Fine tuning the business

[OK Sparky 93]

Happy new year to all!

Going into this new year, I hope it is better than it was , the previous.

First, I had to get the rate pinned down. I know I am a little higher than some multi crew shops, but I don’t believe I am higher than some of the franchise shops. Anyway next item.

The job.

On site, work begins. Now I have 2 hours, tools on, to tools off and writing the invoice. I had been adding about1/4 to1/2 an hour for that process to collecting payment, as sometimes there is a, “ hey,I was wanting to have you look at this” for a future job sort of thing.

Now I don’t have a fuel/ vehicle charge in my OH, and I don’t necessarily want it eating up profits.

I am, at this time, a service type comp. Once I am on the job, I don’t really want to leave, so I try and carry what I think I am going to use. Doesn’t always happen, but generally.

I am not raising my rate, so how or what is right to cover these two things?

 

[ptonsparky]

Happy new year to all!

Going into this new year, I hope it is better than it was , the previous.

First, I had to get the rate pinned down. I know I am a little higher than some multi crew shops, but I don’t believe I am higher than some of the franchise shops. Anyway next item.

The job.

On site, work begins. Now I have 2 hours, tools on, to tools off and writing the invoice. I had been adding about1/4 to1/2 an hour for that process to collecting payment, as sometimes there is a, “ hey,I was wanting to have you look at this” for a future job sort of thing.

Now I don’t have a fuel/ vehicle charge in my OH, and I don’t necessarily want it eating up profits.

I am, at this time, a service type comp. Once I am on the job, I don’t really want to leave, so I try and carry what I think I am going to use. Doesn’t always happen, but generally.

I am not raising my rate, so how or what is right to cover these two things?

It is part of your overhead. You charge for it in your markup of labor and/or material. How you account for it is up to you. Mechanics have a 'shop' charge above their labor and materials charge. Add "$xxx.xx" to each ticket but if you are on the high range already you may want to think twice.

 

[OK Sparky 93]

Obviously it is easy to apply a number/hour to the OH items that have a fixed price. The items that are variable such as vehicle expense, as one job may be a 20 mile round trip and another may be a 70 mile trip.

I know, I have talked to people from other companies, different industries, and they said their company charges a double the going mileage rate.

I know there are those that charge a truck charge or trip charge, maybe a higher first hour rate.

A service call rate that is higher than the hourly rate.

I talked with a former co worker that took over a business. He said they have their hourly rate, (which obviously has their OH figured in) and add a 1/2 hour to every call irregardless of how long that call is.

 

[OK Sparky 93]

Still in the fight!

Been reading several books.

One called Profit First by a Mike Michalowicz.

In tier of income, up to $250k being the lowest. The premise is twice a month to take take 5% for profit, 50% to owner comp,15% to taxes, and 30% for operating expenses.

Of what he classified as real revenue. My understanding was that if you had more than 25% of your total sales was material cost, that did not classify as real revenue.

Anyhow, it seems to make sense.

Another book I am diving into.
Markup and Profit
A contractors guide by a
Michael C Stone.

Some things hard to swallow, like when he says that if, an contractor/owner/sole proprietor, shall we, needs, the example is $75k annual to live on, that he would need to have total sales of over $937,000. Not sure if that is a misprint or not.

When it comes to profit, that is on the basis of total sales. He says 8% this would ultimately be net. I will go with 5, maybe less if I have to in the beginning.

Next was to subtract OH and profit from projected total sales, this would leave direct job cost.

Next was to divide total sales by direct cost and the quotient is
Mark up. A multiplier to be applied to all job cost. The example is 1.57

For myself slightly higher. And maybe I am crazy, maybe not. I am figuring all of my taxes to be an OH cost.

On the labor side of the job cost, let’s say $35/hr + burden. Let’s say 15%. Let’s say it is $42.

Is the employee’s, vacation and any other bennies, OH or job cost?

It would make a difference in the total job cost one way or another.

In another post, I seen someone mention about charging double whatever your employees wage was.

Basing this math on the reading material,
And my #’s 1.62, makes $42, $68.xx
$70, is $113.xx.

Too much rambling, now my head is hurting. I need the phone to ring.

 

[petersonra]

I think you might want to just hire an accountant to set this stuff up for you.

 

[AC\DC]

Still good to know all that stuff.