How to determine overhead

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FirstChoiceElectric

Member
Location
Lower Fairfield County CT
I just started a business ( I know it is not the best time but im still currently employed for someone so I have a coushin while im growing ) Im trying to dertermine how to account for my overhead. Is there % i add to my price, a number I add for every billable hour. I know I can't just take your numbers and punch them in, but looking more of what are some of the methods you guys are using.

I did a few searches and could not find a thread similar to this but if anyone has one I will be glad to read it
 
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JES2727

Senior Member
Location
NJ
There are some online overhead calculators that have been posted here before. I don't have the links, but I'm sure somebody does. The calculators are not perfect but they will give you a pretty good idea of everything you need to consider. Good luck
 
Dnkldorf

Dnkldorf

Senior Member
Is this the only thing you are looking for is an "overhead calculation"?

If your just starting out, may I suggest visiting the Small Business Administration's site.

There you will find links to start up business calculators, financing calculators......ect.

And a host of unbiased information to help you stay afloat and grow.


http://www.sba.gov/
 
Rewire

Rewire

Senior Member
Location
Lake of the Ozarks
Many of your overhead costs will be clear and some will be projected future costs.Start with the ones you know ,phone,utilities ,insurance,fixed asset payments etc.Then your unknowns like fuel,vehicle repairs,tool replacement,office supplies etc.Look ahead will you have employees a building or storage space will you do additional advertising.Once you know your costs you can find several calculkators on line. The first year you should adjust monthly as your costs become apparent.after the first year you will be able to look back and see how you should budjet for the year ahead.
 
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aline

Senior Member
Location
Utah
FirstChoiceElectric said:
Im trying to dertermine how to account for my overhead. Is there % i add to my price, a number I add for every billable hour.
Click to expand...

You should calculate overhead as a rate per man hour.

Divide your billable man hours by your overhead to find out how much per hour you need to charge to cover overhead.
Both your billable hours and your overhead expenses will have to be estimated until you have the actual data.

The billable hours will vary depending on the type of work you do.
Service work will have less billable hours than long term construction jobs.

Having more men working for you will allow the overhead to be spread out over more billable man hours. So even though dollar wise your overhead might be more with more men working for you the hourly amount you need to bill for it could be less since it's spread out over more billable man hours.

Don't forget to include your salary in as overhead. Your salary is not whatever is left over after paying for all of your expenses. It should be factored in as overhead.

Your company hasn't made a profit if there's nothing left after you pay yourself.
Don't just hope there will be something left over to pay yourself. Plan for it and put it in your overhead.
 
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satcom

Senior Member
SmithBuilt said:
Just a word of caution the workers comp does not work on the link above.


When using any spreedsheet be sure each thing you enter does it's job.
Click to expand...

The workers comp needs an experience rate number to work.

And yes, you really need to double check all your numbers.
 
petersonra

petersonra

Senior Member
Location
Northern illinois
Occupation
engineer
I would look at this a little different than a simple spreadsheet or a percentage, or X amount per hour.

Sit down one night and write down on a note pad all the things you need to spend money on that are not direct labor or parts.

Things like:

tools
work vehicle
insurance (probably 3 or 4 or 6 kinds)
taxes including license and permit fees of various kinds
marketing
utilities

You get the idea.

The long list will give you some insight into just what you are up against and why most of the time your direct labor rate far exceeds what you are actually paying anyone, including yourself.

I also strongly encourage you to buy a copy of QuickBooks or some other small business accounting software and learn to use it. Forcing yourself to input your expenses and revenues every day and looking at the printouts will greatly increase your understanding of your business in ways that are not real obvious.
 
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FirstChoiceElectric

Member
Location
Lower Fairfield County CT
Thanks for all the reply's.Just got home so I will read the links. Does the way you bill also determine how you figure it into things. For example rather then an hourly rate do more of a flat rate system. Also my ultimate goal is for a service work "book" as well as a "job" book (terms a former employer used) with a certain team handling service calls and small day jobs and another team handling larger contracts.

And F.Y.I my background is in highend residential light commercial
 
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