it's not available for rent all the time by anyone but me nor will it be putting on hours upon hours every week. That's where we are coming up short. Do we add in an hourly amount per job or just figure in a flat rental fee based on the job? Which is more simple and which makes it feasible to both of us?
On the other hand, the bigger equipment is next on my list of capital expenditures. He's a good sales guy and that's all he really needs to do. Unfortunately I need his equipment at this point if we can come to a decent agreement on it.

 

[Moxley-Kidwell]

Come up with a per day charge. If anything breaks when being used in a normal way it's his dime, if you abuse it and it breaks your dime. Defining those on the other hand will be difficult to do and could get into a pissing match. He should maintain his equipment like the rental yards do.

If you like his equip though maybe work out a rental purchase agreement if he doesn't need/use them. Put most of the rent toward paying them off and they are yours. In this case though you will maintain them in good condition in case you don't pay them off and he isn't left with a pile of junk.