hi all,
maybe it is to late to ask this question. I just finished my biggest job yet. (we’ll the biggest one for “me”) After all is said and done everyone is paid including uncle sam I have 11% of the total bid left over. PROFIT I guess. I paid myself by the hour what I thought I was worth throughout the job. All is aboveboard and legal. Is this typically what is left over to pay comp and liability insurance before i call it profit, or should I aim a little higher? thanks in advance
An inch to short. That’s the story of my life !
bstcrpntr — I hope to grow into this name.
Replies
You may want to move this to the business folder.
good idea how do i do that?
An inch to short. That's the story of my life !
bstcrpntr --- I hope to grow into this name.
go to the business folder and click post new.........then post your message and the title of the thread.
EricEvery once in a while, something goes right!
I think only the SYSOP can move an existing thread. You could post a new thread with your text, then copy and paste TLE's comments into a second post.
Jon Blakemore
If 11% is what you have left over, you are already operating at a loss.
You need to look at your actual overhead costs.
Some things to consider:
Cost of W/C and Liability insurance
The cost of your time to generate this bid (and the ones you don't get)
Tool replacement allowance
And the list goes on.
After you look at all the items you need to consider, you will start to wonder if it is possible to charge enough.
And never forget - you need to make enough to tide you over the bad times, whether it is a non-paying client, a mistake in your bid, injury, or whatever.
Terry
My suggestion is for you to go see your CPA and have him do the work and have him come up with hourly rate that you need to charge to brake even. Second number he needs to come up with is the one that will let your company make good profit of 30 % or 40 % that is so you will quit loosing money right now. Then have him explain how he came up with the numbers. Now make sure you keep on top of the numbers so you can refigure the numbers so you don’t need to do a trump.
My second suggestion is for you to call your state board of economic development. Ask them where you can get some business courses so you will can learn how to be a business man not just a carpender that wants to be in business as contractor.
Of course, you could be figuring things different too. Okay, probably not, but hypothetically - I've seen people compute their "hourly" rate as a compilation of what they're really keeping out of it (labor) as well as all of those things that go into overhead - like putting fuel in the truck and paying insurance. It's not a blatantly stupid way of doing things really, so long as you've done the math to back it up.
Example. You're paying you 25/hr for whatever. But between all the overhead it takes for you to exist, you figure every hour I work, I need to generate 40. Fine, so you think in terms of 40/hr. But if you're just thinking in terms of 25, and on this job you got $27.50, you're still short sheeted. If your overhead, per the example, is really taking 15/hr, you didn't get the 25. You got 10.
Since others have written books on it, I'll throw it out. Mike Stones Markup and Profit. You might have an interest in that.
"If you pick up a starving dog and make him prosperous, he will not bite you. This is the principal difference between a dog and a man." - Mark Twain
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Bstcrpntr it sounds to me from reading your post that you're paying "Uncle Sam" but not considering or planning for the other Costs of Doing Business that you may incur.
11% is a a pretty good Net Profit figure (what's really leftover after everything is paid for) to work toward but it does sound from what you wrote like you are really covering everything to me especially when you say "Is this typically what is left over to pay comp and liability insurance". The 11% you describe as what think may be considered "Profit" may really be 0% or even a negative number. And as I'm sure you beginning to realize or will realize real soon that the time to plan and estimate for Overhead and Profit is before you even bid for a project not after it all over.
I don't know how much you understand about the mechanics of or markup and margins but that's not just another thing you really have to get down to be a contractor it's the most important thing you have to get down. You might want to start by reading my paper Markup: Comparing the Traditional Volume Based Markup vs. the PROOF/Indexed/Labor Allocated method and then (if you agree the premise I present) you can download an Excel spreadsheet I've created that you can use to help yourself set an appropriate billing rate.
A Microsoft Excel Spreadsheet
(Windows & Macintosh)
3/15/2004 7:06am — Version 8 published
Any questions on the hows of whys I suggest like some others have that you put the question forth in a topic in the business folder here.
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