Yesterday, 07:29 PM
The Pressure on Small Operators
Across North America, small owner-operators in the excavation and hauling business are facing mounting pressure from rising operating costs. Fuel, insurance, labor, equipment maintenance, and regulatory compliance have all increased steadily over the past two decades. Yet many contractors continue to bid jobs at rates that haven’t changed since the early 2000s. This disconnect between actual costs and market pricing is pushing experienced operators into financial strain, while newer entrants often underbid without understanding long-term sustainability.
Typical hourly rates cited by small contractors include:
Terminology Notes
Inflation has hit every corner of the industry. Batteries that once cost $134 now sell for $171 due to rising lead prices. Tires have jumped $20 each in a single year, and disposal taxes are now charged even if old tires are retained. Fuel prices fluctuate wildly, making long-term bids risky. In Alaska, dump truck rates have climbed to $95/hr, with belly dumps exceeding $105/hr.
The Undercutting Problem
One of the most damaging trends is the influx of retirees and hobbyists who offer services at unsustainably low rates. A retired plant worker with a new Kubota TLB and Duramax dually may charge $50/hr with no minimum, simply because he enjoys working with tractors. While this may seem harmless, it distorts the market and undermines professionals who rely on fair pricing to maintain equipment and pay staff.
In Ohio, the number of excavating contractors listed in the phone book doubled in seven years—from 70 to 170. Many of these are new companies started by displaced workers from closed manufacturing plants. While entrepreneurship is admirable, many lack a clear understanding of cost structures and bid too low to survive long-term.
Strategies for Survival
In South Dakota, a third-generation contractor recalled how his father warned about “newbies” disrupting pricing. He emphasized the importance of building a loyal customer base and being fair, consistent, and visible. One client, after hiring a cheaper competitor, returned without asking for a quote—just saying “do it and send the bill.”
In Maine, a solo operator with a Takeuchi 135 charges $115/hr and stays booked year-round. He credits his success to niche work, responsiveness, and personal relationships. His clients call him at 5 a.m. or 10 p.m., and he always answers. That level of service justifies his rate.
Recommendations for Small Contractors
The rising cost of operating is not a temporary challenge—it’s a structural shift. Small contractors must adapt by understanding their numbers, protecting their margins, and building lasting relationships. Competing with hobbyists and underbidders is futile unless you offer something they can’t: professionalism, reliability, and long-term value.
Across North America, small owner-operators in the excavation and hauling business are facing mounting pressure from rising operating costs. Fuel, insurance, labor, equipment maintenance, and regulatory compliance have all increased steadily over the past two decades. Yet many contractors continue to bid jobs at rates that haven’t changed since the early 2000s. This disconnect between actual costs and market pricing is pushing experienced operators into financial strain, while newer entrants often underbid without understanding long-term sustainability.
Typical hourly rates cited by small contractors include:
- CAT D4G dozer: $88/hr
- Deere 120 trackhoe: $100/hr
- Tractor with 10-yard pan: $105/hr
- 12-yard dump truck: $65/hr
- Farm tractor with loader and grademaster: $45/hr
- General labor: $12.50/hr
Terminology Notes
- Break-even Rate: The minimum hourly rate required to cover all operating costs, including depreciation and overhead.
- SDI (State Disability Insurance): A payroll tax that adds to labor cost in some U.S. states.
- Belly Dump: A trailer that unloads material through a gate at the bottom, commonly used in road construction.
Inflation has hit every corner of the industry. Batteries that once cost $134 now sell for $171 due to rising lead prices. Tires have jumped $20 each in a single year, and disposal taxes are now charged even if old tires are retained. Fuel prices fluctuate wildly, making long-term bids risky. In Alaska, dump truck rates have climbed to $95/hr, with belly dumps exceeding $105/hr.
The Undercutting Problem
One of the most damaging trends is the influx of retirees and hobbyists who offer services at unsustainably low rates. A retired plant worker with a new Kubota TLB and Duramax dually may charge $50/hr with no minimum, simply because he enjoys working with tractors. While this may seem harmless, it distorts the market and undermines professionals who rely on fair pricing to maintain equipment and pay staff.
In Ohio, the number of excavating contractors listed in the phone book doubled in seven years—from 70 to 170. Many of these are new companies started by displaced workers from closed manufacturing plants. While entrepreneurship is admirable, many lack a clear understanding of cost structures and bid too low to survive long-term.
Strategies for Survival
- Know Your Minimums: Establish a break-even rate and never bid below it. Working for less than cost is worse than sitting idle.
- Lay Off Strategically: Pay workers well, but be transparent about seasonal layoffs. Avoid keeping crews busy at a loss.
- Bulk Fuel Purchasing: If feasible, buy fuel in bulk to reduce per-gallon cost. Use dyed diesel for off-road equipment where legal.
- Avoid Debt Traps: Resist the urge to upgrade equipment during boom periods unless cash flow supports it.
- Build Reputation Over Price: Focus on quality, reliability, and customer relationships. Many clients will return even after trying cheaper alternatives.
In South Dakota, a third-generation contractor recalled how his father warned about “newbies” disrupting pricing. He emphasized the importance of building a loyal customer base and being fair, consistent, and visible. One client, after hiring a cheaper competitor, returned without asking for a quote—just saying “do it and send the bill.”
In Maine, a solo operator with a Takeuchi 135 charges $115/hr and stays booked year-round. He credits his success to niche work, responsiveness, and personal relationships. His clients call him at 5 a.m. or 10 p.m., and he always answers. That level of service justifies his rate.
Recommendations for Small Contractors
- Track Equipment Costs Annually: Know exactly what each machine costs to operate.
- Limit Advertising to Past Clients: Focus on retention rather than chasing low-margin new jobs.
- Use Financial Statements to Guide Decisions: Plan purchases and pricing based on actual data.
- Avoid Competing on Price Alone: Offer insurance certificates, references, and craftsmanship.
- Set Expiration Dates on Estimates: Fuel and material costs change—quotes should reflect that.
The rising cost of operating is not a temporary challenge—it’s a structural shift. Small contractors must adapt by understanding their numbers, protecting their margins, and building lasting relationships. Competing with hobbyists and underbidders is futile unless you offer something they can’t: professionalism, reliability, and long-term value.
