Cranes for Cash: Buy or Rent?

Dan Mello’s crane life has come full circle. The president of Seacoast Tree Care, LLC, an accredited, 13-year TCIA member company based in Stratham, New Hampshire, used to rent a crane as he considered buying one, then he bought one for his own business and to rent out to others. Then he sold it, and now he subcontracts again.

It gives him a unique perspective on a question many tree care companies are pondering. As cranes become a personnel-saving and ever-more-
important tool in the tree care world, should a company rent a crane, buy a crane or subcontract a crane and operator?

“When we sold it, there were a couple of reasons,” says Mello, who owned a crane for five years and sold it in 2015. “The biggest reason is that I wanted to focus on recurring revenue. By owning a crane and having to keep a crane busy, I was focused on tree removal, and that wasn’t what I was passionate about. I was passionate about plant health care and tree preservation, so it was a little bit off our mission.”

After a discussion with his team, Mello traded in the expensive crane and replaced it with a 75-foot bucket truck and a more versatile collection of equipment. He went back to hiring a crane service for jobs that required cranes, and was out from under a machine that carried a lot of cost.

“I own a boat, and the joke is that ‘boat’ stands for ‘Break Out Another Thousand,’” Mello says. “The crane, I feel like, is ‘Break Out Another Four Thousand,’ because every time I had to do a repair, it was a significant amount of money.”

Seacoast has a good relationship with a nearby company, so when Mello fields an inquiry for tree removal that would require a crane, he’ll pass the work along, and the other tree care company will reciprocate with work in Seacoast’s specialty.

“When you’re a young guy and you like tree work, crane work’s a ton of fun, it’s a rush, it’s cool, and it’s super easy to get sucked into that,” Mello says. “There’ve been multiple times when I’ve been sucked into going out and doing tree work, forgetting that I’m trying to build a business that has asset value, and that asset value is plant health care.”

Simply put, climbing and using a crane is a rush.

“It takes a certain personality to climb to the top of a 100-foot pine and prune it or cut it down,” Mello says. “Most guys, when they get into tree work, aren’t like ‘Hey man, I’m going to go ornamentally trim this dogwood.’”

That decision paid dividends, as Mello now owns two companies: the tree care company and a lawn-fertilization company called Seacoast Turf Care.

For long-time customers and other jobs that require a crane, Seacoast will hire a crane-rental service, usually TM Crane Service, LLC, out of Hooksett, N.H.

“They’re a wonderful family, just top-notch people,” Mello says. “The father, Merrill, was the one who taught me how to do crane removal.”

For Mello, it’s been a great relationship. Twice in a typical month, TM Crane Service will come to a site and partner on a job. Trees are unpredictable, and Mello appreciates the knowledge, skill and patience they bring to the job.

Merrill Johnson, who founded the family-run company 40 years ago and now holds the position of “Old Guy,” and who runs TM Crane along with sons Tim and Chip, indicates that the respect is mutual.

“We only work with people we know,” says Johnson, whose company operates two cranes and does a variety of jobs. He estimates that they might do two tree jobs in any given week, but says they are careful who they work with. “We don’t take every tree job we can.”

Many tree care companies are focused too much on getting the job done quickly, the result of inexperience and impatience, Johnson says. “In tree work, you really can’t cut corners,” he says. “The end result is that it catches up with them.”

Their mutual interest in safety is one of the reasons the companies have maintained such a good relationship. Crane operators suffer very few accidents, Johnson says, “but when you do, it can be bad.”

One nightmare scenario: A crane is positioned over a septic system, which has no trouble handling the weight. But then the boom rises, and soon the operators remove a large piece of tree, adding weight that’s already been redistributed. Suddenly, the top of the septic tank collapses. “Then,” Johnson says, “you’re in a world of (pain).”

Busy subcontractors

“In my region, everyone is using cranes for the tree-removal market,” says Peter Nieves-Sosa, president of The Crane Man, Inc., a 10-year TCIA member company based in Chalfont, Pennsylvania, and serving southern Pennsylvania, New Jersey and Delaware. “Between the EAB (emerald ash borer) issues, storm work and just the everyday zero-impact job sites, we are very busy.”

Nieves-Sosa runs seven cranes daily, often six days a week, and almost all of his work is for tree care companies. It is the kind of work that not every crane company does – or wants.

“My friend, Todd Kramer (CTSP, QCL, training and performance manager with Kramer Tree Specialists, Inc., an accredited, 33-year TCIA member company based in West Chicago, Illinois), coined the phrase that crane-assisted tree removal is the safest and the most dangerous way to remove a tree at the same time,” Nieves-Sosa says. “What he meant by that is, from the crane aspect, it’s the most dangerous work you can do, dealing with unknown weights and picking them from midair with no safety net. From the tree-worker side, it’s an
anti-gravity gun to make pieces float away like magic.

“The rental cranes can make any small company able to compete with the largest companies without having to actually purchase a half-million-dollar truck with only one use: to pick things up and put them down.”

Since opening in 2008, a handful of Crane Man customers have decided to purchase their own cranes, says Nieves-Sosa. Of those, many will continue to rent from him, either because they need a second crane or a different-sized crane.

“Even as a rental company, we have 36- and 55-ton cranes, but occasionally I refer a customer to another company with a larger crane. I have come to grips with the fact that I can’t do every job out there, nor do I want to. There will always be something too big or too far away for what you have. It’s OK. If I can’t do it, that’s one less thing I have to worry about.”

Buying your crane

When – if ever – should a tree care company purchase its own crane? One piece of advice is to look at the numbers. All of them.

A crane can bring in a lot of money, which a company needs to justify the purchase of such an expensive machine. The crane also may reduce some manpower costs, because it’s efficient and many of the costs can be written off on taxes.

But the cost of owning a crane goes beyond paying for the purchase. Maintenance, an operator and insurance are also large parts of the equation.

“You can justify the numbers however you like, just try to leave the emotions out of it,” Nieves-Sosa says, noting that your next big cost is for a certified, licensed operator (different states and cities have different requirements) who could be your most expensive employee and may not want to do any other tasks.

“You think climbers are prima donnas, wait till you hire your first operator,” Nieves-Sosa says. “Or, you could luck out and get the great guy willing to do anything you ask and good at everything he does.”

The maintenance costs for a specialized piece of equipment also can be prohibitive and may necessitate the hiring of another employee (though at times an operator will care for their own crane). There is also additional equipment to be purchased, and Nieves-Sosa says that’s also equipment that may be needed if a tree care company decides to rent a crane and operator.

“The difficulties come with the specialized rigging often used in tree-removal work,” he says. “The climbers’ tie-in point would not be something a crane would have if the operator was not doing tree work frequently. The dead-eye rope slings will look foreign to an operator who has never seen them used before. And there may be no convincing him on site that they are OK to use, especially if they don’t have the proper ID tags on them. And that is his right to refuse. Ultimately, he is responsible for everything that goes on the hook. If the job needed mats to enter a yard, don’t expect every crane to carry mats with them. It’s really a bonus if they do. Discuss all the details ahead of time and develop the relationship for future rentals.”

Factoring insurance

Company owners also need to account for additional fuel costs and added insurance. The insurance component is not a minor issue, says Rick Weden, ArborMax agent with Cross Insurance, Corcoran & Havlin Insurance Group, a 12-year TCIA Corporate Member company based in Wellesley, Massachusetts. This is true for the company that wants to buy a crane, and especially so if they want to rent a crane and run it themselves.

“Crane rental can have considerable insurance implications and requirements,” Weden says. “Business-auto insurance rates have escalated, and in the escalation of these rates, the largest increases are found in heavy, road-worthy equipment, like cranes.”

There are different scenarios with different insurance implications.

In some cases, a tree care company owner may want to rent a crane with the intention of operating the crane themselves. In these situations, the insurer needs to see that the operator is trained and licensed. The machine may cost $5,000 to $7,000 to rent, and the rental agency will require a certificate of insurance before allowing the very expensive, very heavy piece of equipment to leave their premises.

“Crane-rental agreements have an insurance clause that is usually very broad,” Weden says, adding that many rental agreements can require anywhere from $1 million to $5 million in automobile liability coverage. The renting party also will be required to insure the crane itself while it is in their possession (care, custody and control). The crane-rental company will be put on the renting tree care company’s insurance to list the rental company as a “loss payee” in their insurance, as well as note the crane-rental company as an “additional insured” under the rental party’s General Liability Insurance.

Weden’s advice is to contact your insurer early on as part of the decision-
making process to get the details on the insurance requirements before giving a final quote to the client.

“We see this happen too often,” Weden says. “The client calls me and says, ‘I’m renting a crane. I need it tomorrow.’

“He’s already rented this crane, and he’s priced out the work and given the customer a quote. Depending on the nature of the work and the duration of the rental, it is possible the insurance costs could significantly cut into the overall project costs, reducing the profit margin.”

Frequently, when he’s consulted early in the process, Weden says, companies will opt to go a different route because of those extra expenses. One alternative may be to hire a crane company or another tree care company that owns and operates cranes as a subcontractor. Through this arrangement, with the use of proper, written subcontract agreements between the company controlling the project and the subcontracted crane-operating company, the risks of the crane work can be properly addressed and transferred to the subcontracted company.

A crane can save a company in personnel costs and headaches. For that reason, the issue of whether to use a crane and how best to use it should remain a question for tree care companies to consider.

“We’re seeing more mechanization coming into the industry, and a lot of new owners are coming up and saying, ‘I want to keep my company small. I want to be able to run my business with myself and a couple of other guys, and I want to be able to do larger jobs, so I’m going to buy a crane,’” Weden says. “I have a couple of clients who do it this way, and it works very well for them.”

To rent, buy, rent out or subcontract remains a personal decision that companies need to make for themselves as they grow, in Mello’s opinion.

“It all depends on how you want your business to be structured and what you want for it,” Mello says. “Some people want to be that all-service tree company that provides everything from crane-assisted tree removal, and has the crane to use in-house, to high-end plant health care or high-end ornamental pruning. You can do it. You just need to have the talent to cover all that and the customer base to support it.”