Am I Calculating This Correctly?

 
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Old 10-28-2017, 05:49 PM   #41
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Re: Am I Calculating This Correctly?


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Originally Posted by Zkmconstruction View Post
Just wondering, what area are you guys in? Maybe that's the difference in prices... I have done alot of research on big store chains, and small/medium companies, and we wanted to be somewhat cheaper than our competition. I had a friend a few years ago get a waterheater changed out for $325. I didn't think $275 was bad... ??
The $64,000 question is...... can you afford to be cheaper than the competition? This is why most start-ups fail: They have no idea what their TRUE operating costs are. They merely base their price off what the competition charges. They just want to be The Cheapest In Town.
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Old 10-28-2017, 05:57 PM   #42
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Re: Am I Calculating This Correctly?


Well, my location is in my info, why isn't yours?
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Old 10-28-2017, 06:31 PM   #43
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Re: Am I Calculating This Correctly?


I can't believe she"s back. I figured some where around KAP's second post and fourthgeneration's first she bought a couple of bottles of Jack.

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Old 10-28-2017, 06:58 PM   #44
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Re: Am I Calculating This Correctly?


My advice would be to set up the spreadsheet so the info for tax forms is correctly generated.
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Old 10-28-2017, 07:15 PM   #45
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Re: Am I Calculating This Correctly?


I am concerned that you are trying to run your business on what should be profit. Seems like you are working with some impossibly small numbers.
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Old 10-28-2017, 08:15 PM   #46
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Re: Am I Calculating This Correctly?


Once you stop trying to be the cheapest you will notice your business will take off

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Old 10-28-2017, 11:25 PM   #47
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Re: Am I Calculating This Correctly?


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Originally Posted by Zkmconstruction View Post
Just wondering, what area are you guys in? Maybe that's the difference in prices... I have done alot of research on big store chains, and small/medium companies, and we wanted to be somewhat cheaper than our competition. I had a friend a few years ago get a waterheater changed out for $325. I didn't think $275 was bad... ??
Therein lies part of your problem... it's irrelevant what the competition charges... there will ALWAYS be someone cheaper and more expensive than you in your market, no matter where it is...

You prices should reflect what YOU need to charge to be in business, not what another company charges... especially considering your "competition" may be a one-man show, and you have partners and yourself (who should be) to be paid...

Once you get past the retail mindset (i.e. -we want to be the cheaper than the competition) you'll come to the realization that not everyone is your customer and that you need to focus on customers that can support what your business needs to charge...
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Old 10-28-2017, 11:33 PM   #48
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Re: Am I Calculating This Correctly?


Years ago, Joe Sixpack got a job as a helper for Fly-By-Night Electric. He started out working with a journeyman wiring houses for Cut Corners Construction. Joe turned out to be a pretty good electrician, learning fast and working hard. As the years went by, Joe got pretty good at wiring houses. Soon, he was running the jobs himself, and had his own helper.

Then recently, Joe got to thinking. "Fly-By-Night charges Cut Corners ten grand to wire a house. I know I get paid about $1500, and my helper gets $1000. I know the material costs around $2500.......... so that means the boss is making five thousand just sitting at the office endorsing checks!"

So Joe decides to strike out on his own. "Man, this'll be great! I'll charge just $7000 to wire the houses, and with only $2500 in material, I'll pocket $4500 for each house I do....... Jeez, that's more than three times what I was making when I was working for 'the man'!"

So Joe hangs out his shingle. He doesn't have any health insurance, thinking he'll get that later when things really get started. Suddenly, he realizes he needs to be licensed. So he takes the test, and spends more money for the test and license. He also doesn't understand that driving his own truck costs money, both in gas, repairs, insurance, etc.

All fired up, he gets his first job for Cut Corners. Right from the start, Cut Corners wants a current liability insurance certificate. So Joe forks out $3000 for insurance. A few weeks later, he gets a letter from the state saying he's not a registered contractor. So another $600 is spent. Oh, yea, the city says they need $1250 for a permit.

A few days into the first job, Cut Corners says they need temporary power. Joe didn't figure the cost of a temp pole into the job, but he builds one and gets it hooked up. Joe finds out he needs more than a 3/8" drill and 4-foot stepladder. So he goes out and buys more cords and a couple ladders. Every time Joe needs material or another tool, he'd drive down to Home Depot and whip out the plastic. Pretty soon, he realizes he's a couple days behind schedule. Why? He's working alone and doesn't have his old helper with him.

So Joe starts working 12-hours days, and a couple Saturdays as well. He skips his daughter's dance recital, and misses his son's Little League game. He comes home dirty, tired and grouchy, which cause his family to stay away from him.

By the time the house is roughed in, his credit card is maxed out and Joe needs to borrow money from his parents. "Just until I get this job done, then I'll be rolling in dough" he tells them. He borrows even more money just to buy the material he needs to trim the house. By this time, he has alienated his family and taken his credit rating down below 400.

And the sad truth is, by the time job is done, he's been paid only $7000 and has spent $14000 just to 'be in business'. So he tells Cut Corners the next job will be $8500, thinking he can 'make it up' on the future work. But even that 'extra' $1500 'from the next job' won't cover his $7000 shortfall. Besides, Cut Corners won't hire him again because Joe caused them to get behind on their schedule. And to add insult to injury, they found someone else to do the job for less.

Dejected, Joe goes home, only to find a letter from the IRS saying they want $3250 for the income tax Joe owes from that job. The state also wants $675 for sales tax. All the 'profit' Joe thought he was going to make went to pay his bills, leaving nothing to pay his parents back with.



And who did Cut Corners hire to wire their next house? Joe's old helper from Fly-By-Night!
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Old 10-28-2017, 11:39 PM   #49
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Re: Am I Calculating This Correctly?


That should be a sticky here somewhere, Sparky. Lot of folks need to read that.



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Old 10-29-2017, 07:09 AM   #50
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Re: Am I Calculating This Correctly?


Never try to be cheaper than the next guy, especially if they are working as a contractor for a big box store. The best way to make a living is to be BETTER than the next guy. Show up on time, do a good job, clean up after yourself. Then you can charge a little more than the next guy.
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Old 10-29-2017, 09:56 AM   #51
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Re: Am I Calculating This Correctly?


I think 480 had it right with his story. And this story has been played out many times in my 45+ years of being in business.

Basically, a lot of people that switch from being just a one man operation making a little more than wages, or, from being an employee to actually starting a legitimate business..........don't know the entire costs of being a business..........at least one that is sustainable.

The Op's original post was how to come up with a profit loss statement based on the 60/40 split on jobs. If I didn't know how to do this, I would get on the web and start looking at examples of profit loss statements for small business. If I saw what it was supposed to look like, I could figure out how to get to that point.

However if I had little or no knowledge of basic business operations, math, computer skills, management, basic accounting and so forth, it would be pretty hard to this. Or, I would have to hire someone to do it that did have those skills.

The problem is, if you are so small, that you are just making wages, and, a partnership at that, chances are you will not now, nor ever have enough income to hire a professional (or close to it).

Based on the thread so far from the OP and others, this business model is not sustainable. It doesn't appear to have sufficient investment monies to get it above the "bottom feeder" level of the competition. Investment monies are: licensing, insurance, taxes, permits, marketing materials, advertising........plus most of the stuff off 480's list.

I think the days starting a small business in an untapped and growing market are long gone.
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Old 10-29-2017, 09:58 AM   #52
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Re: Am I Calculating This Correctly?


Quote:
Originally Posted by B.Johnson View Post
Never try to be cheaper than the next guy, especially if they are working as a contractor for a big box store. The best way to make a living is to be BETTER than the next guy. Show up on time, do a good job, clean up after yourself. Then you can charge a little more than the next guy.
Agreed.

Being the cheapest the THE most common business model, and exhibits more the attitude of an employee than a business owner. You're adopting the model that every Tom, Dick and Harry (and Joe!) are using. And Tom, Dick, Harry and Joe are usually flat broke withing a year or two because, while they may be fantastic craftsmen, they're lousy business managers.

Just because you're working DOES NOT mean you're making money. I can't count the number of new start-up electrical outfits in my area I've seen...... once. I see their fancy new van all purdy with a vinyl wrap going down the street and I never hear anything about them ever again. Every time I see one, I think to myself, "There goes Wal-Mart Electric, the Low Price King."

Every

Single

One




of them starts out with two mantras: Low Price, and 24-hour service. Proudly emblazoned on the side of their spiffy new $65,000 van.


And when the market is over-saturated with 24-hour Low Price contractors, they all look the same to the market. When the market has 20 to choose from, 19 of them will be gone soon. The 20th one might linger another year or two before it finally hemorrhages it's last dollar of capital.

If you are out to be 'cheaper than the other guy', there is NOTHING to distinguish you from all the OTHER 'cheaper guys'. This is why we call it The Race To The Bottom. First one to file bankruptcy wins!

And 'cheaper' contractors are just like the corner drug dealers. Take a drug dealer off the street, and there's a dozen others willing to take their place. A 'cheaper' contractor folds up shop, and there's a dozen more hanging out their shingles.

Yes, there is a market for the über-cheap contractor. But that market doesn't give a chit about whether you're still around next month. They got their water heater changed. Next month, when the roof starts leaking, they'll get on Craigslist and find yet another 'cheaper' contractor to fix it.

And when you're standing in line next to that other 'cheaper' contractor in a soup line, the homeowner will merrily be hiring a third 'cheaper' contractor to install his irrigation system.
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Old 10-29-2017, 10:37 AM   #53
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Re: Am I Calculating This Correctly?


You forgetting to add your profit margin cost into every job, by not adding that you losing money on every job and your profit is going out the window.

So lets say the small job you did per your sample:

$275- total job cost
$93.19- material
$18.19- 10%
$9.09- 5%
$93.97- husband (60%)
$62.64- friend (40%)

What does your profit margin .38 .48 or .65 of the total job cost?

So lets say your profit margin amount is .38 ... and you take $275 (TJC) x .38 (MC) =$105.5 (your profit margin) + $275 = $379.50 Total job cost... now deduct all your material and overhead you left with a profit of $259.03 now your husband's profit will be $155.42 and friend will make $103.61...I'm sure the little extra money they make from each job will not hurt anyone

Of course, the profit margin amount fluctuates as you go, the smaller the job the bigger profit margin is, but that is up to you to figure what is the profit margin for each job is. If you doing piece work and your work is the same thing over and over you can set a yearly profit margin for each job and raise that margin annually... If you doing different work all the time, you adjust profit margin per job.

Add the profit margin to your estimate sheet in Excell and you set.

Good luck
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Old 10-29-2017, 01:52 PM   #54
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Re: Am I Calculating This Correctly?


Quote:
Originally Posted by greg24k View Post
You forgetting to add your profit margin cost into every job, by not adding that you losing money on every job and your profit is going out the window.

So lets say the small job you did per your sample:

$275- total job cost
$93.19- material
$18.19- 10%
$9.09- 5%
$93.97- husband (60%)
$62.64- friend (40%)

What does your profit margin .38 .48 or .65 of the total job cost?

So lets say your profit margin amount is .38 ... and you take $275 (TJC) x .38 (MC) =$105.5 (your profit margin) + $275 = $379.50 Total job cost... now deduct all your material and overhead you left with a profit of $259.03 now your husband's profit will be $155.42 and friend will make $103.61...I'm sure the little extra money they make from each job will not hurt anyone

Of course, the profit margin amount fluctuates as you go, the smaller the job the bigger profit margin is, but that is up to you to figure what is the profit margin for each job is. If you doing piece work and your work is the same thing over and over you can set a yearly profit margin for each job and raise that margin annually... If you doing different work all the time, you adjust profit margin per job.

Add the profit margin to your estimate sheet in Excell and you set.

Good luck
Thank you! I will run this by them. This is what I was looking for. An equation on How to do it.
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Old 10-29-2017, 02:04 PM   #55
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Re: Am I Calculating This Correctly?


Quote:
Originally Posted by KAP View Post
Quote:
Originally Posted by Zkmconstruction View Post
Just wondering, what area are you guys in? Maybe that's the difference in prices... I have done alot of research on big store chains, and small/medium companies, and we wanted to be somewhat cheaper than our competition. I had a friend a few years ago get a waterheater changed out for $325. I didn't think $275 was bad... ??
Therein lies part of your problem... it's irrelevant what the competition charges... there will ALWAYS be someone cheaper and more expensive than you in your market, no matter where it is...

You prices should reflect what YOU need to charge to be in business, not what another company charges... especially considering your "competition" may be a one-man show, and you have partners and yourself (who should be) to be paid...

Once you get past the retail mindset (i.e. -we want to be the cheaper than the competition) you'll come to the realization that not everyone is your customer and that you need to focus on customers that can support what your business needs to charge...
Quote:
Originally Posted by B.Johnson View Post
Never try to be cheaper than the next guy, especially if they are working as a contractor for a big box store. The best way to make a living is to be BETTER than the next guy. Show up on time, do a good job, clean up after yourself. Then you can charge a little more than the next guy.
Quote:
Originally Posted by cwatbay View Post
I think 480 had it right with his story. And this story has been played out many times in my 45+ years of being in business.

Basically, a lot of people that switch from being just a one man operation making a little more than wages, or, from being an employee to actually starting a legitimate business..........don't know the entire costs of being a business..........at least one that is sustainable.

The Op's original post was how to come up with a profit loss statement based on the 60/40 split on jobs. If I didn't know how to do this, I would get on the web and start looking at examples of profit loss statements for small business. If I saw what it was supposed to look like, I could figure out how to get to that point.

However if I had little or no knowledge of basic business operations, math, computer skills, management, basic accounting and so forth, it would be pretty hard to this. Or, I would have to hire someone to do it that did have those skills.

The problem is, if you are so small, that you are just making wages, and, a partnership at that, chances are you will not now, nor ever have enough income to hire a professional (or close to it).

Based on the thread so far from the OP and others, this business model is not sustainable. It doesn't appear to have sufficient investment monies to get it above the "bottom feeder" level of the competition. Investment monies are: licensing, insurance, taxes, permits, marketing materials, advertising........plus most of the stuff off 480's list.

I think the days starting a small business in an untapped and growing market are long gone.
Quote:
Originally Posted by 480sparky View Post
Quote:
Originally Posted by B.Johnson View Post
Never try to be cheaper than the next guy, especially if they are working as a contractor for a big box store. The best way to make a living is to be BETTER than the next guy. Show up on time, do a good job, clean up after yourself. Then you can charge a little more than the next guy.
Agreed.

Being the cheapest the THE most common business model, and exhibits more the attitude of an employee than a business owner. You're adopting the model that every Tom, Dick and Harry (and Joe!) are using. And Tom, Dick, Harry and Joe are usually flat broke withing a year or two because, while they may be fantastic craftsmen, they're lousy business managers.

Just because you're working DOES NOT mean you're making money. I can't count the number of new start-up electrical outfits in my area I've seen...... once. I see their fancy new van all purdy with a vinyl wrap going down the street and I never hear anything about them ever again. Every time I see one, I think to myself, "There goes Wal-Mart Electric, the Low Price King."

Every

Single

One




of them starts out with two mantras: Low Price, and 24-hour service. Proudly emblazoned on the side of their spiffy new $65,000 van.


And when the market is over-saturated with 24-hour Low Price contractors, they all look the same to the market. When the market has 20 to choose from, 19 of them will be gone soon. The 20th one might linger another year or two before it finally hemorrhages it's last dollar of capital.

If you are out to be 'cheaper than the other guy', there is NOTHING to distinguish you from all the OTHER 'cheaper guys'. This is why we call it The Race To The Bottom. First one to file bankruptcy wins!

And 'cheaper' contractors are just like the corner drug dealers. Take a drug dealer off the street, and there's a dozen others willing to take their place. A 'cheaper' contractor folds up shop, and there's a dozen more hanging out their shingles.

Yes, there is a market for the über-cheap contractor. But that market doesn't give a chit about whether you're still around next month. They got their water heater changed. Next month, when the roof starts leaking, they'll get on Craigslist and find yet another 'cheaper' contractor to fix it.

And when you're standing in line next to that other 'cheaper' contractor in a soup line, the homeowner will merrily be hiring a third 'cheaper' contractor to install his irrigation system.
I understand everyone's point. We feel that we do not need to have a million dollar company. We want to have relationships and repeat customers. Which we have established a few. In our area, (Dayton,Ohio) the prices are not that high. We live VERY comfortable on $50k a year. So we can afford to be cheaper. The water heater we installed, ended up with a follow up job of light installs costing $4000. So I think its worth it. We base our prices on how much we think is reasonable. We would never pay $500 or more for a water heater install, so why would we charge that amount?
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Old 10-29-2017, 02:37 PM   #56
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Re: Am I Calculating This Correctly?


Quote:
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...... We base our prices on how much we think is reasonable...........




As opposed to what your actual costs are?
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Old 10-29-2017, 02:56 PM   #57
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Re: Am I Calculating This Correctly?


Quote:
Originally Posted by 480sparky View Post
Quote:
Originally Posted by Zkmconstruction View Post
...... We base our prices on how much we think is reasonable...........




As opposed to what your actual costs are?
I have seen threads on this forum and a few others ranging from $300-$1500.
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Old 10-29-2017, 03:04 PM   #58
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Re: Am I Calculating This Correctly?


There are many million dollar companies that have relationships and repeat customers.

You shouldn't sell yourself short.

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Old 10-29-2017, 03:48 PM   #59
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Re: Am I Calculating This Correctly?


Quote:
Originally Posted by Zkmconstruction View Post
I have seen threads on this forum and a few others ranging from $300-$1500.
Apparently it's not getting through to you.

You base your price on YOUR COSTS.
NOT what the others charge.
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Old 10-29-2017, 09:41 PM   #60
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Re: Am I Calculating This Correctly?


Quote:
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We live VERY comfortable on $50k a year. So we can afford to be cheaper. The water heater we installed, ended up with a follow up job of light installs costing $4000. So I think its worth it. We base our prices on how much we think is reasonable.
Then if that's the case, why did you start a thread asking if you calculated it correctly...


Quote:
Originally Posted by Zkmconstruction View Post
We would never pay $500 or more for a water heater install, so why would we charge that amount?
Because as it stands now, YOU are getting paid nothing for the work you do, and you're on here asking if you're doing it correctly...

Not understanding pricing doesn't mean you SHOULDN'T charge $500 if that's what is needed to be charged to support your business, and targeting the customers needed to accomplish that goal...

No need to be defensive, we're trying to illustrate for you a common problem... if you didn't have an issue, you wouldn't be posting asking...

But to provide you a little outside perspective, which is what you're looking for in posting... You're looking at the $500 as just a number with no meaning and not giving it the context of long-term and depth as part of operating a business... Consider... You have a partnership... You are self-employed.. You're not being paid... you have fixed and variable costs, down-time, potential losses to absorb, etc...

So as a self-employed partnership, who's happy making $50K gross/year, do you have health insurance? Do you have savings? Do you have plans for you to be compensated for the work you do or are you going to be satisfied working for free forever? Do you have a retirement fund? Do you have 3-6 months of Capital Reserves / Emergency Fund? The list goes on... This is for a minimum of TWO partners BTW...

If you can say you have all that in place, then there you go, congrats...

But if not, that $500 takes on a whole new context doesn't it?... encompassing all the costs of doing business, as well as you being compensated as you should be (if you weren't doing it, they would have to pay someone correct?) will by definition RAISE your prices to cover these costs...


Quote:
Originally Posted by 480sparky View Post
Apparently it's not getting through to you.

You base your price on YOUR COSTS.
NOT what the others charge.
Hopefully, the bolded font helped it get through...

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