I was thinking huh...you want me to use my liscense and insurance for that, I would maybe do just residential work for $20 an hr but just doing the dumb end of stuff not all the stuff he was talking.
I have little overhead (it's just me) and I figure my break even is $29/hour--that's no profit in my mind although it actually is.
1500 hours @ $32.00 (labor with burden and overhead) breakeven pricing
This looks about right. If your bidding construction rates, which is the way I've done for decades, you use your average shop rate. Ours runs around $19.50 to $20.00/hr
Is it any wonder why this business is filled with low balling, bottom feeding competitors?
These comments clearly prove that the majority (not all, but the majority) of contractors don't have a clue what "breakeven" is. They are the same contractors that will complain about low bidders and that prices in their market are the reason why they can't make any money. They are the ones that make comments like "you can't get those prices where I'm from". They don't seem to ever put together the fact that they are the problem, that their inability to understand the "numbers" is the reason why prices are so low.
So, here it is, once again, how you determine what your breakeven is. For those of you who will find it irresistible to make stupid unfounded statements like "that isn't the only way to find out how to charge" I say to you...yes, it is!
Please, for the sake of those who actually want to be paid what we are worth, get out of the business; get a hot dog wagon and find yourselves a busy corner. You'll make more money and those of us who actually know how to run a business can raise the bar in our beloved industry.
Flame suit on!
Here's a formula to figure your selling price for a one truck operation (you in the truck, no employees):
Copy and paste this into Word, Excel or program of choice.
Note: This formula is for residential/light commercial service work (no new construction) using flat rate pricing.
Billable Hour: A billable hour is the actual time during the workday when income is produced. FACT: Your total billable hours for one year will not exceed 1,000 hours.
4 (hours a day) x 5 (days a week) x 50 (weeks) = 1,000 hours/yr.
Total Billable Hours/Year: 1,000 Hrs. Don?t make this higher, it very accurate (unless your doing larger bid and spec projects, then use 6 hours a day).
Selling Price:This is the hourly amount you must charge as the labor component of your flat rate pricing. It does not include material. Include material in your flat rate pricing and mark it up whatever amount you desire (or not). You?re really selling your labor, so if you sell your parts & equipment at cost (including freight & taxes) it really doesn?t matter. What matters is selling your billable labor hour. Here?s how to calculate the selling price.
OVERHEAD ITEMS: Fill in amounts and total it on line 36.
A word about owner?s salary: Consider what you could be paid in a year if you worked for a reputable company, that pays what you are worth, as a tradesman and offers a bonus based on performance. It is not uncommon for some to earn upwards of 70-80,000/yr. or more. Do not sell yourself short, even in the first year of business. As a business owner you should pay yourself at least 80k/yr and more like 100k/yr. treat your salary as a business expense.
1. Owner?s Salary __________________
2. Advertising - YP ___________________
3. Advertising ? Other ___________________
4. Answering Service ___________________
5. Bad Dept ___________________
6. Bank Charges ___________________
7. C.P.A. ___________________
8. Call Backs ___________________
9. Cellular Phone ___________________
10. Computer Expense ___________________
11. Credit Card Fees ___________________
12. Donations ___________________
13. Dues/Subscriptions ___________________
14. Educational Expense __________________
15. Gasoline Expense __________________
16. Health Insurance ___________________
17. Insurance ? Truck ___________________
18. Insurance ? Contractors ________________
19. Insurance ? Umbrella __________________
20. Insurance ? Workers Comp ______________
21. Legal Expense ___________________
22. Office Supplies ___________________
23. Payroll Company ___________________
24. Payroll Burden ___________________
25. Postage Expense __________________
26. Rent & Taxes ___________________
27. Retirement/401k ___________________
28. Telephone ___________________
29. Tool Repair/Replace ____________________
30. Travel & Entertain ____________________
31. Truck Expense ___________________
32. Truck Maintenance ____________________
33. Unforeseen Items ____________________
34. Uniform Service _____________________
35. Utilities _____________________
36. Total Yearly Expenses ___________________
37. Expenses Divided by 1,000 B/H = _____________ (This is your break even (B/E) price ?
NO PROFIT!
20% PROFIT ON TOP OF BREAK EVEN COST: This is a standard acceptable profit, please don?t short change yourself. Enter the breakeven number from above and divide by .80 to get your selling price.
__________________Divided by .80 = CORRECT Selling Price Of______________/hour
Enter break even number here
B/E Cost = 80% Of Selling Price
The above list of expenses is only a representation of expenses and may not include all expenses. Be sure to add any and all additional expenses you may incur.
