This one started as a question from a listener getting into land clearing and turned into the clearest breakdown on the show of why so many contractors are working hard at prices that cannot pay them. Brent Oberlink and Alex Eckhardt walk through equipment, debt and the costs that never make it onto the rate sheet.
The costs that do not show up until they do
The reason underbidding is so common is that the expensive things are not the ones you think about while you are writing the number. Brent's example is a machine that has been sitting quiet for two or three months and then hands you a repair bill. That is not a surprise expense. It is an hourly cost you were supposed to be collecting all along, and you were not.
Payroll works the same way. Once you hire, you are not just covering the job any more, you are feeding and paying people between jobs too. If the rate does not carry that, the busy months quietly fund the slow ones and you finish the year wondering where it went.
Rent until your book is full
The rule they land on for anyone starting out is about consistency of work, not about price. If your projects are intermittent, meaning you finish one and might not have another for two or three weeks, rent. Owning a machine that sits is the fastest way to turn a good month into a bad quarter.
On buying used, Brent's own line for the machines they run is fifteen hundred hours and under, maybe two thousand. Past that, the maintenance bill starts making the purchase price look like the small number.
And on debt he is direct: debt is your friend, as long as you are making money on that debt. The test is not whether you have a payment. It is whether the thing the payment bought is producing more than it costs.
Set up the credit before you need it
Two pieces of advice here that cost nothing today and are worth a great deal on the day you need them.
Get established with a bank, preferably a traditional or regional one, early. Rates are better than the higher risk lending you get pushed toward when you are new and have no history. And establish a line of credit before you need it, because the moment you need one is the moment you look least attractive to a lender.
Have contracts, and a scope that says what you are not doing
The recommendation for anyone just starting is to have contracts, with a scope of work that states plainly what you are providing. Most underbidding is not arithmetic. It is a job that grew after the number was agreed because nothing written down said where it stopped.
Know your market, and ignore the truck on Instagram
The closing warning is worth repeating to anyone about to buy their way into a trade. Seeing someone with a new pickup and a new machine on social media tells you nothing about whether they are making money. It tells you they have payments.
The useful question instead is the one Brent asks: what is my differentiator? If the honest answer is price, that is a plan with a short life.
Nothing here is financial advice for your business. Talk to your own accountant and your own banker about your numbers.
Listen to the full episode, or find The Better Contractor Podcast on Spotify, Apple Podcasts and YouTube.