CONSTRUCTION FLEET BURDEN AND OVERHEAD THE TRUE COST OF COMPANY VEHICLES.
A contractor who answers the question what does your truck cost with the monthly payment is understating the real cost by a factor of 2 to 3x. Insurance, fuel, maintenance, registration, and depreciation are all fleet costs. Left out of the overhead rate they get paid out of project margin, and the bid never recovers them. Across a fleet of 8 vehicles that understatement is $80,000 to $120,000 per year, absorbed from net profit on every project, year after year. The fix is a fleet cost inventory that calculates true annual ownership cost per vehicle and allocates it correctly, to overhead for non project vehicles and to direct job cost for project assigned equipment.
Two numbers go wrong at once when fleet is treated as one lump of overhead. Overhead comes out too high, because trucks assigned to a single project are included in it. Job level margin comes out too low, because those same trucks are never charged to the project they serve. Both errors compound, one at bid time and one at closeout. Contractors who build a true cost per day for field equipment and charge it to the project usually find their real overhead rate moves 2 to 4 points, and that the movement was cost they were already paying.
WHAT IT MEANS.
Fleet burden is the true annual cost of a company truck or piece of equipment, not just the payment.
WHY THE FLEET NUMBER IS WRONG.
The payment isn't the cost
A company truck with a $650 per month payment costs $7,800 per year in principal and interest. It also costs comprehensive insurance at $2,400 per year, registration and plates at $300 per year, fuel at $4,200 per year at average utilization, maintenance and tires at $1,800 per year, and depreciation at $6,500 per year on a $32,500 truck depreciating over 5 years. Total annual ownership cost is $23,000, or $1,917 per month, which is roughly 3x the payment most contractors quote when they're asked.
Every vehicle is in overhead regardless of assignment
Company vehicles that go to specific projects belong in those projects as direct job expense. A superintendent truck that's 100 percent on one project belongs in that project's direct cost, while a shop truck used across all projects belongs in overhead. Treating all vehicles as overhead inflates the overhead rate and understates direct job cost at the same time, so both numbers are wrong in ways that compound at bid time and at closeout.
There's no cost per day for field equipment
Equipment deployed to specific projects needs a true cost per day: annual depreciation plus annual insurance plus annual maintenance plus annual fuel, divided by productive days per year. Without that charge rate, equipment cost stays in overhead and the project that used the machine never bears it. Job level margin on that project then reads better than the work really earned.
WHAT IT LOOKS LIKE IN DOLLARS.
A $650 per month payment is $7,800 a year. Add insurance at $2,400, registration and plates at $300, fuel at $4,200, maintenance and tires at $1,800, and depreciation at $6,500 on a $32,500 truck over 5 years. Total annual ownership cost is $23,000, which is $1,917 per month against a $650 payment.
When that difference exists across 8 company vehicles, the fleet burden in overhead is understated by $101,600 per year. That's cost the business is already paying and not recovering in any bid price. It comes out of net profit on every project until the overhead rate is corrected.
Most contractors who do this exercise for the first time find their real overhead rate increases by 2 to 4 points from underaccounted fleet burden. That increase is real cost that was being absorbed from project margin on every job. Correcting the rate at bid time recovers it going forward, without changing what the business costs to operate.
THREE STEPS TO THE REAL NUMBER.
Record the VIN or serial number, acquisition cost, current book value, monthly payment, insurance cost, annual maintenance budget, and primary assignment, whether project, overhead, or mixed. The inventory is the part most contractors have never built. It's the input to everything else on this list.
Payment plus insurance plus registration plus fuel at average utilization plus maintenance. That total is the number that belongs in the overhead rate or in direct job cost, not the payment alone. Depreciation belongs in it too, because the truck is being consumed whether or not anybody books the entry.
Project assigned equipment goes to direct job cost at the project charge rate, overhead assigned equipment goes to overhead, and mixed use equipment gets prorated. Then the overhead rate calculation gets updated with the corrected fleet figures. Both the overhead rate and the job level margin become usable at the same time.
For equipment deployed to projects, the cost per day is annual depreciation plus annual insurance plus annual maintenance plus annual fuel, divided by productive days per year. When the machine goes to a project, the charge rate goes with it as direct cost, and the equipment ownership cost held in overhead drops by the amount charged out. The result is job level margin that includes the real cost of the equipment that did the work.
FLAT MONTHLY FEE. NO SURPRISES.
Three tiers, priced by your trailing twelve month revenue. Which one you're in depends on how much of the work you want off your desk. No hourly billing. No payroll. The one-time onboarding fee is right here in the table.
| Last 12 months revenue | Monthly fee | One-time onboarding |
|---|---|---|
| Under $1M | $1,900 to $3,300 | $1,000 |
| $1M to $3.5M | $2,600 to $5,300 | $1,500 |
| $3.5M to $6.5M | $3,800 to $8,300 | $3,000 |
| $6.5M to $9.5M | $5,100 to $11,800 | $4,500 |
| $9.5M to $12.5M | $6,100 to $14,900 | $6,000 |
| $12.5M to $15.5M | $7,400 to $17,650 | $7,500 |
| $15.5M to $18.5M | $9,400 to $22,400 | $9,000 |
| $18.5M+ | Quoted individually | Quoted individually |
The onboarding fee covers migrating your books back to the start of your last taxable year and getting you fully operational in 60 days. It's billed once, with your first invoice. It's the same for all three tiers. Your first month is prorated, and your monthly engagement starts on the first of the first full month.
Range reflects the three tiers below. Which one you're in depends on how much of the work you want off your desk. No payroll. No hidden line items. The onboarding fee is right here in the table.
You stop guessing.
You get the CFO work. Job costing built against the way you estimate, a 13 week cash forecast, monthly WIP, and a meeting every month that ends in decisions and never in a report.
Your bookkeeper still does the books.
Every job shows its margin while it is still open.
Everything in Core, plus the bookkeeping and bank reconciliations done for you, and the job costing and WIP software set up, loaded with your cost codes, and managed every month. Use your own online software, or move to ours and we cover it.
A bookkeeper we choose does the books and reconciliations. No payroll.
You approve, and the money side gets handled.
Everything in Strategic, plus a controller we choose who handles your bills and receivables for you the way an in-house controller would. They call vendors, pay the bills and keep the accounting current. We plan the cash flow first, and you approve every payment because it is your money.
A controller we choose does the payables and receivables. No payroll, no pay applications, no collections.
FREQUENTLY ASKED.
PART 3 OF 6, TO WATCH.
Never Miss Payroll Without Taking On Debt is a 6 part series on making payroll out of work already performed, without reaching for a line of credit. One of the sessions covers this:
Your Equipment's Leaking Money, and It's Not the Maintenance Bill
A rate built on what you paid recovers enough to own a worn out machine. It doesn't buy the next one.
Playing on this site, with nothing to enter and nothing to join.
