Billable Hours

Milhaus

After a year and a half in the game, I'm still struggling to figure out my estimating and stay competitive. We are currently working on a bathroom that I figured would take 46.5 hours (myself and another guy) to complete. Those are billable hours the way I understand this. Well, the project has taken much longer than that. In trying to stay competitive in the market, I think that my price for this bath was reasonable, I may have been able to charge more, but I don't think so.

So my questions are regarding billable hours. I don't completely understand this. I currently am estimating based on having 35 billable hours in a week. These are hours that will be covering overhead.

So I figured 46.5 billable hours for this job. With two guys on the job this job should have taken just over a week to complete. We are heading in to week 3 now, but I have only had myself on the job for the majority of it. So the job is taking longer, but I am losing a week on my overhead since the job was based on 46.5 hours. I charge my O&P based on my hours on the job, and then charge labor rate only for the second guy. I think even if I had stayed with my original plan on this(two guys on the job), I still would not have completed this in the time I figured. My second guy fell through, and we had delays with the subs and inspectors that set us back a day as well.

Is this my error? With figuring for two guys on the job, this job is actually 93 labor hours. But that isn't covering my overhead for 93 hours, my overhead is only covered for 46.5. Is my error that I figured for having two guys on the job, and have had one for most of it? Even with the other guy on the job, I still don't think I would have completely it in just over a week.

I am missing something here. How can I estimate to include O & P for the full duration of the project, and still stay within the market? Work faster, lower my overhead? I think I would price myself out of the job had I included my overhead the 3 weeks this will take. I can't say for sure, but I really think so.

I hope you all are following me on this. I tend to 'think' myself into confusion with this stuff, but I have to get this figured out!! It's driving me nuts not completely understanding this. Any insight is appreciated.

mark

d-rez

I think I see your problem. Two men, each working on a job for a week (say 8-4) is 80 man hours. You stated you figured 46.5hrs for you and one other, estimated a week. Each man works 8hrs. Two men on job per day, is 16hrs a day. So that job would take just under 3 days, not a week. If you ment two men each working 46.5hrs, then you needed to bill for 93hrs.
In regards to figuring your OH, your hourly rate should include OH, which includes pay/salery. Are you sure you have calculated your hourly rate correctly?

a1propertyclean

Have you calculated the costs involved in each of those hours? You'll have insurances, taxes, and workers compensation, to mention a few. Do you have overtime on these jobs or stick to an 8-hour day?

In addition, if you offer mileage or fuel reimbursements, or 401k matching to the employees, you need to add that in as well.

The indirect costs are the ones that could be causing the problem. Maybe the best thing to do is put together a spreadsheet to capture all the costs and come up with a new hourly rate.

Linda

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Forry

Also, estimating can be tricky, and works differently for everyone. When I run my numbers, I use a multiplier at the end of my calculations to account for my human optimism. Turns out I'm typically optimistic by about 20%, so I add that in to the estimate. Works for me. Also, for t+m work I have multipliers for my subs, 'cause their optimistic too.

Milhaus

Thanks for the responses. I'm pretty sure I have my hourly rate calculated correctly and it is a fair price for me to be in business. I've included necessary deductions (insurance, FICA, all the good stuff) and have my overhead including everything that I need to run the business (truck maintenance, fuel, sales %, office supplies) I'm pretty confident that my Overhead numbers and labor burden are accurate.

I bid this based on 46.5 billable hours, that includes my O&P, materials and labor for two men (so I have included labor at 93 hours - but only 46.5 hours covering O&P). If I was to bill this at 93 billable hours, I'm not confident I would have gotten the job. So how do I find the balance in there? Reduce Overhead, work faster? Should I be charging full O&P for each man hour on the job?

I don't think that my hourly rates are too high, but yet when I get to the final estimate, I'm not confident in the numbers that I come up with. I think that may be the real problem - my head.

mark

Putty Truck

huh? What are your competitors charging? What is the income bracket of your HOs? Are you offering bang for the buck?

Are you good at what you do?

Milhaus

I think I'm good at what I do, moreso the organization of it than the actual work. I'm a perfectionist, but not the fastest by any means. The HO is this case has a six figure income. Project is in a neighborhood I would love to get more work in.

One aspect of this business that I haven't done a great job in is knowing what my competitors charge. I want to go head to head with the best/biggest remodelers in the area, and from the bid comparisons I HAVE done, I come in under them and over the other 1-2 man operations in the area.

mark

Putty Truck

Presentation, then. Feel the ho out for what it likes and play on it...like any good con man, know your mark. The ho wants to feel confident of its choice, so offer it the very best swag.

You have to get to see your competitors' bids. In my trade where you have to work your way up, you get to work for a number of local companies and that is how I know how to compete against them.....visa versa, too.

If you get a job, see if the ho will let look at the other bids. Chances are the ho is a competitor and will totally knwo where you are coming from.

Price is not everything to everyone all the time.

Double-A

OK, let's take this one step at a time. I think we're trying to fix something here that is sorta hard to see.

Bath Remodel.

Milhaus - 45.6 hours at 100/hr = 4560.00
Subcontracted labor 45.6 hours at 10.00/hr = 456.00 x 10% for overhead x 10% for profit = 667.63.
Total labor price for bathroom = 5227.63

Now, use your correct O/P percentages instead of my example of 10% each. Did you come up with a higher number?

Anytime you pay for anything, let me say that one more time, anytime you pay for anything, you're not paying for it, the client is.

Stated another way, the client pays for everything. Period. This includes the profit and overhead for purchased labor costs.

Think of it this way. You put that 456.00 in the bank in an interest bearing account, or lend it to your client at zero percent interest for however many days it takes to be paid back. Which are you doing and why?

__________________
"My clients’ wishes are the center of my attention." -- David Guido, a contractor in Woodstock, N.Y.
New York Times, July 20, 2006

Milhaus

Double-A - I came up with less than that. I didn't include O+P for subcontracted labor. That's where I'm going wrong. I think that I will price myself out of the job if I include O&P for two guys, rather than just one.
I got 'the client pays for everything statements' - .

I said above that I think the biggest problem is that when I get an estimate worked up - I think the price is too high before I say anything to the customer. I'M screwing myself.

Milhaus

So then, a couple more questions.

Any suggestions on how I can find out what competitors are charging without calling them up myself and posing as a customer. I'm no good at bull sh?t really. I ask customers if I can see competitor bids whenever I bid competitively. Any other ideas?

#2 - I've reviewed and reviewed my numbers for O&P, and my labor rates accordingly. I don't think they are out of line. But, when I get an estimate completed, I continue to think that the job is not worth that much. For instance, I have talked with another contractor on 'the going rates' for a bath remodel, etc. I am well above the going rate for this bathroom, but is not a typical bathroom either. We're adding a closet as well, concrete demo for plumbing, etc. Any tips to shut my freakin head off and start looking at this as though I am WORTH what the end figure is estimated at?

mark

Double-A

Or you can price yourself out of business. Remember, you don't lose money on a job you didn't get.

Yes, quit buying on price yourself. Find the added value of service before and after the sale from your higher priced suppliers. Such as drywall. Why buy 1/2" x4x8 from home depot when 1/2"x4x9 will work better from your local drywall supplier? He stocks what you need, but perhaps you pay 50 cents more per sheet. Isn't the cost of finishing less without butt joints? Isn't that worth the extra cost?

Also remember this. This is not your bathroom. This is not your house. This is your client's dream. Do you want to give them less than what they are asking for? How can you do that if price is your first consideration?

Ya, this is typical of a tradesman's point of view verses a businessman's point of view. You have to realize that the "going rate" is a myth. It doesn't really exist. Once you start researching it, you'll find that its really a number bandied about to browbeat someone into a lower price or hold someone hostage to a market created by the "twits with trucks".

Offering quality services at a price you can make money on will cost you and your client's less money in the long run. They get what they pay for (their dream bath) and you get to pay well, stay in business and (gasp)... make a profit.

Now its time to start thinking about such socially unacceptable topics like, vacations, retirement, investments, college funds...

But, that's another thread.

Hope this helps.

__________________
"My clients’ wishes are the center of my attention." -- David Guido, a contractor in Woodstock, N.Y.
New York Times, July 20, 2006

Milhaus

It helps a great deal Double A. Thanks.

As for the 'The going rate' .... this is partially why I haven't invested a whole lot of time into finding out what my competitor's are charging. Because in the end, it still boils down to what I think it is going to take to get the job done. I still think it is good info to know, but in the whole scheme of things, it is my numbers that are going to matter. I've got back off from that type of thinking.

Again, great points. I appreciate your help.

mark

Double-A

Only time wise, not dollar wise.

It takes what it takes, to be honest. You'll have to develop a clearer understanding of your time to complete based on experience. You can't just go off of others.

An experienced plumber might be able to pull a W/C off the floor in less than a minute, even with cruddy bolts that are rusted in place. You, on the other hand, might take 25 minutes to do the same job, trying hard not to damage anything. If you're pulling that W/C, you'd better be charging for 25 minutes and not the <1 minute.

__________________
"My clients’ wishes are the center of my attention." -- David Guido, a contractor in Woodstock, N.Y.
New York Times, July 20, 2006