Time and Materials Question

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buddog57

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I am in the process of opening a electrical business, and after review of sites such as this and a copy of the 2005 National Electrical Estimator,I have determined that because there are too many variables involved, and I have no bidding experience,now is not a good time to attempt giving bids or flat rates.
My business is part time, after work,weekends ect.for now.My question is, in a T&M situation what is a good percentage to add on to the parts to help cover overhead? I know this will not be the same amount for different people but I would like to try to determine a percentage range.
Thanks in advance for your help.
 
Re: Time and Materials Question

Overhead is the value that covers your operating expenses. It is a percentage of your total sales (gross receipts). One way to arrive at this percentage is project how much total sales (gross receipts) you will most likely do this year, then project how much operating expense (OH) it will take to manage your gross receipts. Divide your projected operating expense by your projected gross receipts and this result is your annual projected overhead percentage. OH is: phones, advertising, office equipment, vehicles, vehicle repair, utilities?items that keep you operating towards your projected goal of gross receipt.
GR $50,000.00
OH $15,000.00
OH%=OH value/GR
30%=15,000/50,000

This percentage is NOT mark up. Mark up can be projected by answering the questions: of your gross receipts how much is material, how much is labor, how much is other direct job costs? The sum of these are your total costs, divide your projected gross receipt by your total cost and the answer is your mark up and your mark up is the multiplier you would use on your costs to arrive at your total sale price.
GR $50,000.00
MT $15,000.00
LB $20,000.00
Cost $35,000.00
MU=GR/Cost
1.43=50,000/35,000

It truly is a business, do not hesitate to get the advise of a CPA. You will find your true annual profit after you complete a year and pay your taxes, until then you are projecting.
 
Re: Time and Materials Question

tryinghard,
Your reply is very helpful to me.
Thank you so much for your time.
buddog57.
 
Re: Time and Materials Question

Your question was how much markup on material right? I add anywhere from 35% to 45% on all material, plus with the high gas prices this variable needs to be included. generally I'll charge my labor rate one direction of travel between jobs or starting at my office. be sure to include any trips to the supply house
 
Re: Time and Materials Question

On some very small items--wire nuts, screws, etc. I have seen some invoices for "Misc. Material" and a flat price like $5.00
I prefer to list them individually and also to itemize the invoice. A wirenut can go for .25
With itemized invoices, the few problems we get are the customer who calculates time from when the electrician enters the door to the time he leaves. We then have to explain the concept of travel, or parts house run, some other reason time is longer than front door to front door. We usually explain the industry standard is portal to portal. In addition, we have been adding a "truck charge" to partially compensate for the HIGH price of gas.
Currently it's $10 added right into the job.
 
Re: Time and Materials Question

titletownu.s.a.and tshea,thank you both also for your input as it is helpful to me.
buddog57.
 
Re: Time and Materials Question

I will tell you this NOTHING helps a business be sucessful, than full time commitment with nothing to fall back on. Plus IMO under some circumstances unfair to your current employer
 
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