*
I’ve been in business for 12 years. I don’t need to advertise, all my work is from word of mouth. I work alone, have a small shop in my basement and build custom projects 25% of the time. The other 75% of the time is remodeling bathrooms, kitchens, decks, replacing windows, doors etc. I looked at a lot of estimating books and find them all to be out of wack. For example to replace a steel front door and frame 2 hours. You got to be kidding me. It will take that long to pick up the new one and take the old one to the land fill. I try to figure out how many hours a job will take and X by $25.00. Done this for 11 years and recently gave myself a raise to $37.50. I still will get my share of dirty looks when I bid on a job and tell them the price. I don’t have any one to bounce prices off of and really don’t have a clue to what the going rate is for these jobs. I think I’m at the low end of the scale. My bottom line after all deductions is 35 to 40 grand. Am I at the right range for a professional craftsman? I do very good work and almost never have to go back to fix something. I work in the Massachusetts, Rhode Island area. OK 3questions. (1) What should be the average yearly income for a one man show in this trade? (2) Does anybody have an estimating program for the little guy that’s accurate? (3)What would you charge as the owner of the business for carpentry work by the hour?
Discussion Forum
Discussion Forum
Up Next
Video Shorts
Featured Story
Learn how to fight wood-boring beetles and prevent home infestations with expert advice from Richard D. Kramer, an authority in pest control.
Featured Video
Builder’s Advocate: An Interview With ViewrailHighlights
"I have learned so much thanks to the searchable articles on the FHB website. I can confidently say that I expect to be a life-long subscriber." - M.K.
Replies
*
You should make a minimum, and I mean miminum, of $1200 per week.
Figure it this way: You go on about 8-16 hours per week on sales calls. In addition to that, you also spend about another minimum of 8-16 hours per week figuring how the project will be done, assembling a material list, costing out that material list, calculation the time needed to perform each "operation" needed to complete the job, which includes getting the material, setting up at the site (daily), getting the material to the site area, clean up (daily), typing the Proposal and it's bact to client again with the Proposal - and more time there, etc. I figure for every 2 hours actually worked on jobs each week, we spend about 1 hour or more on the above and accounting. So for every 40 hours worked on jopbs, add another 20 hours minimum for what is related to those jobs.
Once you "properly" calulate all of our costs of running your business, you will find that your true labor cost, including your weekly salary, is really well over $40 per hour.
You should be charging at least $45 per hour. You should not tell owners the labor rate you charge since they will always say; "What?" - meaning you're overcharging them, as though they know what it costs to run your business, or any other business. In 30 years in business, I've always only given a price for the project, not a breakdown. 19 of 20 people who ask for a breakdown ask for it ONLY so they can use it against you to beat down your price. Most people, especially in our current society, could care less about your costs or costs of acquiring your expertise - bottom line is all they care about. So, bottom line is all you should give them. And if they could get someone else at 50% less, they will hire him in a second, and bitch about the workmansip afterwards, or at the least, say about him: "Gee, it's too bad Joe went out of business. He was real cheap and did good work."
Duh ! Wonder why he went out of business?
So, at $25 per hour, that amounts to $1000 per week (if you work 40 hours). Divide that $1000 by the 60 hours per week you really work and you'll find you really make about $17 per hour. If you're really good, you could make that same $1000 per week as a Project Manager working 40 yours per week, working for someone else, plus get medical insurance, a truck, paid vacations and paid holidays.
It's time to rethink you're entire set-up. Right now, you really don't own a business, and don't run a business. You are just a self employed tradesman, and one willing to sell himself very cheaply at that. There is a world of difference between the two.
*SonnyCould you elaborate on what you mean when you told Mace that he is a self employed tradesman and therefore he is not actually running a business. What is the difference between what he does as a sole proprietor and what you do? Is Mace not in business for himself?Is a business something separate from a human being? A non-human entity such as a corporation could never perform surgery but a group of doctors who form a corporation can. Does that mean that doctors who don't form a corporation are merely self employed doctors?It occurs to me that only humans can be carpenters. painters or any other tradesman.I would like some clarification. Any person can say he owns a business. But what does the person own? What are the contents of a business?
*I think my business owns ME!
*I think Mace is in business. It's a small business, but he's running a business just the same.Mace,It sounds to me that you are estimating the same way I do for a company of 20 employees. (I'm still considered a small business too). You figure out how much the material cost including mark-up; you figure out how long it will take to do the job - BINGO, there is your estimate. At $37.50 an hour, I don't think you're high or low. Just right in the middle. That shouldn't stop you from raising your rates again if the market will handle it. You need to be compensated for the business time you spend NOT making saw dust. My market is the general contracting community. It's easy to price yourself right out of the game real quick. But dealing with individual homeowners is a different story. They don't have a notion of what the competition is charging, and if they want you (because of your good word of mouth reputation) then that will factor in how they receive your costs. If you're building tons of apartment complexes then software to do your estimating may help. Me, I've never built the same thing twice. I do everything just like you do. Pencil, paper, calculator and a few calls to the lumber yard for current prices.Good Luck,Ed. Williams
*A self employed tradesman works for wages, and based on the dollar amounts mace posted, he works for wages. If he had a legitimate business, he'd be making a very good salary (at least $1000 per week), plus a net profit of at least 10% of sales, plus a retirement program, a terrific medical plan, reserves for bad debts, depreciation reserve for a vehicle, all equipment over $300-$500, a sufficient reserve amount for self training which would include seminars, books and other such educational items.Too many 1-2 person company owners just keep everything left after immediate costs as their "salary", and it ends up being about what he is currently making.At 37.50 per hour, if he works 40 hours per week for 52 weeks gives him about $1500 per week. As you know, there is not one of us that works 52 x 40, or 2080 hours per year, unless we're working overtime, and if we're working overtime, it should be much more than that $37.50 because 1st, it's overtime, and 2nd it's done evenings and/or Saturdays. My employee gets time and a half over 40 hours. What am I, a second rate employee by paying myself straight time? I figured when I actually worked on jobs by myself, I actually worked about 45 weeks a year. That's about 34 hours per week on average over a year of 52 weeks, but from that 52 weeks take off a 2-week vacaton, holidays, rain outs, sick days, guarantee work - even if it's minimal, etc.Do the numbers yourself. I'm not trying to insult him. I'm just trying to define what a business is, and any business is supposed to produce a net profit, over and above it's owner's fair salary and operating expenses. And that fair salary is supposed to be renumeraton for the tremendous potential liabilities he takes on as an owner of his business, so it had better be damn good. Anything less is just being a self employed tradesman who is working for wages. I did that for years until I got smarter. Only in my case, it was about 65-70 yours per week when including estimating, selling, typing contracts, etc., and for what really ended up being - peanuts.Ed said: "You need to be compensated for the business time you spend NOT making saw dust."BINGO !
*Depending on how you look at it. Sonny's right, but so is Dallas. "Business" is too broad to define in a few clipped sentences. I'm in business and I created the whole thing myself, it's mine. I die, no business. I'm in the business of selling myself. A hired gun. Give my some money and I'll take care of you. I'm as viable as Joe Blows mega-million dollar company down the street. I don't look up to any Donald Trumps and consider myself inferior. They work in dollars, I work in dimes. We're both just hanging on to this twirling ball waiting for our turn to fall off. I can live quite well within my tax bracket and when I reach a certain amount, I slack off, relax and enjoy being a "gentleman of leisure"
*If you are a sole proprietor, then everything you, or your company makes above and beyond expenses and overhead is YOUR wages. This is defined by the Internal Revenue Service. YOU pay income taxes based on this amount.Too many people are still trying to make sole proprietors into corporations.When did YOU become the person to define what a business is, Sonny? I run a business. I own a company. I work alone, and I do not consider myself a self employed tradesman working for wages. Neither does the IRS. So why do you? I will consider myself a self employed tradesman making wages when someone else is paying my insurance, my expenses, my overhead, and my retirement. Until such time, I am the owner, the craftsman, the manager, and all other "employees" of my company. I do it all. We are all different when it comes to how we decide to run our business, and decide on how much we should make each day. Where you live, the cost of living there, and how many mouths you have to feed (or other family related expenses) will dictate what is a comfortable living for you. Small business owners were never known to get rich. When they reach the point that they become rich, they are no longer SMALL business owners. The become Presidnets and CEOs of their respective LARGE corporations (with a few exceptions).Just a thought...James DuHamel
*James, why are you getting so cocky? I'm not trying to make a sole proprietor into a corporation. I do, whoever, would like to see my peers making the money they deserve as business owners in our industry. Of course any sole proprietor is charged with the income of his salary AND profits. That tax structure does not negate the fact that everyone in business is supposed to generate a net profit over and above his salary.If I feel that I am entitled to take a salary of $1200 per week based on my time and what I do in the business, that doesn't mean I should not seek to also get a net profit, if nothing more than as a return for the monies I've invested into the business. Don't take my word for it. Read any business book and especially the chapter(s) about what "net profit" represents. And you're wrong about small business owners not being known to get rich - many do and have, and many will continue to do so. In the book, "Mastering the Business of Remodeling" by Case and Downing, on page73 which is the 1st page of their chapter entitled: "Planning for Profit", they state: "Profit is the return received on a business undertaking after all operating expenses are met. Those operating expenses include the owner's salary when the owner works day-to-day in the business (as do most remodelers). It is the role of every business to produce a profit." Think Case and Downing are also trying to make sole proprietors into corporatons also? Or are they just trying to define to remodeling owners what a business is, and specifically, a remodeling business.Finally, even in a S-Corporation, the net profits are charged to the owners of the stock for IRS purposes. So, does that mean the sole stock holder is not supposed to generate a net profit for his corporaton?Tell you what, keep ripping out and throwing away those pages of our various trade magazines that talk about profit. Naw, we don't need profit as long as we can take a check each week.And about me defining what a business is - I'm not. I'm simply restating what business book authors, professors, successful business owners and others have been stating for decades, including those in our own industry - but then again, they're probably all a bunch of jerks anyway just like me, right?
*Sonny, You've said before that your county issues the most construction permits of any county in the country. Not all of us are in your situation.I agree that we should make as much as we can in our respective businesses. I'll try to do that.But if there's a guy that just wants to take on simple jobs, make a good wage, and never grow, never take on more responsibility, never market, never buy a new truck, never set up a sales system, and just work hard for his money, I'll let him do it and be happy that he can be happy doing it.you go on and run your business the way that makes you the most happy. If you want to label whether it's a business, or a tradesman, or a practice, or a firm, or whatever lables make you happy, go ahead.
*OK guys, I didn't mean to get your hair up on the back of your necks. I thank you for your replys. Sonny, you said (any business is supposed to produce a net profit, over and above it's owners fair salary and operating expenses). THAT IS MY QUESTION. What is a fair salary/hourly wage for the small remodeler? Maybe the question is to personal to answer. On another note, I do think I am a legitimate business owner. If you work for yourself it is easy to take less salary and call the rest net profit or take half of that for net profit and use the rest as you said for retirement, medical, bad debts,training, books and so on. But isn't that just playing with the numbers after all it is still the owners pay. Putting it in 4 or 5 different bank accounts ear marked for these different ligitimate business expenses doesn't make you a dime richer. Are you saying the present hourly wage is in line with the trade were in and I should charge more to cover all these other things? I was open to everyone with my bottom line. I also stated after deductions which is medical, books, depreciation, tools etc. One thing you said is right on, I do not work 52 weeks a year for all the reasons you said. When I first started and I wrestled with the question on how much to charge I was told to charge what you think your worth or what you will be happy with. Well that's all fine and dandy but what your worth is what the market is willing to pay. And what they are willing to pay is what most people charge. And what I will be happy with is the most I can make with out screwing my customers or myself. Which brings us back to were we started, what is the fair price for the trade we all are in?
*Ryan, I agree with you. But what I'm saying is that regardless of the reasons, many of us (me too) are or were really just self employed tradesmen - by the national perception, of business people, of what a business is - business defined - and again, not defined by me. I have however, hit a raw spot because while when I was nothing more than a self employed tradesman, I realized it and didn't feel bad about it, but to tell another he doesn't own a business is like pointing a gun. It didn't diminish what I felt about myself, but I'm a jerk. Mace, whether you call it net profit or just extra monies or whatever, if it is to be realized as "net profit", regardless of the IRS implications, it should still be addressed as to the main purposes of net profit as being separate of a salary. Some of the questons you ask will get a reply from me that will just start up another arguement, so I'll keep my trap shut. Egos are fragile and who am I to tamper with them?
*Sonny,I don't think you'll find too many like minded thinkers on this subject in this forum. Most of us are small businessmen. It doesn't really matter how you cut the pie up, it's still the same pie. Eat it all today, or save some for tomorrow, it's your pie.I know you're a great believer in written business theory and such. If you want to play by those standards of what a business is, that's your choice. But it doesn't make it the only choice.Mace IS in business just as James and I and the rest of us are. How he runs his business and splits his pie is his business. $1500.00 a week is great money. If he put some back for expenses or spends it all every week is his business.Maybe it's been a while since you wore a nail bag, but I don't know of any businessman in our line of work who can pay an employee that kind of money per week and stay in business. Mace is making a fair wage PLUS profit. As the business owner, he has the opportunity to use the whole thing as his wages or not. I am the president of our corporation. I don't pay myself $1500.00 a week. I'm just another employee of the corporation. I pay myself a wage, but I don't have to. I could spend every dime the corporation makes as fast as it makes it. That's my choice because I own my business, just as Mace does.Ed. Williams
*Ed, still put the nail bag on 2-3 days a week. I take a salary of $800 per week before taxes. The rest is taken quarterly as part of the profits. Notice I said "part" of the profits. The rest of the profits goes for other things I've mentioned, and more. Probably the same as you do. I don't need to work, but I enjoy it. Just because I don't need to work doesn't mean I shouldn't get what I deserve - read "earned" - for my expertise when I do work. I routinely tell customers who ask about my prices that they are not hiring my time - they are hiring what I know. I then say "However, if you're main goal is to hire "time" at the least dollar amount per hour, then you should call Manpower, currently at $12 per hour here. Can't get time any cheaper other than putting an and in the paper for a laborer." I go on to say that I'm a businessman, no different than the man who owns A&P or local gas station. I then suggest that if they only want to hire a carpenter, drywaller, painter, electrician and plumber, they can just look thru the yellow pages and get them all. Then they can draw up their own contracts, coordinate schedules, arrange for trash removal and material deliveries, buy liability and workers comp, etc.BTW, I'm a sole proprietor.
*I am the Seattle version of mace. I charge about the same do similar work, the big diferanc is in time doing this only about a year, alltho I started working with wood for a living 23years ago. I have to agree with Sonny on most of what I have read. I try to think my bisnes as something bigger than me,I wont to make a good living provide for my family, satisfy my customers with quality work. but for me their needs to more an alteristic side giving more than just a pay check or a tax dollar to the comunity.Looking at my bisnes as separate from me helps Chris
*Mace, I think that you need to charge as much as the market will bear. When you are backlogged, raise your price incrementally and see what happens. If business slows down, drop back. In your locale, do you think that a divorce attorney feels guilty when he charges 200.00+ per hour? Why should you even at 65.00/hr. or more? Most people just want a job done right, and will pay for that security. But that is the key in the construction business; where does one fit in on the quality chain in ones area? I have found that it is of little value to share income information because there is such a diverse range of incomes either by the hour or by the piece across the country. I work mostly in the beach cities of So. California (Newport, Laguna, San Clemente) as a wood floor contractor. I charge 3.25/ft plus extras to install a 3/4 plank floor. The same figure to sand and apply two coats of polyurethane plus extras. If I were in upstate New York, 1.50/ft to install and 1.50/ft to finish is not uncommon. Talking to people in MA and RI is your best resource to get a fix on pricing. You might want to get out of the habit of charging by the hour, at least in your bid to the customer. You probably have a good idea of how much time is involved in a project. Give a flat price mat and labor, and leave it at that. Most consumers just want to know the total anyway. Don't give breakdowns. They don't need to know how much you make. Giving out an hourly rate just gets one in trouble. GW
*Sonny,I really didn't mean to be "cocky". I was asking you a legitimate question based on the information you posted. I never called you a jerk, suggested you were a jerk, or even insinuated that you were a jerk. That all came from you.I do, however, have a small problem with your textbook answers every time you post an answer to someone's question. I don't live or work in a textbook environment, and I am sure that most others here don't either. What people here are looking for is answers and opinions based on real world scenarios and real world situations. It seems like each time you give an answer to a business related question, it is with a textbook answer. I have been reading your posts both here and at the old Remodelers site for over three years. I have a lot of respect for the knowledge that you have, and share. I do not have any animosity towards you whatsoever. Please don't think I do. We have been through situations like this before, and I'll say the same thing I do each and every time. We come here to share information, help each other out, and learn. Don't lose sight of this.I do not own and operate a business in the top 1% like you do. You keep saying that you are far from it, but all the business data I have studied for the past 15 years for our related fields says that a small company, with the number of employess that you have, generating the income and profits that you do, (I base this on the numbers that you have given for the past three years) puts you in the top 1% nationwide. I am not knocking this at all, and am very happy that you made it to the top. That leaves the rest of us in the 99% group. As much as we strive to be on top, make lots of money, be successful, and grow - reality sets in far too often. Markets, geography, economics, and lots of other real world problems face us each and every day to form barriers to this goal. Truth be known, not all of us WANT to be on top. I know that is extremely hard for you to understand. Why would I want to stay small, generate less income and profit, and keep my jobs small? My situation is because I value my time far more than I value money. It is a long story, but the fact is that I want to enjoy life more than I want to be rich. Been there, done that, was miserable. Point of all this is the fact that we are all different, have different views, and have different strategies and outlooks. It bothers me for someone to keep telling me I am lousy at business because I am not generating all the money I can. I just don't see that viewpoint at all. Just a thought...James DuHamel
*According to the Harvard Study of the Remodeling Industry there are approximately 800,000 businesses in construction. Of that about 572,000 are self-employed individuals grossing between $100,000 to $250,000. You are not alone.The failure rate of construction companies is widely believed to hover between 70-80%, amazingly close to the percentage of self-employed individuals. Does anyone else find it curious that these two percentages are so close? Everyday I am continuely surprised at the amount of work I do as a business owner and what that compensation should be. We all know the many hats we wear: carpenter, electrician, plumber, engineer, architect, laborer, bookkeeper, accountant, consultant, appraiser, estimator, salesman, .... you get the idea. We all do varying amounts of these but I'm sure you realize that we must have a knowledge and ability in these many fields just to get by. Undoubtedly the businesses that fail have not realized that fact. Everyone on these boards is to be congratulated because they have beat the odds.The cost of that success can come at a high price however. I think it was Rick Ritovoy that told me once that; "I was buying my work by discounting my price". Now believe me this wasn't a conscious act. But I love my trade and what I do. It's easy to overlook all the other "stuff" I did so I could continue doing what I enjoyed. As I realize all the things I do to support my trade I inch my prices higher. Doing what you love and being compensated for it are not opposites. They go hand in hand or you don't continue as a business. Don't buy your jobs just to support your habit. You have to know your numbers and many of those keep themselves well concealed.
*Mace,I don't think anyone can answer your questions. Not when you have million independants competing with one another for a given amount of work. What constitutes a vaible business and what doesn't matters not. This year you can charge a dime and next year you might work for a penny. The stage is liquid and the variables change with the drop or rise in interest rates. It's like the wild West, footloose and fancy free. That's the very reason most of us are doing the one-man thing, freedom...of course we could always form a union..Naaaaahhh. I like it this way.
*James, let me comment about the "textbook" comments I make.Like most of us, I learned how to run my "business" by hit and miss - the business end that is. I did that just long enough to finally go under back in 1981. Remember, I'd been in business since 1971, so I made it thru the first dangeous 5 years and even to the first 10 years, when my ignorance of business expertise finally did me in - regardless of my salesmanship, by ability to coordinate subs and my own staff, and everyting else that went along with running business as Peter described above. Doing 5 of 6 good just wasn't good enough!That was when learned that having the expertise in 5 out of 6 "departments" inherent in running a business didn't cut it. Either one had good expertise in all 6 or hired those who knew those I didn't. It's a fine line we all walk to just feed the family much less prosper. I fed the family but didn't prosper until "after" I went under. That was when I hit the books. Not having time to actually take a business class or two in college at night, and not having the benefit of these forums, I bought books and subscribed to not only trade magazines but business mags also, like Inc., Forbes, Business Week, etc.As I read and learned, the "Duhs" emminated from my mouth as I realized more and more what I had been doing wrong and what a business really was all about. See, most of us base our business decisions on ignorance of business, as I did for years, so we continually operate in a lose/lose situation. Textbook learning gives us the basis or foundation of which to make good decisions, the same as knowing how to properly operate a circular saw and chisel affords us the opportunity to then use them in carpentry. How to lay out a stairway is a completely separate "skill" from learning how to properly use a circ. or chisel. The proof is in the pudding. With all of the business books about our business such as the one I mentioned above, most of the "newbies" in our industry still don't feel the need to read them - learn form "textbooks" as a preparation "prior" to going out on their own. Hence, our high rte of failure. Sure, a guy can feed the family by ofsetting his ignorance of good business practices by just working more hours. But what does that get him - 60-70 hours to obtain a check each week equivalent to a 40 hour job - and without the perks.A lot of post here ask about "going rates". I dont' care about "going rates" because of two reasone:1. There is an attempt to establish them by the public, who doesn't know the first thing about our industry.2. They are to a large degree determined by other contractors who themselves short change themselves becasue they, like I did, don't know the 1st thing about the financials of running a business. So in effect financially incompetent people are setting the "rate" for the rest of those in there own area. These are the guys who start out working out of a truck and taking home $800 per week and thing they fell into heaven - until the monthly bills start rolling in and there's no money to pay them. So, they work more hours.Few and in between do those exist who initially have a grasp of business expertise as you do. I certainly wasn't one of them and come from a family who had three businesses. I'm not one of those 1% you mentioned. They never went under. It took me 7 years of working on jobs 60 hours per week to pay off those bills - hardly one of those in the successful 1% bracket.So, I'm like the nagging parent who is constantly telling his kids: "Don't run out into the street. A car will hit you." Do they listen? Fighting egos is a bitch. Each man feel that it is an affrontary to his manhood to be told he's doing something wrong. Too bad. Then don't post on a forum asking for answers to questions or advice. The advice is sometimes burning. That's why many years ago I thru out my ego and decided I'd learn from every possible source, regardless of how I came to me.Each one of use runs a different type of business, in different locales, and with different priorities and goals. But regardless, whether learning about a laundrymat, restaurant, construction, publishing, house cleaning or whatever, they are businesses and as businesses all operate on the same basis or foundation called good business practices. The sooner each of us learn what they are, the soooner we start making money and reducing the aggravation. So years ago, I learned not to sell myself at "the going rate". I sold myself at the rates I "learned" I needed to obtain the monies I needed to properly run a business. Any one can work for "the going rate". Big deal. Usually, the going rate, for the reasons I've stated above, is chump change. It takes salesmanship however, to get one's price. And that is why Cadillacs don't "sell" for the same price as a Buick, and clear pine casing doesn't "sell" for the same price as finger jointed casing.As we all know the "bar" to enter self employment in our industry is very low. Anyone who has good trade skills thinks he can run a business that uses those skills. Wrong, and our failure "stats" proves it. Having a particular skill and running a business is about as different as pie and coffee. They're two completely set of "skills" and careers.Finally, I have competitors here who service condo associations at a charged rate of as little as $30 per hour and up to $50 per hour. I don't consider myself a great carpenter, a great painter, nor a terrific stucco man. That difference of $15 to $35 per hour represents an average of about 37% more than my competitors - "the going rate." And many of them are much more proficient an their particular skills then I. So why am I able to get over $65 per hour from the associations I serve? I say take "going rates" stick it, and "sell" your own rate instead. Again, it's everyone's own business so they can operate it any way they please. My view just happen to be contrary to that 80 plus percent that don't agree.
*Sonny,When I grow up I'll take your advice. I think you know what your talking about, but in my experience I'm also an old dog well set in his ways. I don't think it's an ego problem (could be) as much as a (I really enjoy doing my own thing and as long as I have a roof over my head and something to eat, rice and beans are just fine) I'm happy.I think if a guy really wants to succeed in this environment and carry around a portfolio, he should take your advice. I have a close friend who worked very hard as a dentist and used his money wisely until today he owns businesses here and in Europe. He loves what he does, but seldom has time to relax and enjoy the day (my motto) Everything has a trade-off. I have the time to go, but can't afford it (there's always the travel channel) I've created my experience and he's created his. There's no right or wrong in this or one guys smarter than the other. It boils down to choices. I consider myself a success because I've achieved my goals (which I've already stated)
*Amen Sonny!You did exactly what I was hoping you would do, and what many here were hoping you would do. You answered my post with real world experience instead of textbook advice. I have dozens of business books that I could look stuff up in, but I much prefer to hear answers from people who have experienced first hand the things we discuss. I want to hear how THEY dealt with it, thought about it, or ignored. You have a tremendous amount of business knowledge to share. I really like it when you relate and share your actual daily experiences rather than a textbook quote. It gives the discussion quite a bit more personality, and reality. When I mention the top 1%, I am not refering to anything in your past. I am refering to your here and now operation. You take a full time, one man crew, and yourself as part time (on labor - I know you work full time on the business end of it all), and you generate a large amount of income. Most remodeling/repair businesses generate a much lower amount of income, with a lot more people. Your area of the country allows for you to make more money than other areas. That is wonderful, and I applaud you. If your operation, as it is now, were here in my region, you would not make that kind of money. Socioeconomic conditions here would prevent you from running your business the way you run it where you are. People here just don't have that kind of money, nor would they spend it on their homes if they did. Priorities seem to differ here, I guess.In my area, the number of remodelers/home repair and improvement companies is very high. Every time a major employer here (like the major refineries) has a layoff spree, hundreds more join our ranks. I learned a long time ago not to sell jobs to my clients. I sell my company instead. This has worked very well for me. I know what my overhead is, and what prices I must get in order to pay my bills and make a decent living. Competition or not, I still must charge this minimum in order to survive. With so many start up construction and remodeling companies going into business here, I still must keep a grasp on reality as far as how high I can take my pricing. By selling my company rather than job, I have a lot more to offer the client than my competitors. This has allowed me to charge a bit more than most contractors in my shoes. Works for me, anyway.Don't take anything I say personal. I do not mean to rake you over the coals, or be mean spirited. I pry, ask tough questions, make tough comments, and read replies. By doing this, I learn about a lot of little things that most people wouldn't even think of. If I offend anyone, I am truly sorry. James DuHamel
*Well James, I have to give you credit. Asking "hard" questions and pulling true life experiences or deep seated thoughts out of people is a talent. It turns a discussion from the run of the mill, what I call "crap talk" into a real discourse. And no hard feelings on my part.I'll try to be brief in this next thought about your comments regarding my present location.Getting a lot more money, not just a little more, than your competitors.There are two basic ways to sell that I know of: (1) Don't sell at all but just contract for whatever one thinks is that going rate and what the client expects to pay. (2) To sell the price you want based on the charged labor rate "you" want. We all know that most tradesmen hate selling but love doing their trade(s), so they compromise and "take what's available" instead of learning how to sell to get what they deserve, and need to make thier business flourish financially.I wanted more than what was "available." In Michigan I lived in a rural area 7 miles from a two small towns with a populaton of around 6000. The residents were farmers and factory workers with a few white collar workers thrown in. We also had people from Chicago who owned houses and cottages on the 36 lakes within 7 miles of where I lived. We ended up with a separate roofing division. I did all of the selling for all projects. I developed a way to sell roofing that allowed me to get 25% or more than my competitors were charging. It's not important here as to what I did. Suffice it to say that I live in what could be called a very middle class area and with more than our share of welfare recipients. That 25% plus is a helluva lot of money. Back in the 80s, why should a client pay me $2800 instead of $2000 for a tearoff and roofing job? The answer was, and still is, salesmanship. Remember what I posted earlier about my prices vs. my competitors here servicing condo associations. So even here I'm still substantiallly above my competitors.So i still contend that we can "buy" a clients price, or "sell" our price. One is a piece of cake while the other is often a bitch, if one does not know how or does not develop a sales system to do just that.Whether one owns a 1 man company or a 20 man company, he can either just make a "job" for himself as I did for several years, or he can make a business and still own a 1 man "business" Doing the technical work is easy compared to doing the financial and selling work, but the money is not in the technical work. It's in the financial and selling "work" - and as you know, it is work. I can lower my prices and put on another 2-3 guys but for what - the same money?Anyway, everything will change come March 1st. I've decided to accept an offer from my sons and have The Lykos Group, Inc. assimilate my business. We will change my current business to a division of TLGI and we will only do service work at $75 per hour plus a $40 trip charge. I will also be responsibile for developing TLGI into a "no punch list contractor" system (via CSCS among other things) - a new concept in our area, plus be responsible for marketing and PR for their company - all the things I love to do most.But no more working on jobs. I'll miss that, trading in my apron for a sport coat and tie.
*I like the "real meat" discussions best myslef. Makes life a bit more interesting.Good luck on your new venture. I know you will do well, and have fun doing it at the same time.James
*mace... peter bush mentioned a quote from ric ritavoy.. about ""buying a job""that's an important concept....most of us use the concept of ""buying a job"""instead of ""selling a job""when you finish a job..... cost it out..did you make what you intended ?if you didn't .. you should have raised your price....if you had raised your price, would you have sold the job ?if the answer is no... then you are not ""selling your jobs"" you are buying them.. no matter what rate or what price.. if it is not the price or rate you want or need, then you are not selling , you are buying...until you can get over the hump of forcing yourself to get your price, you will never make what you want or need.....so , forget about what joe blow gets for his job... it's what YOU have to get for your job.. and that involves sellingif you are trying to meet or come under joe blow.. then YOU are buying... not your customer.....he's ( the customer )SELLING his job to you at something other than YOUR price... and you're buying
*It seems to me that most of the posts are dancing around Mace's question. James D. talks about posts that give "real" world answers to the burning questions. I don't think we as contractors operate any differently than Exxon or Mobil, or Ford and GM. Most of us tend to collude on some level or another. That is how we find our base upon which we begin to determine our own price. After a base price is set, other elements are compared to adjust that price. Things like overhead, quality levels. Mace just wants to find that base so he can begin to modify his prices. But that can only be done within his own jurisdiction, or by posts relative to his own locale.GW
*mace, I lived in northern NJ until recently. I now live in northern Vt. My estimate for an hourly wage rate,"guesstimate", for the RI/Mass. area would be twice that which you've posted. You have the experience and the tools. Tools wear out and break. Experience and good will are intangible but valuable. Life is short,enjoy your work, get your price. Regards, Dan-O
*Mike hit it right on the head. Every sentence!But you have to 1st determine the "realities' of just what "your" price is supposed to include. That perhaps a is separate discussion. Briefly, if you really insist that you own a "business", then make sure your "business" overhead or expenses include "standard" overhead expense items, like medical premiums, a retirement plan, reserves for future capital expenses, reserves for bad debt, a sufficient amount for seminars, mostly available at trade shows, economic downturns so you can survive by still taking a weekly check for a while, and a few others. Or are you a 2nd rate business owner? Sacrificing the life, future and financial stability of your wife, your kids and yourself, to save a customer 10%. I pay about $390 per month for medical premiums. As a sole prop., I can't take that $4700 per year as a deduction, so it (1) must come out of profits, and (2) puts me into a higher tax bracket. One of the advantages of being a corporation - med. premiums are fully deductable. So currently, not only am I paying tax on that $4700, but it's also pushed me into a higher bracket so my total tax percentage increases on "every" dime I've made.So, just what do profits - the monies in excess of what you need to reasonably live by? Those profits go into retirement, future capital expenditures (maybe a down payment on a commercial bldg.), income for slow times, and various other purposes. Above I mentioned reserves. Those are also profits, in excess of your reasonable salary. Budget for a new truck every 2-3 years, or drive a beater to again, save money for your customers. Sure they are taxed monies, but I'd gladly spend the tax 15-20% taxes cause I get to keep the other 80-85%. Plus that other 80-85% is not only available, but working for me maybe in a mutual fund, making even more money for me.Mace, read Rich Man, Poor Man. Learn how middle class people work for money, while rich people make thier money work for them. And many of those rich today, started our like you and me, but made their money work for them.So, do as Mike said, but you'd better be sure that the amount you charge, or specifically, the net profit included in the amount you charge, and the overhead you charge - is realistic.Then you sell/market the hell out of your self and your company to get your price, instead of "buying" "their" price. And the key is what Mike said - cost out each job, otherwise you have no basis for knowing if you made a goal or not. Can any of you imagine playing a football game without keeping score, or playing a basketball game without a hoop. Business, like a sports game, needs "goals" to shoot for. Otherwise, as Michael gerber says, every day and the next day, and the next day, you "just keep doing it and doing it and doing it - what? everything, over and over and over again." And getting nowhere.Great for a hobby. Great for punching out parts each day in some factory. Lousy for a business.
*James D,"I want to enjoy life more than I want to be rich."Amen, you got right, Amen.You are rich.Ed.
*Hey Mace, How's this for an answer:Make a list of all the expenses that you have for your business eg. Labour, Workmans comp, health insurance, income tax, tool maintenance, vacation, pension, profit, new tools, mistakes etc.Figure out what each one costs you a yearor for labour enter you desired salary (say 52000/year) add it all up and then divide by 2100 hours. This will give you an hourly rate that you should apply to all your bids where your expertise will be used. In my little shop's case this added up to $41.54/hour so I round that up to $45.00. If your too busy, you are too cheap, if life is comfortable then your rates are as well. Stick to your guns if someone askes for an hourly rate (I've lost some jobs because I was too cheap. People do not know all the costs that you need to pay when your on your own, ask a plumber into your place who is employed by someone else and the rate is 65 plus an hour due to the fact that his hour must be used to pay the operation cost of the business.Good luck
*Mace, I only sell my services to builders. I used to bill hourly for 37.50. It just sounded like a nice number. I then realized that I was losing money, because I was earning over 50.00 per manhour on my contracts. I read where Sonny was billing for $95 per hour for high end remodeling and I got jealous. I decided to raise my rates. I now bill change orders hourly at 58.50. But, I don't work by the hour, I still sell by the job. And I try to stay at the top end of the scale. If a builder only wants to pay 5.00 per foot, and the market is paying 7.00, why shoud I work for that builder? Let someone else do his work.Mace, you need to decide whether you are "retail" or "wholesale". If you are strictly wholesale, and a builder is marking up your services, then your hourly rate might be fine. If you are "selling" to the public, you are very low. If you are closing 100% of your sales calls, you aren't selling, you are giving. Anyone can give.Someone mentioned dividing by 2100 hours. Don't do it! That's unrealistic. Figure your "billable" hours at 1200 to 1500.blue
*
I've been in business for 12 years. I don't need to advertise, all my work is from word of mouth. I work alone, have a small shop in my basement and build custom projects 25% of the time. The other 75% of the time is remodeling bathrooms, kitchens, decks, replacing windows, doors etc. I looked at a lot of estimating books and find them all to be out of wack. For example to replace a steel front door and frame 2 hours. You got to be kidding me. It will take that long to pick up the new one and take the old one to the land fill. I try to figure out how many hours a job will take and X by $25.00. Done this for 11 years and recently gave myself a raise to $37.50. I still will get my share of dirty looks when I bid on a job and tell them the price. I don't have any one to bounce prices off of and really don't have a clue to what the going rate is for these jobs. I think I'm at the low end of the scale. My bottom line after all deductions is 35 to 40 grand. Am I at the right range for a professional craftsman? I do very good work and almost never have to go back to fix something. I work in the Massachusetts, Rhode Island area. OK 3questions. (1) What should be the average yearly income for a one man show in this trade? (2) Does anybody have an estimating program for the little guy that's accurate? (3)What would you charge as the owner of the business for carpentry work by the hour?