Here's the thing nobody tells you about the tree care industry: we're terrible at math. Sure we know our bar lengths, and socket fractions, can do complex multi point trigonometry while swaying back and forth in a tree over power lines and traffic… but to sit down and repeatedly and accurately produce solid business math our company can rely on is another story.
I mean spectacularly, embarrassingly bad. We're running a $40 billion industry like it's still 1985. Most guys I know can tell you exactly how much their new Bandit chipper cost, but they have no clue what it actually costs them per hour to run the damn thing. They think "overhead" is something that happens to other people.
I've spent the last few years building TreeShop differently. Not by buying bigger trucks or hiring more crews, but by treating it like an actual business instead of just "tree work with better equipment." The data this company has been able to produce for me across multiple line item services has been revealing.
To get to the full picture, we must build strong understandings and functional control of the individual components. When TreeAi was in its infancy, it was referred to as AlgoTree. This all started right before the AI bubble started inflating. It was called AlgoTree, because I was hunting the algorithms that the tree industry operated on. When I found them I needed to convert them to usable data forms.
One of those necessities was a simple, accurate enough way for everyone who uses the system to understand the actual cost of that asset, whether its employees or equipment. The first article on this Substack was about employee problems. Much more nuanced problem to solve than equipment.
Rule 1: We Fight From Solid Ground
If there is no solid ground, build it. Then fight. This entire journey kicked off because I wanted to build a sales system I could use to train sales reps at tree companies across the country. A Grant Cardone style sales training, for the tree game. So basically I started with how do we identify price. This quickly led to needing to define what everything cost.
Go online, everyone says "you GOTTA know your number." Coincidentally none sit down and explain the ingredients for "Your Number". TreeShop will.
So to create solid ground in the business planning, we will work from provable. Your receipts, your purchases. These things do not move or change and are typically monthly enough that you can get them pretty stable and accurately to inform and keep your pricing up to date. (Yes, TreeAi does this automatically… still coming soon)
So equipment, lets get into it.
Equipment was actually the easier problem to crack. Every piece of machinery has predictable cost patterns if you're willing to track the right data points. We built a system that captures six critical inputs:
Input 1: Usage Pattern - Reality vs. Fantasy
First, you need to know how much you actually use the machine. Not how much you think you use it, not what you told your money guy you'd use it. How much you actually run it.
We track this three ways: days per year in operation, hours per day when running, and total annual hours. Most guys guess wildly here. "Oh, we run the bucket truck every day." No, you don't. You run it maybe 180-200 days per year once you account for weather, downtime, maintenance, and the reality that tree work isn't 365 days of steady operation.
Our bucket truck example: 200 days per year, 6 hours per day average = 1,200 annual hours. Not 2,000. Not 2,500. 1,200 real hours that machine actually earns money.
This number drives everything else. Get it wrong, and your hourly cost calculation is worthless.
Input 2: Purchase Price and Depreciation Timeline
What you paid and how long you plan to keep it. Sounds simple, but most guys either forget about depreciation entirely or use fantasy timelines.
That $80,000 bucket truck you're keeping for 7 years? It's losing $11,429 in value every single year. But here's the key - you spread that depreciation across actual operating hours, not calendar time.
$80,000 ÷ (7 years × 1,200 hours/year) = $9.52 per hour in depreciation cost. Every hour that machine runs, it burns almost ten dollars just getting older.
Please be honest with yourself. Keeping a piece of equipment 7 years in the TCi is a long time. Yes you can do it, but you need to make sure during pricing you are accurate. A good rule of thumb is however long the warranty is. Manufactures tend to place them right before expensive systems start failing based on their internal durability testing.
Input 3: Fuel Consumption - Track Don't Estimate
Stop guessing what your equipment burns in fuel. Go find out what your engine burns per hour. Most modern engines have this information somewhere. Google Searched: GPH fuel burn rate
CAT 265. Google Output: "A Cat 265 compact track loader will typically consume between 10 to 14 gallons of fuel per hour, with the exact amount depending on the engine's load, hydraulic usage, and attachment selection."
Great, whats your average fuel price.(You can google this one too.)
- •burn rate x fuel price = hourly fuel cost
- •hourly fuel cost x daily run rate = daily fuel cost
So, to put a period on this, lets do an example. My CAT 265 burns 14 Gallons Per Hour of diesel fuel. I only run on road for consistency and i have no reliable fuel supplier around for off road anyways. The average price of diesel is $3.64 per gallon. That means that my CAT 265 burns $50.96 worth of diesel every hour it runs. (and thats a tiny baby 74 hp engine)
Now, since I ACTUALLY only get about 6 hours of run time per work day means my CAT 265 will burn $305.76 per day. These kind of numbers will destroy a project that is multi day/ multi machine projects if not addressed correctly before.
Does my 265 burn $305 per day. No. There are days where it burns that, but there are days where it burns $50. the reason we break it down to hour is for the math. If you plan to put 3000 hours on a machine and flip it then you know that you need to provide a maximum of $152,880 for fuel over the lifetime of the machine. This is why fuel tracking matters - it's the most volatile cost component and the one that kills margins when you're not paying attention.
Input 4: Some Maintenance Required
TreeAi uses formulas for this but the gist of it is a simple 8-15% of purchase price set aside every year for maintenance is a good starting point. This point is where the good purchases stand out from the trash brands. (Some trash brands build good products still so be careful, you buy the service department when you buy a machine.)
For our CAT 265, we price out $9.58 per hour for maintenance.
Input 5: Insurance and Fixed Costs - The Hourly Hit You Forget
Your insurance bill doesn't care how many hours you run that machine. You pay the same premium whether it works 2,000 hours or sits in the yard collecting rust. But for true hourly cost calculation, you spread those fixed costs across actual operating hours. Whats the price, your agent can tell you exactly as needed.
Input 6: Resale Reality - What It's Actually Worth When You're Done
Probably should move this up to the purchase price section lol. Either way, it still needs to be done and its hear now. What are you going to sell this thing for when you hate it? After its broken down 3 jobs in a row, when the shop says uhh you cracked the frame, or we don't know but maybe a long block will fix it… what will you accept.
Tip- go find something in similar condition as yours will be when time to sell, whats it selling for now.
The Complete TreeAi Calculation
Now we add up all six components for our CAT 265:
- •Depreciation: $7.78/hour (realistic resale after 5 years)
- •Fuel: $50.96/hour (14 GPH × $3.64/gallon)
- •Maintenance: $9.58/hour (15% of $115,000 purchase price)
- •Insurance/Fixed: $2.33/hour (annual costs spread across hours)
TreeAi Required Hourly Cost: $70.65/hour
That's what it actually costs to run that CAT 265 for one hour. Not $50. Not $90. $70.65 based on real Florida pricing and actual operating data. (JUST THE CAT)
The Business Intelligence This Number Produces
This hourly cost becomes the foundation for every business decision involving that machine:
Minimum Billing Threshold: Cannot profitably deploy this machine for less than $70.65/hour. Period. Any job paying less is costing you money.
Daily Revenue Requirement: At 6 hours/day average runtime, this machine needs to generate $423.90 daily just to break even on its own operating costs.
Annual Revenue Target: At 1,800 hours/year utilization, this machine must produce $127,170 annually to cover its costs before you add labor, overhead, or profit.
Project Planning: Multi-day projects with this machine burn $423.90 daily in equipment costs alone. Factor that into your estimates or watch profits disappear.
Replacement Decision: When maintenance consistently exceeds $12/hour or utilization drops below 1,200 hours annually, start shopping for replacement equipment.
Fighting From Solid Ground
This is what Rule 1 demands. You now know exactly what that machine costs to operate every single hour. No guessing. No hoping your pricing works out. Mathematical certainty. Trust the math to get you close enough. Skill and Systems will smooth out any edges.
Most tree companies are flying blind with equipment costs, charging what "feels right" and wondering why they're not building wealth. When you know your CAT 265 costs $70.65/hour and your competitor thinks his costs $50/hour, you understand why he's heading toward bankruptcy while you're building a sustainable business.
This systematic approach to equipment costing is the foundation everything else builds on. Without accurate equipment costs, you can't price jobs correctly. Without correct job pricing, you can't generate reliable profits. Without reliable profits, you're just cutting trees with expensive toys that will bankrupt you the first chance they get.
TreeAi automates all these calculations, updating fuel costs in real-time and tracking actual maintenance expenses against projections. But the principles remain the same: measure what matters, calculate precisely, and fight from solid ground.
TreeShop Ops is coming soon.