First Person: How Construction Companies Can Use Their Equipment to Increase Revenues

Large construction companies use their equipment and assets to make additional money at job sites. Many small and new construction companies often overlook this simple method to increase their bottom line and to make the individual job more profitable.

Leasing equipment from the Construction Company

In large construction jobs, the construction company will lease equipment to the job site. For example: The construction company owns the pickup and will bill the customer a rental fee for using their pickup at that particular job site. Construction companies can also rent specialty equipment from another company and add a fee to the invoice. For example, Construction Company rents a fork lift from Rental Company for $100 per week. Construction Company charges the customer, $110 per week for the fork lift. This added revenue helps to cover administrative and insurance costs.

The Owner Leasing Equipment to the Construction Company

Rather than purchasing equipment outright, some owners of construction companies will purchase equipment and then lease it to the construction company. Thus, the owner is able to depreciate the pickup while making a little extra money. When the construction company is doing their taxes, the construction company can write off the entire amount of the lease price of the vehicle which would have to be spread over the life expectancy of the vehicle if the construction company bought it out right. This is particularly useful to corporations, partnerships and LLCs construction companies.

Potentially Overlooked Revenue Source of Leasing Equipment:

When a construction company is first starting out, they are concerned about overbidding a project and losing the job on hard money bids. The equipment rentals should be factored into the bids as this will help to pay for repairs or replacement of company owned equipment. If the construction company leases the equipment, this expense can be passed onto the customer especially when the contract is a Time and Material contract in lieu of a hard money bid.

A Time and Material contract is just that, a construction company is paid a set price per man hour and material is added onto the contract. In a hard money bid, the full amount of the contract is priced. "We will do this project for XX amount of money." The construction company cannot charge more, even if there are difficulties in completing the contract on time. By including the equipment as part of the bid item or as material to the jobsite, the construction company will have a way to replace any equipment that is worn out, stolen or damaged during the project. It provides an additional way for a small business, and their owners, to increase their bottom line and make more money during a construction project.

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