It’s tough to price your estimates correctly if you don’t know all your expenses. So, if you don’t have an equipment budget, chances are you could be pricing your work incorrectly. Some of the most common methods people use to incorporate their equipment costs aren’t based on their own expenses, but what others in the industry are charging! If you’re guilty of this, don’t worry you’re not alone. But here’s why you need your own equipment budget to price your work.
The problem with using a dealer’s rental fees or your competitions hourly rates to price your equipment is it’s not based on YOUR numbers. The dealer and your competition are both going to have different job sizes they work with, different overhead amounts they need to recover, different quantities of stock and they could be able to buy in bulk for cheaper rates or get better finance rates etc.
If you’re copying those numbers, you could be pricing your equipment either too high or low because you’re basing your price off someone else’s costs. By setting up your own equipment budget, you can be confident that the numbers you’re using are you going to make YOU profitable and recover the required overhead. This is the most important reason for setting up your own equipment budget and is the first step in knowing what you need to charge your clients to cover your costs, recover overhead, and make some profit.
Another common mistake is to stop charging for your equipment once it’s been paid off. If you’re not charging for the use of this equipment, when repairs or new equipment is needed it’s going to come from your profit. This is obviously not ideal! Just because a piece of equipment has been paid off, doesn’t mean you shouldn’t be charging for its use! An equipment budget will make sure even your owned equipment is added so no expenses are forgotten and you’re prepared when repairs and replacements are needed.
Lastly, by setting up an equipment budget it helps you when it comes time to making purchasing decisions. Using your budget, you can see how the additional equipment is going to affect your bottom line and what you would need to charge per hour/day to make your money back on that piece of equipment. Without a budget, you won’t know how much profit you’re making off your equipment or even how much to charge to breakeven!
LMN makes it easy to know your numbers. Interested in finding out more information on how our software can help? Visit golmn.com today and sign up for a free 30 day trial!