renosteinke
Senior Member
- Location
- NE Arkansas
A certain large industrial firm (Call it "The Mill") has much electrical work performed by licensed contractors under "labor only" agreements. That is, The Mill provides all parts and lifts; the contractor provides people and tools, including such things as 555's, threaders, and ladders. Under these agreements, the contractor bills The Mill at a rate approximately equal to double what they're paying the journeymen. The contractor does provide basic benefits (medical, 401K, uniforms, etc.), and often he contractor is a "Union" contractor.
Now, let's compare this operation to a major testing firm, which operates on a "not for profit" basis. That is, they're limited by their charter to a certain nominal profit. When a product is submitted for evaluation, they bill their customer at a rate calculated to only cover the costs of employing someone, and basic operating expenses. Over the years, their multiplier has increased from 2.75 to 2.95; that is, they bill their customers for nearly 3x the employee's wages.
This is what puzzles me: how can a firm make a profit at 2X, yet barely break even at 3X? What am I missing? Are the contractors on the road to bankruptcy? Is the 'not for profit' firm simply insulated from its' own inefficiencies?
I suppose the best answer to this question will come from someone who actually operates a large contracting firm. Just how much does it cost you to employ someone (expressed as a percentage of their hourly rate)?
Now, let's compare this operation to a major testing firm, which operates on a "not for profit" basis. That is, they're limited by their charter to a certain nominal profit. When a product is submitted for evaluation, they bill their customer at a rate calculated to only cover the costs of employing someone, and basic operating expenses. Over the years, their multiplier has increased from 2.75 to 2.95; that is, they bill their customers for nearly 3x the employee's wages.
This is what puzzles me: how can a firm make a profit at 2X, yet barely break even at 3X? What am I missing? Are the contractors on the road to bankruptcy? Is the 'not for profit' firm simply insulated from its' own inefficiencies?
I suppose the best answer to this question will come from someone who actually operates a large contracting firm. Just how much does it cost you to employ someone (expressed as a percentage of their hourly rate)?