How to Start a Skid Steer Business in 10 Steps

This guide covers everything from buying used vs. new, licensing, business setup, costs, insurance, maintenance, growth, and more.

Many heavy equipment operators dream about owning a business someday. Who doesn’t want to be their own boss and have complete control over their day-to-day? What could be better than running your own heavy equipment and getting paid directly for your hard work? 

One path for getting started in the grading and excavation business is to start off by building your own skid steer service and working jobs in residential construction, commercial construction, and landscaping. You don’t need a lot of money to get going and if you do it the right way, you can build your company up over time. 

That being said, let’s be clear - running your own skid steer business is hard work. You need to think about a lot more than just running equipment and each year there are many owner-operators who go bankrupt because they fail to understand the complexity of running their own show. 

In this article, the team over at Boom & Bucket has laid out a 10 step process for starting your own skid steer business in 2022. If you’re thinking about starting your own business or buying a skid steer, please reach out to our team as we would love to help you get going.

Step 1: Ensure you know how to operate a skid steer

Okay, perhaps this is a no-brainer but you would be surprised by the number of people who think they know what they’re doing behind the controls of a Bobcat Skid Steer or a Bobcat Compact Track Loader and in reality, have no idea what they are doing. Training and getting the right experience are of critical importance. It will ensure that you’re able to stay safe, work efficiently and produce high-quality output which will drive repeat business.

The best way of getting this training and experience is by working for someone else for a couple of years. Perhaps you have a relative or a friend who is in the industry and can help you get going. Another way to get trained is by enrolling in a hands-on skid steer operator course from a local dealer. If you don’t have any in-person training options, you can also look at some online courses which have become increasingly popular during the COVID-19 pandemic. In particular, look for training courses that offer OSHA certified skid steer training which will help you with licensing down the line.

If you want some specific recommendations for a skid steer training class near you, feel free to reach out to our team at support@boomandbucket.com and we’ll be happy to get you some recommendations.

Step 2: Understand your startup and operating costs

As they say, it takes money to make money. But exactly how much money do you need to get going and do you need to have all the cash saved up or can you obtain a loan. This is often the step that trips most people up and scares them away from pursuing their dream. Even once you understand your startup costs, you also need to have a really good idea of what your ongoing operating costs will be so you have a good understanding of what it will take to be profitable.

Startup costs that you need to take into account include:

  • Licensing
  • Professional services (e.g. accountants, legal, etc)
  • Equipment (e.g. truck, trailer, skid steer, or compact track loader)
  • Personal Protective Equipment

Operating costs that you need to understand include:

  • Fuel
  • Maintenance (parts, mechanic labor, etc)
  • Loan payments from financing equipment (or lease payments if you don’t plan on truly owning your equipment)
  • Depreciation (i.e., how much is your equipment going down in value as you use it)

In order to be successful, you need to make sure that your monthly revenue from doing jobs is greater than your monthly operating costs (income = revenue - costs). Even if you don’t have any maintenance that month and even if you can’t see the depreciation on your equipment, you need to save those funds on the side in preparation for the future.

Note that in the early days of your business, you may have to underprice your services in the very beginning as a means of building a reputation for yourself and building relationships. Of course, don’t sell yourself too short and ensure that you increase your pricing gradually to the point where it is market rate. More on this in step 8!

Step 3: Open a business bank account

Some folks get tempted to just run their business out of their personal checking account. While this might seem like the easiest thing to do, it can be messy and make it a lot harder to stay organized while running your business. Opening a business checking account is not that difficult and will help you keep things straight so you can focus on doing great work.

One business checking account that our team endorses (note: we do not receive any sort of advertising or affiliate payment fee for this endorsement) is the BlueVine business checking account

The reason we like it so much is that it offers the following benefits:

  • No minimum balances
  • No monthly fee
  • No Not Sufficient Funds (NSF) or other hidden fees
  • No ATM Fees at 37,000+ MoneyPass ATMs nationwide
  • Two no-cost checkbooks
  • 0.6% APY on account balances (20x the national average)
  • Great online and mobile banking apps
  • Free ACH and cheap ($15) wire transfer payments
  • Ability to easily get a line of credit based on your accounts receivables (in other words, you can get a short term loan because you have money coming in soon from a job you completed and invoiced someone for)

Step 4: Hire a bookkeeper or take a course online

Let’s admit it, accounting is not fun. No one likes paper pushing at the end of the day but keeping your books straight is vital if you’re going to be successful. There are two options here that you can pursue

Option 1: Do it for me

Option 1 is to just bite the bullet and hire a part-time accountant or bookkeeper to just do this work for you. They can typically do this work remotely and often bill by the hour so the costs scale with your business. The benefits of this approach are that you’ll be confident that you won’t be making any mistakes and will have an expert by your side as you build your business. The drawbacks however are that you can sometimes be a bit more removed from the numbers and it can be expensive.

Option 2: Do it myself

Option 2 is to take some classes and learn to do it yourself. Over the past several years, the rise of online education has made it really easy to learn how to do basic accounting work and keep things straight. Some online classes that we would recommend include:

The benefit of this approach is that you’ll have a stronger command overall financial elements of your business which will enable you to be a bit more nimble in your decision making. Of course, the big drawback here is that you have to invest a good chunk of time to learn the ropes and there’s also a risk of making errors. If you do go down this path, try to find a friend who runs a small business themselves and can serve as a mentor or watchful eye as you get started.

Step 5: Obtain a contractor’s license from your state

We know what you’re thinking...do I really need to do this? Sure, there are several outfits that skirt by without a license but in our opinion, that’s just short-term thinking. Getting licensed has a number of benefits. First of all, it can help you land business from customers who have never worked with you before. Second, it can make it easier to get things like bank loans and insurance. Third, some jobs that you want to bid for will require it. Fourth, if you want to grow your business and eventually employ others, you’ll need to have this to avoid liability. Last but not least, being licensed often means you can charge more for your services.

Licenses vary from state to state. We suggest contacting your local builder’s association to learn more. Some states such as California have more in-depth licensing requirements including passing an exam whereas other states such as Idaho require you to fill in a simple form registering yourself as a contractor.

Step 6: Find a Skid Steer for sale or Compact Track Loader and other required heavy equipment

Now it’s time for the fun stuff - buying heavy equipment for your new business. First, you’ll want to understand whether or not you want to buy your equipment new or used. Both options have several advantages and drawbacks.

Buying new equipment

When you buy the equipment new, one major advantage is that it comes with a factory warranty that can provide you with some coverage should there be any mechanical problems with your equipment for a limited period of time. You’ll also get to take advantage of the latest technology and comfort features offered by manufacturers. The drawbacks of this approach are, you might have to wait a long time before a new piece of equipment is available from your local dealer and you’ll take a big depreciation hit as soon as you put it into operation.

Buying used equipment

When you buy equipment used, you’re typically getting machines at a much better price and you can get what you’re looking for immediately. We even wrote a quick guide on how to find the best used skid steer for sale if you're interested. Well-maintained used skid steers tend to hold their resale value for a really long time so you’re likely not going to have any immediate depreciation. The drawbacks of buying used however are that you often have to spend a little bit of money upfront to perform some maintenance and sometimes you don’t have the full history of how the equipment was maintained previously.

It’s a tough decision to make but as we discussed in step 2, you’ll want to carefully consider your budget and what you can afford. In our experience, we find that many people just getting started will acquire the equipment used to keep their startup costs under control.

For more information on buying used skid steers, you can reach out to our team at support@boomandbucket.com. You can also read our Ultimate Used Heavy Equipment Buyer’s Guide for more helpful tips or browse our inventory

Step 7: Get insurance

There are a number of different things that you will need to consider from a protection and liability perspective. The best thing to do is get in touch with a reputable local business insurance broker who can go deeper in understanding your operation and provide you with recommendations on policies that you should consider getting. 

Some common types of insurance include:

  • General Liability Insurance
  • Property & Equipment Insurance (Skid Steer Insurance etc.)
  • Workers’ Compensation
  • Business Auto Insurance
  • Umbrella Liability Insurance

It’s worth calling out the importance of Property & Equipment Insurance. As a skid steer service, you’ll want to adequately protect the machines that keep you in business. Certain things such as equipment theft are outside of your control so it’s worth having a policy that can give you peace of mind.

Step 8: Get jobs, do good work, build relationships

A lot of your success as an owner will depend on your ability to hustle and win business. You can’t just sit by your phone hoping that jobs will just come in by themselves rather you have to go out and make opportunities happen. 

If you have a pre-existing network of potential customers, you’re in really good shape to make some phone calls and start to drum up some potential jobs. If you do not have a big Rolodex however, you have to put in the work and get yourself in front of decision-makers who can give you a shot. This means a lot of driving around town to job sites and getting information from the site superintendent or fore-person on who you should talk to in order to pitch your service.

Once you do manage to get in front of decision-makers, one method for gaining business is to offer promotional pricing for the first job. Basically, you’re underpricing your service as a means of getting your foot in the door so you can prove that you do really good work. Subsequent jobs would be at your market rate. What’s good about this approach is that you are incentivizing people to take a chance on you. Profit margins in construction are slim and everyone is looking to save a few bucks. If you do use this tactic, make sure that you keep your costs under control and make sure that you’re still operating within your means.

Last but not least, if you’re going to be successful, you have to do good work. That means communicating well, being professional, executing the scope of work with a high-quality standard, being a good problem solver when challenges arise, etc. These are all important elements for building trust and satisfying customers. Be proactive about asking for feedback and be forward about asking for an opportunity to bid on the next job that the general contractor has coming up. This will make it easier and easier to get new jobs and build a reputation in your region.

Step 9: Maintain your equipment

It’s not fun but maintaining your equipment is vital as you operate your business. While it may be tempting to defer maintenance and save a few bucks, odds are you are increasing the likelihood of having a more costly maintenance/repair need down the line. Think long term NOT short term!

There are two types of maintenance that you need to consider:

  • Planned or preventative maintenance
  • Unplanned or emergency maintenance

As you operate your business, hopefully, most of your maintenance is planned. This is because unplanned maintenance means you are experiencing downtime which means you are not operating on schedule. You have to scramble to get a technician on-site and potentially scramble to bring in replacement equipment as soon as possible. This can cause some ripple effects in regards to the project schedule and you will likely end up angering your customer if this were to happen.

Planned maintenance on the other hand is more in your control. You follow the equipment manufacturer’s recommendations on what services to perform at specific hour meter intervals and you constantly stay ahead of potential breakdowns. In addition to following manufacturer guidelines, you’ll also want to conduct a daily walk-around inspection of your equipment and flag any items that require work. You don’t have to reinvent the wheel here. There are many inspection form templates for skid steers online that you can just download, print and use.

The other thing that you will have to consider about equipment maintenance is whether to perform the work yourself or get it done by a mechanic (either independent or affiliated with a dealership). 

If you perform maintenance work yourself, it will save you a lot of money as heavy equipment technician labor rates are quite expensive. It will also give you a much better appreciation for the condition of your equipment and how to operate it in the best manner to avoid unnecessary wear and tear. If you work with a mechanic, however, you will ensure that the maintenance work is being performed at a really high-quality standard and you’ll have a second set of eyes on your machines to ensure that you’re truly uncovering all the maintenance needs. You can also take more of a hybrid approach as well. Do all the simple stuff yourself like oil and filter changes but reserve all major maintenance work for a local mechanic.

Step 10: Grow your business

Once you get some reps under your belt, it will be time to start growing your business and investing more in your marketing. One of the simplest things you can do is build a website and make sure your business is easy to find online (especially your contact info). Platforms such as Wix, Webflow, and Squarespace have made designing a website a 1-2 day process. Just drag and drop some images and draft up some text and away you go. You can even use an off-the-shelf template to get things up and running even faster. If you need help in this area, another way to get your business online is to hire a freelance website developer on Fiverr.

In addition to getting your business online, another way you can grow your business is by asking for referrals. Once you have some happy customers, ask them if they know of other contractors in your area who they would be comfortable referring you to. As an industry, construction operates on trust and there’s no better way of getting your foot in the door than someone vouching for you and saying that you deliver on your promises.

At a certain point, you may have to make a decision on whether you want to keep your business small or whether you want to expand further (i.e., hire employees and buy more equipment). This is a highly personal decision. For some, they may want to move up the food chain and become a true grading and excavation subcontractor with a large fleet whereas others don’t want any added complexity and risk and just want to continue to bring in a steady income. There’s no right or wrong answer here.

Conclusion

Starting a new skid steer business is a lot of work but by following the above blueprint, you’ll be off to a great start. As you get going, our team at Boom & Bucket would love to help. Please feel free to reach out to our team at support@boomandbucket.com and we would be more than happy to talk to you about your skid steer equipment needs and getting help financing used heavy equipment.