?Owners salary?

[OK Sparky 93]

I know title says owners salary, and I could not post initially because not enough characters. So here they are.

Here is another topic for discussion.
In the early days of the busy ness, I didn’t do what was necessary. I didn’t keep track of every single hour worked. Hard to know the reality. I knew when an employee I’ve seen 1600 hours and I’ve seen 1400 hours. So I tried to base a rate around that. I sucked! I would go to job and push a button on a gfi, or reset a tripped breaker, because someone didn’t know how, and have a nice day. No charge. Can’t do that anymore.

As far as OH, I knew some of the numbers, and made up some numbers. Now after a full year, at least for the first, I know what they are, and I still think I need an allowance for a truck payment, because I don’t have piles of cash.

I’ve had about $9,000 in fuel and vehicle repairs. Initially I figured about $6.00 an hour for the 1200 or so worked. Didn’t know a better way and still not sure I do. Based on that I lost.

I’ve seen and heard people say 50% profit. Take direct cost and double it, and that’s the price for the job. I don’t think that works for everything.

Someone wants a ceiling fan installed. Or two. It maybe takes an hour, and very little parts. You know there is no permit. Your J-man which just happens to be yourself gets paid maybe considerably well, let’s say $35. So what are the direct cost, that one would double?


You're the owner taking all the risk, you should be paying yourself a owners salary. $100k.

Ok, one day I am not going to be able to do this any more. Never made enough money as an employee to barely survive, and no way to save. Hopefully better late than ever. If I have to crash course retirement out off that 100k ,and then pay taxes, even working in the field at $35 I still don’t have much.

Are my numbers wrong?


So how do you guys pay yourselves, Owners salary, your rate for doing electrical work, and retirement

Go!

 

[OK Sparky 93]

Ok, so this thread. Seems to be all over the place. Not really sure how it should have been titled.

Looking back, I didn’t figure for employee OH. In another post someone said to charge double what you paid. So let’s say it is now $70.

In a ceiling fan swap, box is supported. I allow an hour, I allow a 1/2 for one way drive, but I have to pay an employee door to door.

I happen to be one and the same, in this case. Is it an hour and half or two?

At 1.5@ $70, $105 now double that, and this is takes care of OH and hopefully some profit. $210 for a fan install.

Right, wrong, more or less?

When I first started out I got a lot of hot tub jobs. I had to figure out what it could potentially cost. Looking back, I am sure I was close. I probably made a little on some, even though I was charging T&M. I would give a rough price.
Now some of those I could actual on job about 5&1/2 to 6 hours plus material. I’d run 6/3. More than 1/2 a roll, it got charged for the roll.
Plus all other material. High end on material around $800. I was walking away between $1300-$1500. Might be the only job for the day, as I wouldn’t schedule anything else.

Looking back if I had to allow $70 an hour for an employee, I probably would assume 8 hours door to door. Now that cost is $560, only employee OH, plus the $800, for material. If there is a permit & inspection then that cost. Maybe it should always be figured.

Maybe, I am looking at $1400 cost to me to do that job, if I double that, cost to customer is $2800.

Now I had someone last week ask how much? To install a cook top.

Never done it don’t know. What if the opening is to small for the new top. Obviously the cost is going to be more. If it is a Formica top (doubt it) , I could probably handle it , but how much time, I don’t know.

Now as far th install maybe 2hours plus drive maybe 3, at $70, maybe a flex connector, some wire nuts. $210 cost to me, $420 to customer. May be more than 1/2 the cost of the cook top maybe less.

I would consider these to be flat rate cost.

If I have been charging $125 plus material and marking up 20%, that makes my hourly rate at $156.xx.

I would be over $450 to do that cook top.

Which is right?

Am I way off?

Merry Christmas!

 

[AC\DC]

I am not the person to answer since I am in the same boat. I know I got to stop t&m and do only bids. Hard on my service work.
Have you read Mike holts business emails. I have them saved and few I read seemed really positive and uplifting, along with informative.
You got to realize it’s not about changing how you run the business but changing how you run your life.
Merry Christmas

 

[kwired]

But this line of work isn't as simple to figure out what something will cost a client as say running an automotive oil change and other simpler maintenance shop. For one thing those places the client brings the work to you, you already know most vehicles take x amount of oil and a filter and maybe 20-30 minutes depending on what else you offer to do with the "standard oil change". You also usually have disclaimers for certain vehicle types that you know will generally have more cost to perform same services on, like a diesel pickup truck will probably need maybe 3 gallons of oil vs 5 or 6 quarts.

These electrical installs you maybe can have certain amount of fixed prices for certain tasks but you are not working on things that are always so much the same like the oil change shop is pretty certain how similar each and every oil change will end up turning out to be.

In the auto repair shop if someone brings a car in with a simple problem that you fix in 5 minutes and don't really add any parts to, it didn't cost you the time to go out to a client's location just so you can do something as simple as reset a GFCI. You maybe even squeezed it in while waiting for oil to drain from another clients vehicle so you were still getting other things done at the same time. A lot of those repair shops might still bill the customer anyway, some maybe not as much as others but is entirely up to them.

 

[AC\DC]

But this line of work isn't as simple to figure out what something will cost a client as say running an automotive oil change and other simpler maintenance shop. For one thing those places the client brings the work to you, you already know most vehicles take x amount of oil and a filter and maybe 20-30 minutes depending on what else you offer to do with the "standard oil change". You also usually have disclaimers for certain vehicle types that you know will generally have more cost to perform same services on, like a diesel pickup truck will probably need maybe 3 gallons of oil vs 5 or 6 quarts.

These electrical installs you maybe can have certain amount of fixed prices for certain tasks but you are not working on things that are always so much the same like the oil change shop is pretty certain how similar each and every oil change will end up turning out to be.

In the auto repair shop if someone brings a car in with a simple problem that you fix in 5 minutes and don't really add any parts to, it didn't cost you the time to go out to a client's location just so you can do something as simple as reset a GFCI. You maybe even squeezed it in while waiting for oil to drain from another clients vehicle so you were still getting other things done at the same time. A lot of those repair shops might still bill the customer anyway, some maybe not as much as others but is entirely up to them.

Correct and that’s we’re the difficult parts come in. People are greedy myself included, and what we don’t see won’t hurt us.

Dropping that car off for an hour or two while they only take 5 minutes we feel the price is reasonable (usually).
Driving to some ones house and reset gfci/breaker takes me total of 30 minutes to a from since I am in a small town.
They see how simple that was, and get puffed up when you give them the bill.

Most pay and are happy but some throw a fit/ or I see how limited there income is and cave in or give them a break.
Need to change my self to improve my business. Not let the emotions get to me.

Two weeks ago
I did some free work for a guy replacing his feeder cause he was in the cold and insurance would not cover it.
Told my self was my gift giving for the season instead of the pregnancy center I usually do.
He had no money. So I felt terrible for him.

If I am going to stay in business I got to keep my emotion out of it. I still would of done what I did for this guy but through the year I run into these occasional and I got to say no.
I don’t know if op has that problem but it’s still a business related issue.

 

[kwired]

Correct and that’s we’re the difficult parts come in. People are greedy myself included, and what we don’t see won’t hurt us.

Dropping that car off for an hour or two while they only take 5 minutes we feel the price is reasonable (usually).
Driving to some ones house and reset gfci/breaker takes me total of 30 minutes to a from since I am in a small town.
They see how simple that was, and get puffed up when you give them the bill.

Most pay and are happy but some throw a fit/ or I see how limited there income is and cave in or give them a break.
Need to change my self to improve my business. Not let the emotions get to me.

Two weeks ago
I did some free work for a guy replacing his feeder cause he was in the cold and insurance would not cover it.
Told my self was my gift giving for the season instead of the pregnancy center I usually do.
He had no money. So I felt terrible for him.

If I am going to stay in business I got to keep my emotion out of it. I still would of done what I did for this guy but through the year I run into these occasional and I got to say no.
I don’t know if op has that problem but it’s still a business related issue.

I will sometimes reset a GFCI and ask for nothing. Majority seem to want to give me something anyway.

If you demand I come out in middle of night or on a Sunday and all I do is reset a GFCI - you are more likely to get at least a regular minimum service fee now then you might have been when I was younger and less wise. If you are one of my better friends and it was interrupting your grill out or similar you better at least be giving me a steak and a beer

 

[letgomywago]

I will sometimes reset a GFCI and ask for nothing. Majority seem to want to give me something anyway.

If you demand I come out in middle of night or on a Sunday and all I do is reset a GFCI - you are more likely to get at least a regular minimum service fee now then you might have been when I was younger and less wise. If you are one of my better friends and it was interrupting your grill out or similar you better at least be giving me a steak and a beer

When it's something like that I keep a good supply of business cards and hand them 5 or 6 and say "I'd normally have to charge $1xx for a service call minimum but I feel bad charging that so if you could hand these out to people who are looking for an electrican I'd appreciate it" I did a job for a little old lady 3 months ago and she handed my card to her boss and now he's doing a big lighting upgrade to LED for his shop. If you do those right they'll come around but you need to stress that you normally charge for this service so that they value your time and don't just come to you for free service.

 

[Hv&Lv]

Correct and that’s we’re the difficult parts come in. People are greedy myself included, and what we don’t see won’t hurt us.

Dropping that car off for an hour or two while they only take 5 minutes we feel the price is reasonable (usually).
Driving to some ones house and reset gfci/breaker takes me total of 30 minutes to a from since I am in a small town.
They see how simple that was, and get puffed up when you give them the bill.

.

They argue with “all you did was push the button, why should it cost that much!?”

I got to the point where I told them it wasnt the act of pushing a button they were paying for.
Ive asked them why didn’t you push the button and not call me to do it.
told them, “your paying for knowing which button to push, consider it a valuable lesson”

 

[kwired]

They argue with “all you did was push the button, why should it cost that much!?”

I got to the point where I told them it wasnt the act of pushing a button they were paying for.
Ive asked them why didn’t you push the button and not call me to do it.
told them, “your paying for knowing which button to push, consider it a valuable lesson”

Been times I had to teach them to turn a tripped breaker to the fully "off" position before trying to turn it "on".

Have learned to ask if they did that when talking to them on the phone before coming out. Some still don't figure it out though.

 

[Amps]

You got to love that "“all you did was push the button, why should it cost that much!?”. Do they say that to their dentist, doctor, shrink? And they travel to them! We travel to their house, listen to their drama, and push the button.

 

[User Name]

I know it's really hard to figure it out. You can't exactly go up to your competion and ask what are you charging, most won't say, some might, but the best answer I always got is by asking other trades. Ask the plumbers, ask the hvac guys, ask the builders, ask what they hear about what other EC shops are charging. That's just one way I keep my labor rate up to date.

Personally I hate bidding, it is to much of gamble for me, some jobs you can cash in on, others you will lose your @$$. I really try only for T&M. As far as showing up to reset a breaker (I've done a million times) have a message at the bottom of your bill "minimum X hours for all service calls".

 

[AC\DC]

Bids are Amazing!!!! In my mind.
when I get a job we’re I walk out at 250-350 I am good.
I know you can lose your bit on them. I have been lucky in three years and the worst one I walked out as if I did t&m

 

[kwired]

Bids are Amazing!!!! In my mind.
when I get a job we’re I walk out at 250-350 I am good.
I know you can lose your bit on them. I have been lucky in three years and the worst one I walked out as if I did t&m

Bids are fine if everyone bidding gets a plan with all installation specifications and everyone bids to those specifications.

Most of the so called bid requests I get are not so clear on specifications, but I don't consider them a bid, but rather an estimate and usualy with my own specifications. What is unfair is to compare the estimate to somebody else's without considering what may be different in the specifications. I've heard stories of HO's that complain they were told it would cost X amount but then find out later that price didn't include this or that and ends up going higher - I try to include a description of what my estimate does include and usually mention that price can go up or down depending on what actually gets done. Often there is a lot of possible things the HO never even considered being an option and when it does get mentioned during install...."Well that would be nice to have", then "it is easier to install now than it will be sometime later on". Pretty soon all these unexpected things add up. An additional receptacle outlet here and there are not really a big deal but early on is only things the owners seem to think about if you ask them what they do want.

 

[zbang]

It's not knowing which button to press, it's that I came out here to press it.

If I am going to stay in business I got to keep my emotion out of it.

If you think it's bad, consider the veterinarian- sure they can save the animal, but want $500 ($1000, etc) or a credit card in advance because they know it might not end well and after than few people will want to pay a cent.

 

[AC\DC]

Good point

 

[OK Sparky 93]

Ok so I got I figured out.

Labor
Labor burden

This at this point in time is what I as a one man shop need to cover my current living expenses and then some, plus the burden, being the taxes required to cover it.

Now my OH,
which may be more or less than what it should be. And most definitely different than actual
Expenses.

Profit.

As a one man shop, this should leave me some money in the business, after taxes paid on that.

Now I suppose at this point it is up to me as to how much, I want, or need to leave in the business, and I can invest the rest.

 

[kwired]

Ok so I got I figured out.

Labor
Labor burden

This at this point in time is what I as a one man shop need to cover my current living expenses and then some, plus the burden, being the taxes required to cover it.

Now my OH,
which may be more or less than what it should be. And most definitely different than actual
Expenses.

Profit.

As a one man shop, this should leave me some money in the business, after taxes paid on that.

Now I suppose at this point it is up to me as to how much, I want, or need to leave in the business, and I can invest the rest.

If you make comparisons to a multi person operation

Labor charged to clients - generally is going to be what you collect to cover what you pay employees (and/or yourself for the one man shop) which should also include enough to cover things like routine payroll taxes, employee benefits and similar.

Overhead is mostly considered to be the normal recurring expenses the business incurs and can include both regular recurring expenses like insurance, utilities, professional licenses or other similar required items, or longer term expenses like equipment purchases and maintenance of said equipment. Things you maybe need to be able to do whatever it is that you do, even if not absolutely needed, they might be a good investment as they may make it easier to do whatever it is that you do.

Profit is nothing more than having excess funds after taking all the receipts and subtracting all the expenses (regardless of how they are subcategorized) If said funds are a negative number then you had a net loss.

For a sole proprietor you can track things how you want but all profit is essentially taxable income to the sole proprietor, the business is technically not a separate entity to the IRS but can be a separate income source for the taxpayer, meaning you can have a typical W-2 wage from some employer as well as self employment income from some other activity you do.

 

[OK Sparky 93]

My first year, I have to just say that, I was ignorant.

My tax preparer just said you need to allow 30% of what ever is left.

The problem was, I really didn’t now how to get there.

So now, hopefully moving forward, I can implement some better marketing, and hopefully get more aware of how to use google, even if it cost me $300 / month, to use the fist quarter to pay its taxes and what I am going to owe for the last.

It may not be as bad as what I think, but anything is worse than it should be.

I knew I had the cost, associated with the business, and I knew I had to live.

I made money, I just didn’t really know, how to make the money to pay for everything.

In a perfect world maybe a guy would have 2000 hours. I don’t this year. I know moving forward my hourly rate, needs to be applied to those 2000 hours, but in the end even if it winds up being a 1000 hours, I still got to pay the OH, and I still have to pay for my basic living expenses. But who just has basic living expenses.

Now if for some reason, I had to go out tomorrow and get a new used service truck, whatever it would be I would have no idea how it would be paid for, unless I set my OH figure more than what I need, or think I need to cover.

 

[kwired]

I know title says owners salary, and I could not post initially because not enough characters. So here they are.

Here is another topic for discussion.
In the early days of the busy ness, I didn’t do what was necessary. I didn’t keep track of every single hour worked. Hard to know the reality. I knew when an employee I’ve seen 1600 hours and I’ve seen 1400 hours. So I tried to base a rate around that. I sucked! I would go to job and push a button on a gfi, or reset a tripped breaker, because someone didn’t know how, and have a nice day. No charge. Can’t do that anymore.

As far as OH, I knew some of the numbers, and made up some numbers. Now after a full year, at least for the first, I know what they are, and I still think I need an allowance for a truck payment, because I don’t have piles of cash.

I’ve had about $9,000 in fuel and vehicle repairs. Initially I figured about $6.00 an hour for the 1200 or so worked. Didn’t know a better way and still not sure I do. Based on that I lost.

I’ve seen and heard people say 50% profit. Take direct cost and double it, and that’s the price for the job. I don’t think that works for everything.

Someone wants a ceiling fan installed. Or two. It maybe takes an hour, and very little parts. You know there is no permit. Your J-man which just happens to be yourself gets paid maybe considerably well, let’s say $35. So what are the direct cost, that one would double?


You're the owner taking all the risk, you should be paying yourself a owners salary. $100k.

Ok, one day I am not going to be able to do this any more. Never made enough money as an employee to barely survive, and no way to save. Hopefully better late than ever. If I have to crash course retirement out off that 100k ,and then pay taxes, even working in the field at $35 I still don’t have much.

Are my numbers wrong?


So how do you guys pay yourselves, Owners salary, your rate for doing electrical work, and retirement

Go!

Getting back to some of what was originally mentioned ...

If you want to pay yourself a $100k salary, you certainly can. Next question is did the company earn enough to be able to pay that salary?

With a simple approach using the sole proprietor organization you could in theory pay yourself that $100K, if you didn't actually earn that much and didn't have the equity to pay it with, then you likely had to borrow money to pay at least some of it. If you put yourself on the "payroll" and let the company pay the payroll taxes on that 100K then you as an individual still owe the IRS whatever income tax is applicable for that 100K. Your Schedule C for the business will likely end up showing a net loss though. You generally don't get tax credits for net losses so taxable income associated with schedule C is zero and not a negative amount that would overall reduce the tax due. In the end you likely end up paying much more income tax if you did this then if you did not pay yourself that 100K and instead just took the net profits your business actually had as your Schedule C net profits. You would have no other W-2 wages to report, unless you also did work for somebody else as an employee during the year.

If your business normally makes well over $100k and you want to pay yourself a $100K wage, that could be a good thing to do. Probably best to talk to a tax advisor though to figure out the good and bad and make a decision from their advice.

 

[kwired]

My first year, I have to just say that, I was ignorant.

My tax preparer just said you need to allow 30% of what ever is left.

The problem was, I really didn’t now how to get there.

So now, hopefully moving forward, I can implement some better marketing, and hopefully get more aware of how to use google, even if it cost me $300 / month, to use the fist quarter to pay its taxes and what I am going to owe for the last.

It may not be as bad as what I think, but anything is worse than it should be.

I knew I had the cost, associated with the business, and I knew I had to live.

I made money, I just didn’t really know, how to make the money to pay for everything.

In a perfect world maybe a guy would have 2000 hours. I don’t this year. I know moving forward my hourly rate, needs to be applied to those 2000 hours, but in the end even if it winds up being a 1000 hours, I still got to pay the OH, and I still have to pay for my basic living expenses. But who just has basic living expenses.

Now if for some reason, I had to go out tomorrow and get a new used service truck, whatever it would be I would have no idea how it would be paid for, unless I set my OH figure more than what I need, or think I need to cover.

Sounds like you more after how you should determine how much to charge clients?

There is no simple answer. Breaking down the details often will be based on some constants that are not always so constant for a newly established business. On top of that, unless you started out with a lot of capital that wasn't tied to something else, chances are you had to borrow some that capital so you need to factor in paying that debt down as part of the so called overhead as well. And on top of that you want to be able to have some excess that can build up over time so that you have easy access capital for that suddenly needed new service truck vs having to borrow to acquire it. It is not always easy though. I've been doing this on my own for 25 or so years. I still would need to borrow money for a new truck, even a mildly used truck I would need to borrow to acquire. Or at very least wipe out what safety net I have accumulated to purchase it.