Income

[aline]

An observation:
I think it is unfair to the *business* and unrealistic in general for the owner to pay themselves more than what a capable outsider would earn for those jobs the owner is doing (*and* at RT hour rates too).

If after the dust settles (at years end etc) and the business is doing well and earns a profit then THAT money rightfully belongs to the owner to do with as he pleases. But please don't call business profits salary.

I'm not calling business profits salary. I'm against taking company profits for the owner's salary. That's why I think the owners salary should be listed as an overhead expense and factored into the pricing so you don't have to take it from profits.
A business doesn't make a profit until all expenses have been paid. The owner's salary is an overhead expense and should be budgeted for. I don't know of anyone that would be willing to work for free. I can't work for free. I have a certain amount I have to be paid or I can't pay my bills. I have a house payment, utilities, groceries to by etc.

If I can't generate enough sales for my company to pay me a salary and make a profit then I'll end up out of business. How can I expect to pay me a salary if I don't include this as an overhead expense? I'm not going to just hope that there's going to be something left over for me.

How many companies will report losses in a quater? Does the CEO still get paid? He may not get paid as much but you can bet he still gets paid even if the company didn't make a profit.

I don't get the $100k unless I meet my sales goals and make the 10% net profit. That's why I haven't gotten the $100k yet. I haven't met the sales goals I've set for myself.

But if I don't budget a $100k of salary into my overhead to come up with my sales goals how can I expect to ever get it?

I disagree that after the year ends and the dust settles and the company made a profit that the profit rightfully belongs to the owner. The profit belongs to the company for future growth and working capital. The $100k that was budgeted for the owner's compensation rightfully belongs to the owner.

 

[BryanMD]

Two different issues here:

I'm not calling business profits salary. I'm against taking company profits for the owner's salary. That's why I think the owners salary should be listed as an overhead expense and factored into the pricing so you don't have to take it from profits.

I never said the *business* shouldn't forecast ALL expenses associated and this includes what the owner gets to take out of it each week too.

My *point* is to treat that money as WAGES for the day to day jobs being done; like another wage earner on the payroll schedule and charge the *business* a fair market rate for the worth of the time/effort needed.

In my initial post on this I even allowed that the owner could do each job as well as a competent outsider but now I'll go further. If you aren't a good X (accountant) but are a great Y (wireman?) your wage rates for those different jobs should show that difference.

I disagree that after the year ends and the dust settles and the company made a profit that the profit rightfully belongs to the owner. The profit belongs to the company for future growth and working capital. The $100k that was budgeted for the owner's compensation rightfully belongs to the owner.

I think we're closer on this issue than not.

Hey, it's YOUR business... do what makes YOU happy.
Keep it all in as retained earnings or buy trucks/equipment or pay yourself a nice bonus. You earned it.

But don't make your *business* pay you $50/hr to be a receptionist.

 

[aline]

But don't make your *business* pay you $50/hr to be a receptionist.

I don't make my business pay me $50/hr to be a receptionist.

I do want my business to pay me $50/hr to be the owner, which at the moment includes being a receptionist, accountant, salesman, estimator, call taker 24 hours a day seven days a week, sleeping with the phone next to my bed so I can be sure to answer it in an emergency and oh a master electrician with over 25 years in the field among other things.

If you could find someone to hire that can and is willing to do all those things how much do you think they would want in pay?

I also don't get sick leave, paid vacation, a company matched 401k plan, retirement & health insurance.

I can't make my business pay me anything I have to earn it. The money doesn't just show up in my mail box.

 

[aline]

So if I hire a receptionist, accountant/book keeper, esitmator, salesman and electrician then I can justify paying myself $50/hr because now I'm strictly doing the work of the owner?

Not only that I put in a lot more than 2000 hours per year so 100k doesn't work out to $50/hr. It works out to be less than that. More likely in the upper $30/hr range.

100000/3000hrs = $33/hr. Make that the lower $30/hr range. So here I am as owner making $33/hr with no benefits.

 

[emahler]

ah, quit complaining...you're the owner, you're loaded...money falls out of your pockets as you walk...you're getting rich off the backs of others..jeesh, didn't you get the memo?

 

[aline]

ah, quit complaining...you're the owner, you're loaded...money falls out of your pockets as you walk...you're getting rich off the backs of others..jeesh, didn't you get the memo?

I feel rich everytime I sit down and pay the bills.

It's too bad they don't have minimum wage laws for contractors.

As I said I can't make the business pay me anything but I can include my salary in my overhead and budget and set goals to meet so I can hopefully acheive these goals and earn this salary.

I'm sure not going to have the pay of a receptionist for my goal.

 

[emahler]

I feel rich everytime I sit down and pay the bills.

It's too bad they don't have minimum wage laws for contractors.

yeah, you're just like every owner...no owner ever makes money

how many Porches do you have these days? 3? 4?

 

[aline]

yeah, you're just like every owner...no owner ever makes money

how many Porches do you have these days? 3? 4?

I have my work van and a 1986 Nissan pickup with 200k miles on it.

At least I don't have a car payment.

 

[emahler]

maybe you should do some sidejobs...you know the jobs that an EC doesn't want...you could suppliment your income that way...

 

[peter d]

maybe you should do some sidejobs...you know the jobs that an EC doesn't want...you could suppliment your income that way...

That was the post of the month right there.

 

[aline]

I can't chat any longer. I've got an estimate for a job to get done.
How much per hour does an estimater get paid?
How much if he's on overtime?

 

[emahler]

That was the post of the month right there.

think it'll get me any points with Bob?

 

[peter d]

think it'll get me any points with Bob?

I doubt it...it didn't have any code in it.

 

[emahler]

Back on topic...

along with where Satcom went...I have a friend who is an EC...averages 5-8 guys and does about $5mil year...

that being said...here are some facts...

2 sons that can outwork 95% of the guys out there (not just labor, but knowledge wise as well)

his material runs about $3-3.5mil year

he owns more equipment than most 30 man shops...this equipment makes him money...for example, they can run about 1200 feet of direct burial cable for site lights in about 2 hrs finished (2 men - 1 operator, 1 guy to oversee)...compare that to the traditional trenching method....probably 15 man hours for that job...

that's where he makes his money...

it can be done...but not by the average EC with average electricians...

 

[emahler]

I doubt it...it didn't have any code in it.

i'll tie it into the code somehow...i decided to catch you in points this year...and since you no longer work with him everyday, i got a shot now

 

[peter d]

i'll tie it into the code somehow...i decided to catch you in points this year...and since you no longer work with him everyday, i got a shot now

Good luck with that. It'll be as easy as convincing Lawnguy that sidework is bad for the industry. Now if you don't mind, I need to get some sleep. I have a big side job I'm doing tomorrow.

 

[BryanMD]

So if I hire a receptionist, accountant/book keeper, esitmator, salesman and electrician then I can justify paying myself $50/hr because now I'm strictly doing the work of the owner?

Not only that I put in a lot more than 2000 hours per year so 100k doesn't work out to $50/hr. It works out to be less than that. More likely in the upper $30/hr range.

100000/3000hrs = $33/hr. Make that the lower $30/hr range. So here I am as owner making $33/hr with no benefits.

uh huh. I think you're beginning to get my point.

And because you probably wouldn't know... I have been in business before
and have worn all those hats and have put in the time and had all worries.
I've been there/done that... but no one gave me a tee shirt!

And I'm really not trying to antagonize or depress you but numbers don't lie.

Of those 3000 hours you work 1000 are worth OT (you forgot that)
so $100,000/3500 = $28.57


What I personally have seen and will project onto the typical small shop EC:
(on a typical weekday )

1.5 hr/day = receptionist/dispatcher & scheduling clerk
1.0 hr/day = receivables clerk & bookkeeper

3.0 hr/day = estimator/salesman
1.0 hr/day = general manager & purchasing agent
1.5 hr/day = delivery driver

0.5 hr/day = Site Foreman & project manager
0.5 hr/day = Chief Apprentice Trainer

(Thats 10 hours btw and you haven't even picked up a tool yet but some of that can (on a good day) be done at the same time (eg: drive/talk) so we can discount those 10 hours some... maybe 10%? I'll make it 20%

8.0 hr/day = all the admin and manager stuff above
2.5 hr/day = tools in hand working grunt field electrician

lets pretend there aren't seasonal variances in volume or weather issues:
10.5 hr/day x 5 day/week x 50 week/yr = 2625 hrs

(then you add the saturdays and late night call outs)

All I can say is... better you than me bud.

 

[Tiger Electrical]

I'm trying to understand this. When you say he does $5 million/year with $3-3.5 million in materials are you saying he's doing $1.5-2 million after COGS?

Dave

 

[romexking]

I'm trying to understand this. When you say he does $5 million/year with $3-3.5 million in materials are you saying he's doing $1.5-2 million after COGS?

Dave

I can't speak for that particular contractor, but COGS also includes labor, permits, rentals, ect. Essentially it is all of the direct job costs.

 

[emahler]

I'm trying to understand this. When you say he does $5 million/year with $3-3.5 million in materials are you saying he's doing $1.5-2 million after COGS?

Dave

yes...but like I said, he has equipment that cuts manhours down drastically...so yes he does in the range of $2mil (after material) with 5-8 guys