I’m piecing together my business plan now that I have become a legal entity and have been penciling out my costs and what I need to charge / bill out for an hours worth of a journeymans time. I’ve got pretty low overhead as I’m working out of an office in my basement and other basics such as that are covered and are pretty low. But……to cover just my wages, IRA contribution, insurance and taxes, (which my CPA advised me to bill out 45%-50% of the hourly wage just for taxes, gulp!!). That puts me billing out at $58.00/hour. Am I in the ball park from your experiences or am I really off base. I understand there are regional differences to billing rates for carpenters too but I’m having a hard time believing Joe and Mary residential customer is going to want to fork over that kind of money for someone to replace a door or trim out the den for example. I have a vague recollection of seeing a document one time that my former employer here in Seattle was billing me out at and that was, as I recall, $54.00 / hour and I was with one of the larger general contractors in the Seattle area. Of course that is not what I made but………Would any of you be willing to disclose what you bill out at for a journeyman so you don’t get stuck with a big tax bill you have to dig up the cash for?
Can you recommend a resource to help me figure out a rate?
Or is this a topic that I will run the risk of scorn and/or dismemberment by the board members?
Thanks
BjR
Replies
You are right in the ballpark. I know it might sound high but you'll quickly find that once you start breaking it down you must charge this much or more to run a business and live a life that gives you the comforts for your now increased labor. I'm just drawing on personal trial and adjustment over the course of 15 yerars or so, no references. Good Luck.
BjR I have a freeware spreadsheet I developed that you can use to figure out a billing rate that's based on what your real costs of doing business are:
Capacity Based Markup Spreadsheet
PILAO_Wksht.xls
A Microsoft Excel Spreadsheet (Windows & Macintosh)
If you have any questions regarding the spreadsheets use feel free to ask them here.
"...I've got pretty low overhead as I'm working out of an office in my basement and other basics such as that are covered and are pretty low. But......to cover just my wages, IRA contribution, insurance and taxes, (which my CPA advised me to bill out 45%-50% of the hourly wage just for taxes, gulp!!)."
45%-50% sounds a little bit on the high side but since your accountant wants you to include your IRA contribution in that percentage it sounds like it might be alright. Yup that is what happens when you really do figure out what your real costs of doing business are.
"...I'm having a hard time believing Joe and Mary residential customer is going to want to fork over that kind of money for someone to replace a door or trim out the den for example."
You are going to have to learn to forget about what you feel you can charge and instead learn to trust the numbers you crunch. If you come up with a rate $54.00 / hour or even $74.00 per hour you will need to understand that that is what you really need to cover your costs and pay you wage and if you don't charge what the number crunching tells you something has to give, something then isn't going to get paid, and when you get to the bottom line it's money that's coming out of your pocket.
And if I might I'd also like to recommend a real simple book Ellen Rohr's book How Much Should I Charge?: Pricing Basics for Making Money Doing What You Love and read through it. It's a quick and even enjoyable read as she does a great job and simplifying explaining what you need to understand and know.
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Jerrald, Thanks a bunch. That's a really great program. Do I need to have Excel on my computer in order to run the program. I can view the documents when I download the program but I can't modify the numbers in the columns to match my situation. Or am I missing something, I'm still learning about this contraption
Again, thanks a bunch.
BjR
BjR, yes the workbook does take Microsoft Excel to run. If you don't have Excel yourself you probably have a friend somewhere that does. Eventually one day I build the calculator as a standalone application in FileMaker so anyone can run it regardless of whether they have Excel or not but who knows when I get around to that.
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I am going to get Excel today. I will eventually need it for some of the other programs I want to use anyway.
Thanks Jerrald
And Dave that was a good story about the Lexus lady.
BjR
OK....... I just installed Excel and am looking forward to using the program. Does it have a tutorial with the program?
Thanks again Jerrald.
BjR
It's been over a decade since I first started out with Excel but I do remember books like Excel for Dummies and the Idiots Guide to Excel being really helpful.
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Jerrald, This is a great program and I really want to thank you for your generosity. It has exceed my expectations. I'm sure I am going to have to futz around with it a bit to get the hang of it and go over some stuff with my CPA and accountant. If I went by the biling rate my first go around with crunching the numbers I would be charging $136.79/ hour. That's more than my CPA's getting. It's a great tool though. Is it possible to add line items?
BjR
BjR - "If I went by the biling rate my first go around with crunching the numbers I would be charging $136.79/ hour."
Yeah you probably do have something wrong in there but to tell you the truth for some of the plumbers and electricians in our region (metropolitan NY) that wouldn't be out of line and carpentry wouldn't be that far behind. Plumbers and Electrician while paying roughly the same wages to their personnel generally have higher billing rates due to the high ratio of the unproductive hours to productive (billable) hours. I know of a couple of them whose employees are paid for an eight hour day while only 5 of those hours are spent on the job being productive. The other three are going to the shop in the morning where they stock up and then returning back to the shops in the afternoon so their rates reflect that.
Carpentry is (or at least should be) a lot leaner and more efficient than that so yes $136.79/ hour. probably does mean something you have in the workbook isn't quite right.
" It's a great tool though. Is it possible to add line items?"
Well yeah but until you are a little bit more familiar and experienced with Excel you might not want to try that in that as an Excel novice you might inadvertently damage the files structure and then not have things add up and compute correctly. But while the spreadsheet is distributed in a "Protected" state that protection can be turned off via the pull down "Tools" menu under "Protection" (there's no password required so leave that blank).
So what were you thinking of adding? I can always revise the workbook based on user suggestions or maybe what you are looking to add is already in there somewhere I can point you to the correct worksheet and line number to find it.
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Not thinking of adding anything in particular. It was more of a general question type of thing. The line items look pretty comprehensive but somehow I always seem to be the pessimist and could imagine there was something left out.
I did find the "Protected state" feature a couple of times and I did disable it via the instructions. I hope I didn't damage the file structure by doing it though. How would I tell? I recall the program wouldn't let me enter a number or something like that and the window popped up and said "protected" & tools and such. I disabled it and I could enter the numbers as I recall and I continued on. Should I enable it back to the default settings ?
BjR
Make a copy and then experiment away on the copy.
Great idea.
Not knowing exactly what you were working on I can reasonably speculate that it's possible where you were trying to enter numbers that that cell was protected because it was a cell that was to be computed as part of sum or other formula based on numbers entered in other cells. So it is possible that disabling the protection and entering the number straight into that particular cell you might be tampering with some computing excel formula.Until you more experienced with Excel you can always ask me questions about any cell by referring to what worksheet it was located on and what it location is and I can tell you what it does or how it was created.
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So I may have messed up the calculating function. And without knowing exactly which cell it was chances are good I probably did mess it up. So probably the best way to be safe is to delete the program and re-load it?
BjR
And Bill's advice about making a copy of the original and then working on, taking apart, and modifying the copies is a pretty good way of learning and seeing how Excel works.But keep a copy of the original on file that you know works.
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One way to get over the "I can't charge that much per hour?" guilt is to quote and charge by the job.
When I first started out (about a 18 months ago) customers would balk at my hourly rate. And worse, the ones that signed on took on a level of 'clock watching' and micromanagement that they wouldn't tolerate in their own job. I switched pretty quickly to a 'per project' fee (still using the same hourly rate for my calculations) and it's been easy sledding since.
-Norm
my company (in metro Boston) charges $55/hr. per carpenter, $45/hr. per apprentice (or jr. carpenter as they like to put it), and $30/hr. per laborer.
I was having a semi-philosophical discussion about labor rates the other day with a potential customer who was balking at a ballpark guesstimate I gave her.
She didn't really understand that I'm a "real" business with taxes, insurance, licenses, etc that have to be covered or I'm going broke. I think I "won" the debate when I pointed out that she didn't balk at the labor rates for service on her Lexus and that I also have and maintain the special tools, training, and experience to do her work. She had to laugh when I also pointed out that I make house calls and they don't - lol.
To me journeyman carpenter means commercial......and perhaps (since I was strictly a residential builder/carpenter) you can use all these formulas and high hourly rates cause you're dealing within a business environment........but still you're usually bidding against someone else for the job and a lot of times (unless you're the governors brother) the lowest bid wins the job.
Mom and pop is a different story. You can get away with a higher price if you have the reputation to justify it other wise it's just a fact that you must charge what the going rate is (usually all subs charge pretty much the same ...as do general contractors)
or whatever the market will bear........this takes a lot of research and smarts....especially if your not an established name.....
you are in competition with a lot of guys working out of the backs of their pickups for wages only...
and a lot of these guys are good carpenters who don't know what those books say ...and don't care cause they are strapped and have to feed the kids etc.
Around here 58.00 an hour will get you laughed out of town.
Blind allegiance FOR ANY REASON is the greatest ignorance we can bestow upon ourselves.
jjwalters - "Around here 58.00 an hour will get you laughed out of town."
Where is here? And is 58.00 per hour laughed-out-of-town high or laughed-out-of-town low?
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billing me out at and that was, as I recall, $54.00 / hour and I was with one of the larger general contractors in the Seattle area./////I believe the guys saying that his boss hires him at x amount and bills the client 54.00 for every hour he puts into the job......and he is asking about billing his guys at 58.00 an hour.Sounds good on paper, and may work on the commercial side of building, but from my experience in residential construction (unless you have a reputation that warrants it) you have to charge what the market will bear in the environment you find yourself.In SE ohio where I live you can hire a good carpenter for about 15.00 an hour......and maybe bill a client 30-35 for time on job......any more and I believe you would be over the top and not getting much work..........My suggestion to him is......to find the market in his area as a starting point ....talk to other carpenters/builders and find average going rates for framing? so much a square foot....etc......turn key houses so much a square ft 85 to 100+ and so on. IMO bid books and all that don't work. I've made a lot more than 58 an hour and a lot less in my 30+ years as a carpenter/builder......bidding is difficult to learn period ....and especially for a guy just starting out cause he has no history.Course I'm semi-retired and out of the loop so what do I know?..... I wish the guy well
Blind allegiance FOR ANY REASON is the greatest ignorance we can bestow upon ourselves.