Skidder/Operator hourly value

[miketclew]

Thanks Guys! A lot of great feedback. The circumstances really do matter.   

Out of curiosity are there any bigger outfits that have put an expense number on a cable skidder + operator employee? I believe the term accountants use is the "Loaded Labor Rate".

It's probably a long-shot, I'm guessing most needs for cable operators are fulfilled through independent contractor relationship - given workers comp costs and a whole slew of other obstacles.

Mike  

[Zewnten]

when I figure out equipment and operator rates I do a couple things. First is this a long term job or do I need to charge for the loading and unloading? Second what would it cost to replace your equipment; take the monthly payment and divide that by hours expected to be used that month. For example skid steers I used to charge $40/hr just for the machine, 3-5 years ago. Now decide what you want your labor rate to be; what would someone expect to make sitting in that seat, and add 30-40% of that back to it to cover taxes, SS, etc. Bet a $100/hr won't even cover expenses. 

I work dealer now and we charge $230/hr plus mileage. A service truck isn't any more expensive to run than heavy equipment.

[230Dforme]

Good afternoon miketclew

Believe you may be overthinking this a bit

If you are offered work, like any other contractor, you decide what you want to charge and offer your services at a price
I assume this is a short term job, so no no great commitment 
Possibly #1, all goes great, you make money, customer is happy and you get more work from him and others
Possibly #2, it doesn’t go so well, but you should always finish and not bail out unless real crap show,
you will know first day
You may lose your time, fuel etc, but that is contracting / business 
In my construction business you cannot bail, you must finish 
It’s called risk, no risk, no reward
Done it for 35 years now

Go do it, what could possibly go wrong 😳

[Stephen1]

My sawmill and truck are 130k so I charge $130 hr, minimum 4hrs plus travel both ways. Same as what is said above about cost of the machine, I had heard on here years ago that ever $1,000 worth of machine is $1hr and that is how I have always rolled. No sense in working if your not making money. 

[nativewolf]

Interesting thread.  Hope you get a rate figured out.  I guess I am surprised anyone is cable skidding pulpwood.  I don’t see the economics on that.  

[chep]

@nativewolf



Yes people can skid pulpwood. Right. Now in our area hardwood pulp is pay 60-65$/ton delivery before trucking. And I know certain guys with contracts for more $$
That's not bad money if you are in a decent pulp cut
I know where you are it's not worth it. But if there was a time to pull it around here it's probably right now

[nativewolf]

 @chep that answered the question! 

[Riwaka]

The Forest Service skidder rates for 2009 based on Blue Book rates.

Class Age (years)
 The two prices are supposedly for a 5 year old and a 15 year old machine (bureaucrat thinking) One might use a lower hour or higher hour machine classes?

Wheel Mounted Log Skidder: Diesel, Powershift
Deere 540G III, Cable, 117 HP,
Maximum Line pull: 35,029 lbs $85.10 $82.90

Franklin 405 S2, Cable, 135 HP,
Maximum Line pull: 40,000 lbs $86.80 $84.70

Franklin 405 S2, Grapple: 100” , 135 HP,
Winch-Maximum Line pull: 34,000 lbs $97.30 $94.90

Caterpillar 525B, Cable, 160 HP,
Maximum Line pull: 40,300 lbs $115.60 $112.80

Caterpillar 525C, Grapple: 120” , 182 HP,
Winch-Maximum Line pull: 39,342 lbs $141.40 $137.70

Not sure how one could lower the rate, maybe using old restaurant cooking oil blend in a skidder that can handle it. 

[newoodguy78]

The rise in operating costs as of late are enough to totally nullify 2009 operating costs. Anyone using those numbers to operate these days won’t be able to keep up with the work coming in then be left wondering why they can’t afford to put fuel in their pickup let alone pay for a routine service or breakdown. 

[Blue Noser]

My sawmill and truck are 130k so I charge $130 hr, minimum 4hrs plus travel both ways. Same as what is said above about cost of the machine, I had heard on here years ago that ever $1,000 worth of machine is $1hr and that is how I have always rolled. No sense in working if your not making money.

So a new off the lot Scorpion King can fetch CAD$900/hr? (Purchase price of CAD$900,000). If you assume it depreciates 33% of its value when you drive it off the lot that's still CAD$600/hr when it's new. That's 3-4x what it's actually worth per hour.

[miketclew]

Good afternoon miketclew

Believe you may be overthinking this a bit

If you are offered work, like any other contractor, you decide what you want to charge and offer your services at a price
I assume this is a short term job, so no no great commitment
Possibly #1, all goes great, you make money, customer is happy and you get more work from him and others
Possibly #2, it doesn’t go so well, but you should always finish and not bail out unless real crap show,
you will know first day
You may lose your time, fuel etc, but that is contracting / business
In my construction business you cannot bail, you must finish
It’s called risk, no risk, no reward
Done it for 35 years now

Go do it, what could possibly go wrong 😳

Oh, I don't think so (overthinking it). You probably misunderstand my intent. I already had a rate in mind, given all my fixed expenses and stomach for variable expenses, limits and capabilities. I was more curious what the range of responses would be. Let's face it, there are so many variables involved in contracting in general, let a lone forestry. All markets, soils, acres, machines, operators, ground conditions etc, aren't created equal - and on and on an on. 
Too many times people have bad mouthed a wood harvester because the stumpage he paid was less than some other person got, and the lot looks worse than the other guys. But does anybody know what the goals of each land owner were? Or what the stand condition was to begin with? You've been contracting for 35 years, I'm preaching to the choir - for sure. Anyways, look at this awesome thread and all the responses.  I take every response, including yours, with great respect and value! Cheers.

[Stephen1]

My sawmill and truck are 130k so I charge $130 hr, minimum 4hrs plus travel both ways. Same as what is said above about cost of the machine, I had heard on here years ago that ever $1,000 worth of machine is $1hr and that is how I have always rolled. No sense in working if your not making money.

So a new off the lot Scorpion King can fetch CAD$900/hr? (Purchase price of CAD$900,000). If you assume it depreciates 33% of its value when you drive it off the lot that's still CAD$600/hr when it's new. That's 3-4x what it's actually worth per hour.

Blue Nose , that is how I price and as some others point out it is how they price also. I am not sure  about the $900,000 piece of machinery, but my question...... how you can afford to run a machine like that and make money? If you only charge $200?

[Tom K]

Stephen - I get what your saying, but I don't think purchase price has much to do with what you should charge. If I only paid $15k for my skid steer, does that mean I should only charge $15 an hour for it because that's 1% of value? I'm going to charge the going rate for a machine of the same size and capability. The same machine new may cost $60k, but if mine can do the same work why would I charge any less?

The truck used to pull it to the job also doesn't seem to be relevant in hourly change in my opinion either. If I pull it to the site with a $100k King Ranch, or a $5k beater it shouldn't magically change the value from $20/hr to $115/hr. The value is what I produce, not how I get to the site. If I need a dozer or UNIMOG to access the site that should be a separate mobilization charge, not part of an hourly rate. Should a logger that runs a brand new $150k truck and $75k trailer add $225/hr to his log skidder hourly wage because that's what he hauled it to the job with? That's not going to work.

Now purchase price and replacement cost do absolutely need to be figured into operating cost, but that's not what operating cost should be based on. Basing charges on equipment purchase price only is just a WAG and would have little impact on actual profitability.

[Stephen1]

Stephen - I get what your saying, but I don't think purchase price has much to do with what you should charge. If I only paid $15k for my skid steer, does that mean I should only charge $15 an hour for it because that's 1% of value? I'm going to charge the going rate for a machine of the same size and capability. The same machine new may cost $60k, but if mine can do the same work why would I charge any less?

The truck used to pull it to the job also doesn't seem to be relevant in hourly change in my opinion either. If I pull it to the site with a $100k King Ranch, or a $5k beater it shouldn't magically change the value from $20/hr to $115/hr. The value is what I produce, not how I get to the site. If I need a dozer or UNIMOG to access the site that should be a separate mobilization charge, not part of an hourly rate. Should a logger that runs a brand new $150k truck and $75k trailer add $225/hr to his log skidder hourly wage because that's what he hauled it to the job with? That's not going to work.

Now purchase price and replacement cost do absolutely need to be figured into operating cost, but that's not what operating cost should be based on. Basing charges on equipment purchase price only is just a WAG and would have little impact on actual profitability.

Tom, I understand where your coming from. I never made any money portable until I followed this guideline. Does it work everywhere, maybe not but it sure is a good guideline. I can not be portable without a truck, 5k truck or 100K truck but I still have to have the cost in my business plan. I will tell you this though, if you run your business plan based on the 5k truck or the 5k sawmill of 5k skidded and you have to go buy new machinery, you are going to be loosing money and will quickly go out of business.
So I base my numbers on the new equipment. 
 A lot of sawmills do not depreciate a high rate.
The logger can pay someone to float his equipment into the site and so , does he need a truck and trailer? He does need to price his hourly rate so he can stay in business, IE: buy new equipment. Used or new, does not matter it still needs replacing at some point.
If you are going to loose money running your machines, I would rather Go Fishing or Golfing is my motto.

[Tom K]

if you run your business plan based on the 5k truck or the 5k sawmill of 5k skidded and you have to go buy new machinery, you are going to be loosing money and will quickly go out of business.

This is the main part I'm getting at, hourly rates should never be solely based on purchase cost whether high or low. They should always be based on true operation cost and local market conditions. Equipment cost do factor into operating cost, but are not strictly tied to profitability. Without doing the math to calculate operating costs the correlation to equipment value is more of a coincidence.

Playing this game with either cheap or expensive equipment will skew your calculations drastically one way or another, neither are based on profitability.

[Joe Hillmann]

Stephen - I get what your saying, but I don't think purchase price has much to do with what you should charge. If I only paid $15k for my skid steer, does that mean I should only charge $15 an hour for it because that's 1% of value? I'm going to charge the going rate for a machine of the same size and capability. The same machine new may cost $60k, but if mine can do the same work why would I charge any less?

The truck used to pull it to the job also doesn't seem to be relevant in hourly change in my opinion either. If I pull it to the site with a $100k King Ranch, or a $5k beater it shouldn't magically change the value from $20/hr to $115/hr. The value is what I produce, not how I get to the site. If I need a dozer or UNIMOG to access the site that should be a separate mobilization charge, not part of an hourly rate. Should a logger that runs a brand new $150k truck and $75k trailer add $225/hr to his log skidder hourly wage because that's what he hauled it to the job with? That's not going to work.

Now purchase price and replacement cost do absolutely need to be figured into operating cost, but that's not what operating cost should be based on. Basing charges on equipment purchase price only is just a WAG and would have little impact on actual profitability.

You shouldn't be charging only $15 an hour for it, you should be charging based on its replacement cost.  Because once yours dies it is going to have to be replaced.  If you aren't including replacement cost in your billing, once it is time to replace your machine you will have to downgrade instead of upgrade and it becomes a slow way to run yourself out of business.
It also depends on the service your customers are expecting.  In my experience, old worn out equipment cant work as many hours without maintenance or breakdowns as brand new equipment can.  Often old equipment is just as costly keep running (when you also include time lost) as the payment on brand new equipment.  So if your customer expects equipment that can run 10 hours a day for weeks on end they should expect to pay more for it than for equipment that runs two days, then has a three day break down, then runs a few hours and then a 1 day break down, and so on.