Renting a machinery includes bulldozers, backhoes, dump trucks of large diesel engines, loaders and other large buildings and commercial equipment. When a rental business operating heavy equipment, rates are determined based on the benefit of the desire of the owner along two to four years. To determine what types of benefits provided, the costs of maintaining the equipment must be considered, taking into account the depreciation of the equipment over time. The amount of the value of equipment depreciates over time the rate should be calculated in the planning as an expense (also called “responsibility”).
Instructions :
Visit the local government office in the county where each piece of heavy equipment has its registration taxes and questions about the acquisition of a list showing the three years of the depreciation of the same make and model that will rent. Since literally thousands of different county governments are around the United States (and provincial governments of Canada), the depreciation rates are highly dependent on the way the local government determine the valuation of such machines.
Visit several auctions of heavy equipment where equipment similar to yours are sold after three to five years of use and records the final selling prices. Between step 1 and this step, you have two numbers value for each type of machine: a depreciation schedule of government and a price based auction after three to five years of use.
Sum depreciation government based on the final auction price after five years for each machine and then divide the sum of the two numbers for two. Suppose the machine sold for $ 100,000 back the sales floor. If the depreciation of the government after five years showed a loss in the value of US $ 40,000 after five years and the machine is being sold at auction for an average of $ 70,000 after five years, then we have two numbers: US $ 60,000 value after five years in accordance with the government and the value of US $ 70,000 after five years according to the current auction rates. Adding the two together add up to US $ 130,000 and if divided by two gives an average finish worth $ 65,000 after five years of use. Subtract the $ 100,000 machine US $ 35.000 is depreciated over five years on average.
Calculates rates for hours of use, so the machine is amortized over five years and also pay for the average depreciation using the above figures. In Step 3, the new total cost of the machine was $ 100,000 and the average total depreciation over five years was $ 35,000. Sets the start speed per hour so after five years, the machine will generate US $ 135,000. Thus, the responsibility of the depreciation became income. When the machine is sold after five years, the final sale price will also income.
Determine the total cost of employees and expenses of business operations and then this final figure includes costs for business. These expenses should not be planned to “go to the customer” if the depreciation-denial strategy described in this guide is used, as this will prevent your rental price competitive. Instead, use the receipts for purchases and maintenance, tax deductions at the end of each year to reduce the amount of taxes you have to pay.
Establishes a preliminary rental price based on the machine have to pay for your new price in five years, plus the impairment loss. In this example, $ 135,000 is the desired amount of more than five years, and then you add an income 60 percent extra on top of this to have a cash flow to purchase parts for repair and payment of wages the employees. In this example, it is an additional sum of US $ 81,000. For five years, the total to be collected at this point is US $ 216,000, which is $ 116,000 more than the cost of a new machine at the dealership at the time of purchase. This percentage should be changed based on the number of employees and what the agreed salary per year.
Set personal cost of living wages for a period of five years for you and your family and add them to the figure of five years of US $ 216,000. This is where rental prices must be balanced to be competitive with what other rental companies are renting heavy equipment for its units. In a way, this will determine what you’re going to have to live in this kind of business. A good percentage of the cost of living, however, should be about 20 percent of total annual five years done before. Thus, 20 percent of US $ 216,000 is US $ 43,200 annual income. In five years, that an additional US $ 216,000 is added for a total of $ 432,000 in five years.
Sets the hourly rental bring the final amount in five years. A good estimate is to keep the machine rented 200 hours per week, or 800 hours per month, allowing weekends are excluded. For five years, this will be about 48,000 hours. If the machine is rented for US $ 10.00 per hour to this number of leased hours, if successful, will generate US $ 480,000 during the period of five years. Adjusts to US $ 20.00 per hour if the machine just try to rent half of the desired hours.
Tips & Warnings
- Estimates here are very conservative and somewhat rigid. A rental company of heavy equipment may have a greater number of employees or fewer employees. In addition, maintenance costs can vary in different areas and these differences have to be considered in a way that the business still generates the desired level of revenue. In the real world, to pay all costs while still making the desired benefit may require an hourly rate of $ 50.00 rent between US $ 100.00 and US per hour in some cases. Serve your business interest to establish your closing prices (as long as competitive).
- Know your costs of doing business and discover all the big and small things in your final hours chosen. Add to the insurance costs of the machine, office equipment and computers, fuel costs, insurance workers’ compensation for the employee (s), taxes in accordance with codes of state and federal taxes for your desired income, etc. Every business is unique and all things must be taken into account. Consider hiring an accountant to help you make your business profitable.
- The annual profit is, in its most basic form, the desired gain the operator adds up the total costs, liabilities and taxes.