Excavation Business Overview

An excavation company provides earthmoving and land preparation services for construction, landscaping, and infrastructure projects. These businesses operate heavy machinery to clear, grade, and prepare land for various purposes.

Related: Checklist To Start A Business

How Do Excavation Companies Make Money?

Excavation companies generate income by offering specialized services for land preparation and earthmoving tasks. Revenue is typically project-based and depends on the scope and complexity of the work.

Common ways excavation companies make money include:

• Site Preparation Services: Preparing land for construction projects, including clearing, grading, and leveling. This is often the largest revenue source because it is a necessary first step for most construction projects.
• Trenching and Utility Installation: Digging trenches for water lines, electrical cables, and other utilities.
• Foundation Excavation: Digging spaces for building foundations, basements, and retaining walls.
• Demolition Services: Removing existing structures and preparing the site for new construction.
• Landscaping Excavation: Shaping land for landscaping projects, such as creating terraces, ponds, or garden beds.
• Snow Removal and Seasonal Services: Offering snow plowing and clearing services during winter months. This provides an additional revenue stream in areas with seasonal demand.

Industry Statistics

Excavation contractors prepare construction sites through activities like foundation digging, land grading, and trenching. This industry falls under NAICS code 238910: Site Preparation Contractors.

Here are some statistics about the excavation industry.

Excavation Industry Size & Growth: The excavation industry generated $120.9 billion in revenue last year. The industry experienced a decline in revenue of 0.8% annually over the past five years. Over the next five years, revenue is expected to grow as rising disposable income levels boost both residential and commercial construction activity. This growth will be supported by ongoing infrastructure projects and increased construction spending. (IBISWorld)

Number of Excavation Companies: There are 238,000 excavation businesses operating across the country. The industry remains highly fragmented, with no single company controlling more than 5% of the market. The two largest companies, Brandenburg Industrial Service Company and Condon-Johnson & Associates Inc., maintain modest market shares. Most businesses serve local or regional markets rather than operating nationwide. (IBISWorld)

Excavation Company Profit Margins: In the excavation industry, companies typically achieve average profit margins of 7.7% of revenue. Higher labor and material costs have affected profit margins as price-based competition has increased among contractors. (IBISWorld)

Costs To Start an Excavation Company

Starting an excavation business could cost between $125,000 and $750,000, depending on equipment choices and business scale. This range accounts for basic requirements like equipment, insurance, and necessary certifications.

Here are some of the main costs to consider when starting an excavation business:

Equipment: The biggest expense comes from purchasing heavy machinery. A basic fleet might include an excavator ($45,000-$250,000), a backhoe ($25,000-$140,000), and at least one dump truck ($20,000-$120,000). The lower ranges represent well-maintained used equipment, while the higher ranges reflect new machinery.

Insurance Coverage: Construction liability insurance, equipment insurance, and workers’ compensation will cost between $15,000 and $50,000 for the first year of coverage. The amount varies based on the size of operations and types of projects undertaken.

Transportation: A heavy-duty truck and trailer for moving equipment between job sites ranges from $25,000 to $150,000. This includes the cost of a commercial trailer capable of hauling excavation equipment. Used trailers and trucks in good condition account for the lower range.

Certifications and Training: Operator certifications, safety training programs, and necessary licenses cost between $8,000 and $20,000. These qualifications are required for both owners and equipment operators.

Storage Yard: Initial costs for a secure equipment yard, including first and last month’s rent plus security deposit, could range from $15,000 to $45,000. The space needs to accommodate equipment storage and maintenance areas.

These estimates represent general ranges, and actual startup costs will vary.