Will You Retire

O

OK Sparky 93

Senior Member
Location
Iridea14Strat
Occupation
Electrician
Forbes online article says 1 in 4, 25 out of 100 have a plan for retiring.

Do You?

I'm 56, I have a $1000 that I started a Roth with earlier this year.

Started this adventure of being the man, that seemed so alluring, yet is so difficult.

For those of you that are running your own shop, whether you hire many, or are a one man operation and are a part of the elite 25%, how do you fund your future.

Ive read that an electrical contractor makes around $65K a year. Now I am not sure if that is gross or take home, either way it seems like chump change.
I am not talking about gross sales on the business.

Does you customers fund your retirement?

Now I am taking a little detour! I just finished a book, that was geared toward people in construction, written by a Shawn Van Dyke, owned his own and contributes to The Journal of Light Construction (never heard of it).

Anyway the book is an eye opener about the health of ones business financial health, and is written for the sole purpose of getting one to realize a profit.
It let me know that I paid myself money, that I didn't really have, and although I put money into an account for profit, I didn't really have it.
A pill that I had to swallow and it sucks. My revenue went down this year but I paid myself roughly the same amount as I did the previous year, and it was tight at that.

And I am quiet sure, although I did not track every single hour, that I had well under a 1000 hours.

When I look at my P&L it has my COGS, but it is just materials, so the best I can come up with is that 1/2 of the money I paid myself Is contributed to labor and then figure for burden plus fuel cost/ wear and tear, to get a truer Cost of Goods, and the determine how much the multiplier needed for markup in order to pay myself a liveable wage, at a recommended PTR of 33%. It also would not hurt for me to have more billable hours.

Sorry for crying in my beer!

In the book an excerpt; Profit First for Contractors (PFC), also name of book, Percentage of total revenue (PTRs) for a healthy construction business:
Tax: 6%-10%
Owner's Comp: 10%-15%
Net Profit: 8%-10%
Total OPEX: 76%-65% Operating Expenditures.

That's not me!

My metrics and I believe it to be this way for anyone with gross revenue under $250K is

Materials I have no subs 25%
Profit 7.4%
Owners Comp 33.7%
Tax 11.2%
OPEX 22.4%

I don't know about the rest of you but, and sense I dont have any rule book, my OPEX has a larger footprint than what my owners comp does.
Apparently, (I know) you have to sell your jobs for more than they cost. The real question is how much more.

Unless I am wrong, and I could be, the math is,

Hourly OPEX $78.xx, and to make enough revenue to cover that would be to divide by 22.4%, based on 1000 hours, I would need to produce over $350K. I don't see that happening either.

Do you spend money on marketing? That could be costly. A truck, it may be possible to find one for under $20,000, but I am sure that there are some, because I have seen them, that are probably closer to $60K if not more, and then for the brilliant that wits until he is pushing 60 to think about trying to prepare for the future, there is the retirement. To have a chance at not working until I am in the grave, it would be somewhere between $12-$25K per year.

With all of the other small ticket items its between $60-$70K on OH.

All of the things swirling around in my head and probably more. I figure if I write and someone else sees it, They are either experiencing the same or thay have gone through it and made it to the other side. Maybe someone has some insight or advice, maybe that I will see things differently.

Good night!
 
I am thinking maybe the end of the year. I will be full retirement age.

I think I have enough to retire on, but these days you don't ever really know. It was not that long ago that a million bucks was considered adequate for a decent retirement. I would say it is probably closer to a million and a half these days after you factor in social security.
 
I'm 26 and have a Ira but I don't plan on ever retiring. I'd have to be crippled to retire. I see old guys who don't have hobbies that retire become couch potatoes and then have a stoke and game over. If I ever have the money to quit working I'll need to have a physical hobby.
 
Well, I don’t see myself crawling in and out of attics at 76 and definitely not in a crawl space. Probably won’t be up on a ladder either sooooo
 
ptonsparky said:
The guys had to help me out of ditches and told me to stay off the roof. It seemed like all I did was PR and sign checks. You will retire one way or another. Plan for it.
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It is inevitable. My 83 year old father isn’t capable to do much. He came from time when companies provided a retirement.

Very few of those now.

In regard to my OP, I have all the numbers that I feel are necessary for me to operate a viable business and provide myself a living and provide a profit for the company.

I was hoping someone would say that, this is the number of hours in a year that you need to use, to develop an hourly rate, no matter what.

If someone came to me tomorrow and told me they have a year long project and they wanted a to know my hourly rate, I would have to be $154/ hr. $160. How ever I know I am not going to have 2000 billable hours.

I honestly don’t know how many I will have.

Most likely I need to figure out if there are any cost that I could eliminate.
 
I am not a contractor. I can tell you that there are a lot of electrical contractors making a go of it charging less than $160/hour. Obviously this varies with location and the type of work being done but I don't think you are going to get much business as the new guy at those kind of rates.
 
petersonra said:
I am not a contractor. I can tell you that there are a lot of electrical contractors making a go of it charging less than $160/hour. Obviously this varies with location and the type of work being done but I don't think you are going to get much business as the new guy at those kind of rates.
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I never came close to those rates, but I did start having more of us supporting Cost of Business. Start your investments of some sort 10 years ago.
 
Journal of Light Construction is probably the most popular magazine for smaller contractors and remodelers. Geared towards generals/builders.

Im at $160 for service work, $250 first hour. Any less it wouldn’t really pay to do service work.

Im roughly the same for remodel work however. I need to make $1,200/day to pay for what I want to make, and recover overhead.

Like the old saying, “I can stay home and go broke, I’ll be danged if I’m going to go to work and go broke just the same”.

OP, I recommend getting 3 books by David Gerstel; Running a Successful Construction Company, Nail Your Numbers, and Building Freedom.

While the books are written by, and primarily for, general contractors and remodelers, the business principles apply to any construction business.

As I went into a little in my post about pricing, I think the most important thing is to get an accurate handle on what overhead actually is. By the year. Once you know every single penny it costs to run your business, you now have the opportunity to recoup those costs. But if you don’t know them, you will never know until it’s too late if you are recouping them.

And as I touched on a little, a percentage based system of charging for overhead is very difficult, especially for a small contractor. Unless you do the exact same amount of work, and roughly the same volume, it will probably not work out.

This is why I use a time based method. If I need $75,000/year for OH, and I think I’ll work 1,000 billable hours, then I need to charge $75/hour just to recover OH.

Then figure what you want to make. If a J-man will cost you $45/ hour, plus labor burden, plus a markup for you having an employee, maybe that equals out to another $75. Now you’re at $150/hour. If you want to pay yourself more, then raise prices till no one hires you. 😂

Or, work on lowering OH. That is one of those “low hanging fruit“ options for small contractors. Every bit of unnecessary OH you can cut, is cash money in your pocket.
 
Here in my area of far northern california, where everyone and their brother has grown marijuana for the past 50 years, there is a major shortage of people who will actually work. So labor is high here.

We’ll see what happens now that the cannabis industry has completely collapsed in on itself.

Living is also high as giraffe nuts here. You’re not buying any livable home for under about $350k.

Diesel fuel is $6.00/gallon.

We’re 400 miles from Portland, and 400 miles from San Francisco, and highways in and out of here regularly close, winter from storms, summer from wildfires, and there is a truck length restriction on all highways coming into the county, so goods are expensive. Or at least that’s the excuse they use. I think it’s just because everyone got used to charging pot prices for everything.
 
OK Sparky 93 said:
any cost that I could eliminate.
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My biggest liability has always been self-employment tax.

Just started investigating how to get something back from that mandatory investment.

Maybe eliminate some personal costs with the next dental crown, which are now over $1200.ea
 
OK Sparky 93 said:
the book is an eye opener about the health of ones business financial health
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Here is a short article that checks the critical factors for retirement bealth.
phys.org

How three hours could add up to a better retirement

Older workers who completed an evidence-based retirement planning course reduced their expected retirement age by an average of just over a year, felt more confident in making financial decisions, and felt better prepared to leave the workforce.
phys.org phys.org
 
ramsy said:
My biggest liability has always been self-employment tax.

Just started investigating how to get something back from that mandatory investment.

Maybe eliminate some personal costs with the next dental crown, which are now over $1200.ea
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Well taxes in general are probably the highest cost, next would be vehicle or retirement. Everything else is peanuts in comparison, unless some one factored in any marketing cost.
My financial guy told me I needed close to $2500 a month. With that there may be no retiring. But it has been on my mind of there years when it ws a chore to rub two nickles together. (My dumbness or the dumbness) Either way I believe that cost to be in business for the small guy could potentially outweigh the reward. Like seven-delta-fortyone was saying. You have $75,000 in OH and pay yourself $45,000. It should be the opposite, but some how small pieces at a time of that pie find there way somewhere else. And then when the phone is ringing.......

Now if I was the CEO of Coke, every time You purchased one you would be contributing to fund my lifestyle and my retirement.

The difference is that people, consumers are not having, nor do most plan for having a trades person in there home on a daily basis, yet have a stockpile of coke in the fridge.
 
ptonsparky said:
The guys had to help me out of ditches and told me to stay off the roof. It seemed like all I did was PR and sign checks. You will retire one way or another. Plan for it.
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Sounds like you were the "boss." You're that guy in the TV ads selling foam-in insulation; pushing new windows; selling siding. You're the face of your company. Those guys in the ads are not the guys on the ladder! Not a bad position; PR to boost customers; signing checks to keep things moving. Running the Company -is- a job!
 
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