Additional Math Pages & Resources

Thursday, February 25, 2010

Patching Potholes, Part 2: Plan

Yesterday we discussed patching problematic potholes. I did some research and I have a plan to propose today. A business plan. That means we need some math. Just elementary school math, nothing complicated.

My plan involves a JetPatcher machine - a faster way to patch potholes. Go on and take a look at their site; I'll wait here, checking out this used truck I found.


Maybe I could buy one and rent myself out to the city and make a ton of money... Shall we do a preliminary business plan here?

My used JetPatcher will cost $70,000 dollars compared to $200,000 for a new one. Let's say I keep it one year and sell it for $50,000 at the end. My equipment cost is $20,000.

I'm going to estimate (guess) at the other expenses.

FIXED EXPENSES
We assume $20,000 for the machine.
We estimate $50 per day in fuel, insurance, repairs, etc. times 250 working days (5 x 50 weeks)
(We might also have to work a few weekends if there are too many rainy days.)

Fixed Expense Total = $20,000 + ($50 x 250) = $32,500

VARIABLE EXPENSES
We estimate $5.00 per patch in materials (sand, asphalt and oil).
We estimate 20 minutes per repair including driving from one to another = 3 potholes per hour
We estimate paying $15 per hour per person for 2 people = $30/hr or $10 pph [per pot hole]

Variable Expense Total = $5.00 materials + $10.00 labor = $15.00 pph

WORK TARGET
(5 days x 50 weeks) x (3 per hour x 8 hrs/day) = (250 x 24) = 6000 potholes per year maximum

ESTIMATED INCOME
What if I could charge the city $20.00 per pothole?  If I could do this, we have:

STEP 1. $20.00 - $15.00 = $5.00 pph that I can put towards my fixed expenses.

(REALITY CHECK $32,500 ÷ $5 = 6500 potholes to break even = 26 per day to break even.)

STEP 2. $20.00 per pothole x 6000 repairs = $120,000 income - $32,500 fixed expense = $87,500

STEP 3. ($87,500 - (6000 x $15.00)) = ($87,500 - $90,000) = $-2,500. That's a small loss.

We're not going to make any money at this $20.00 price  :-(

What if I could sell the city on a $25 per pothole price? We'd work fast and make the streets look good. If I could get this price, now we have:

STEP 1.  $25.00 -$15.00 = $10.00 pph towards the fixed expenses.

(REALITY CHECK $32,500 ÷ $10.00 = 3250 potholes to break even = only 13 per day to break even.)

STEP 2. $25 per pothole x 6000 repairs = $150,000 income - $32,500 fixed expense = $117,500

STEP 3. ($117,500 - (6000 x 15.00)) = ($117,500 - $90,000) = +$27,500 That's a profit.

We're making a good profit at this $25.00 price  :-) so now we will have to pay a few taxes  :-(

PS - A newspaper article said Tijuana's pothole patching pace is 200 per day! Maybe I could hire THEM to fix our potholes! Or is something wrong with our math? Or are their potholes smaller, closer together and easier to fix?