🚜 Equipment Management
Equipment is a major cost center. Managing it well—whether owned or rented—directly impacts your profitability.
Key Principle
Utilization is everything. Equipment sitting idle costs money. Track it, maintain it, and make sure it's earning its keep.
Rent vs. Buy Decision
When to Rent
Rent if:
- You need it for one project
- Utilization would be under 60-70%
- Technology is changing rapidly
- You lack maintenance capability
- Cash flow is tight
- Storage is a problem
Benefits of renting:
- No capital outlay
- Maintenance included
- No storage costs
- Tax deductible expense
- Flexibility to right-size
When to Buy
Buy if:
- You'll use it 70%+ of the time
- You have steady work requiring it
- You can maintain it properly
- You have storage space
- The math works (see below)
Benefits of owning:
- Available when you need it
- No rental minimums
- Potential profit center (rent to others)
- Tax benefits (depreciation)
- Builds asset base
The Math
Break-even calculation:
Annual Rental Cost = Monthly Rate × 12
Annual Ownership Cost =
Depreciation
+ Maintenance
+ Insurance
+ Storage
+ Financing costs
If Ownership < Rental × Utilization Rate → Buy
Example:
- Skid steer rental: $2,500/month = $30,000/year
- Purchase price: $50,000
- Expected life: 5 years
- Annual depreciation: $10,000
- Annual maintenance: $3,000
- Insurance/storage: $2,000
- Annual ownership cost: $15,000
Break-even utilization: 50% ($15,000 / $30,000)
If you'll use it more than 50%, buying makes sense.
Equipment Tracking
What to Track
For each piece of equipment:
- Equipment ID number
- Description and specs
- Purchase date and price
- Current location
- Maintenance history
- Hours/miles
- Fuel consumption
- Utilization rate
- Assigned project
Tracking Methods
Basic (small fleet):
- Spreadsheet log
- Daily check-in/out
- Manual hour readings
Intermediate:
- Equipment management software
- Barcode/QR scanning
- Weekly reporting
Advanced:
- GPS tracking
- Telematics (automatic hours, location, alerts)
- Real-time utilization dashboards
- Preventive maintenance automation
Equipment Log
| ID | Description | Location | Hours | Last Service | Next Service |
|---|---|---|---|---|---|
| SK-01 | CAT 259D Skid Steer | Main St Job | 1,245 | 1/15 @ 1,200 | 1,400 hrs |
| EX-02 | Kubota KX040 Excavator | Yard | 890 | 12/20 @ 850 | 1,100 hrs |
| CP-01 | Wacker Compactor | Oak Ave Job | 412 | 1/10 @ 400 | 600 hrs |
Maintenance Management
Preventive Maintenance
Why it matters:
- Prevents costly breakdowns
- Extends equipment life
- Maintains resale value
- Ensures safety
- Required for warranty
Maintenance Schedules
Daily (operator):
- Walk-around inspection
- Fluid levels check
- Tire/track inspection
- Safety device check
- Clean and report issues
Weekly/50 hours:
- Grease fittings
- Check belts and hoses
- Clean air filters
- Inspect hydraulics
- Check battery
Monthly/250 hours:
- Change oil and filters
- Check/adjust tracks/tires
- Inspect brakes
- Check electrical system
- Test safety systems
Seasonal/Annual:
- Full service
- Hydraulic fluid change
- Major inspections
- Prepare for storage (if applicable)
Maintenance Records
Track for each service:
- Date and hours/miles
- Work performed
- Parts used
- Cost
- Who performed it
- Next service due
When to Repair vs. Replace
Consider replacing when:
- Repair cost > 50% of value
- Downtime is becoming frequent
- Parts are hard to find
- Fuel efficiency has dropped
- Safety concerns
Rental Management
Getting Good Rental Rates
Strategies:
- Get quotes from multiple vendors
- Negotiate long-term rates
- Ask about weekly/monthly vs. daily
- Consider rent-to-own options
- Build relationships with rental companies
Rental Agreements
Check for:
- Included hours/overage rates
- Delivery and pickup charges
- Insurance/damage coverage
- Maintenance responsibility
- Fuel requirements (return full)
- Cleaning requirements
Managing Rentals
Best practices:
- Schedule delivery precisely
- Return on time to avoid extra charges
- Document condition at pickup and return
- Track rental costs by project
- Consider rent-to-own for long rentals
Equipment Costs by Project
Allocating Costs
Owned equipment:
- Track hours by project
- Apply internal rate (ownership cost/hour)
- Include fuel and operating costs
Rented equipment:
- Direct charge to project
- Include all rental costs
- Track utilization
Internal Equipment Rates
Calculate an internal rate that covers:
- Depreciation
- Maintenance
- Insurance
- Overhead
Example:
Skid steer annual costs:
- Depreciation: $10,000
- Maintenance: $3,000
- Insurance: $1,500
- Storage/overhead: $1,500
- Total: $16,000
Expected annual hours: 1,200
Internal rate: $16,000 / 1,200 = $13.33/hour
Fleet Planning
Right-Sizing Your Fleet
Analyze:
- Historical utilization data
- Upcoming project needs
- Seasonal patterns
- Rental vs. ownership costs
Goals:
- High utilization (70%+)
- Equipment available when needed
- Right equipment for your work
- Controlled costs
Replacement Planning
Track and plan for:
- Equipment age and condition
- Replacement timeline (5-10 years typical)
- Capital budgeting
- Trade-in timing
Adding Equipment
Before purchasing:
- Verify consistent need
- Analyze utilization of similar equipment
- Calculate ownership vs. rental cost
- Consider financing options
- Plan for maintenance and storage
Common Problems
"Equipment is always breaking down"
Causes:
- Deferred maintenance
- Operator abuse
- End of life
Solutions:
- Implement PM schedule
- Train operators
- Replace aging equipment
"We can never find what we need"
Causes:
- Poor tracking
- No central system
- Equipment spread across jobs
Solutions:
- Equipment tracking system
- Daily location updates
- Central dispatch
"Equipment costs are killing us"
Causes:
- Low utilization
- Too much owned equipment
- Maintenance costs
Solutions:
- Track utilization
- Sell underutilized equipment
- Rent for occasional needs
- Improve maintenance