billable hours equipment hours faq How Do I Forecast My Equipment's Billable Hrs/Year

There are two schools of thought when estimating equipment.  Some contractors estimate By the Operating Hour where they estimate only hours where the vehicle/equipment is actually in use.  Other contractors estimate By The Day where the vehicles/equipment are charged while they are at the clients' site, regardless of whether they are actually being operated.

Let's illustrate how to enter these costs using some examples:

 

A skid steer gets 300 operating hours per year, and spends about 70 days per year out working on jobs.  The user can estimate in two different ways

By-The-Hour Method (maintenance or construction)
Start with the number of operating hours per year.  You can pull this number off the hours meter on most machines.  For example, you enter 250 hours in the forecast billable hours field (assuming 300 is the average operating hrs per year).   When estimating, you only estimate the actual operating time on each job. The cost per hour is higher, but the less hours are estimated since you are only estimating when its actually being operated.  Machine should be setup to use HOURS as its units.
By-The-Day Method (construction only)
Start by estimating the number of days the skid steer is used on jobs per year.  In the example above, we're estimating it gets 70 days of actual use on jobs.  If your average work day is 8 hours, so you could enter 560 hours (8 hours x 70 days) in the forecast billable hours field.  All hours while the skid steer is at customer's site are estimated, regardless of whether its operating or parked.  The cost per hour is lower than the operating hour method, but the user estimates more hours, since you're estimating full days.

 

 

You estimate that the average crew truck works every day, all day, 180 days per year.  But on average, it spends only 1.5 hours actually driving each day.  

By-The-Hour Method (maintenance or construction)
Enter 270 hours (1.5 hrs/day * 180 days) in the forecast billable hours field.  Then only estimate actual driving time in estimates. The cost per hour is higher, but estimates include less hours since they are only estimating when the truck is actually driving.  Truck should use HOURS as its units.
By-The-Day Method (construction only)
Estimate the number of working days in a year for the truck;  For example: You estimate the truck gets 180 days of use, minus 20 days for rain days, holidays and warranty.  If your average work day is 8 hours, you would enter 1,280 (160 days x 8 hours per day) hours in the forecast billable hours field.  When estimating, you estimate full days while the truck is parked at a customer's site, regardless of whether its driving or sitting idle at the curb.  The cost per hour is lower than the operating hour method, but you're estimating more total hours, since you're estimating in full days.
 

 

Equipment Costing Tip:

At LMN, we use the By-The-Day method for all construction equipment.  It's simpler for estimators and reviewers to understand and less likely to get missed.  If you estimate 27 operating hours, no one knows whether the machine should be there 3 days at 8 hours a day, or 10 days at 2.7 hours per day.

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