Calculating Overhead

 
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Old 08-31-2005, 08:05 PM   #1
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Calculating Overhead


I don't know about you guys, but my overhead keeps going up and up and it's putting a hurtin' on me!. Which makes me wonder whether or not I am calculating correctly!

I currently take things like auto payment, insurance, phone, cell phone, total them up and divide them out to come up with a daily rate. Let's say all my overhad expenses are $100 per day. I take this $100 and add it to my salary to arrive at a number that I MUST make each day. Do you do the same?

What about things like tools?? For instance--a mitre saw costs $400. It's paid for in cash. Do you still add this to your daily overhead expense for the entire year?

Richie
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Old 08-31-2005, 08:16 PM   #2
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Re: Calculating Overhead


Related to overhead- Starting today every service call gets an explicit $5 fuel surcharge added to the bill. I could just raise the service call minimum by 5 bucks, but an explicit fuel surcharge makes people mad at oil companies instead of me.

Don't reply to fuel surcharges, since I don't want to threadjack a pretty decent overhead claculation question.

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Old 08-31-2005, 10:37 PM   #3
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Re: Calculating Overhead


Quote:
Originally Posted by Richie-C
Do you do the same?
Same way.


Quote:
Originally Posted by Richie-C
What about things like tools?Do you still add this to your daily overhead expense for the entire year?
I plug small tools and equipment into OH. I look at the cost of the item, estimate a reasonable life expectancy (replacement cycle) and figure a per day cost. Not everybody does it that way I'm sure. Ask your accountant what he/she thinks.
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Old 09-02-2005, 01:50 AM   #4
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Re: Calculating Overhead


personally , i break it down the same way. actually, i include my personal expenses (house payment, etc.) to figure what i have to make to cover overhead , AND still pay my bills.
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Old 09-02-2005, 07:23 AM   #5
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Re: Calculating Overhead


It may sound overly simplistic, and I'm not questioning your intelligence, but this is more generally to anyone out there...make sure you only divide by the number of days you operate in a month, not 30 or 31...it's more likely 20.
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Old 09-02-2005, 09:48 AM   #6
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Re: Calculating Overhead


To sum it up... Every expense, including your salary and your office staff's salaray, which can not be directly billed to a job expense, such as materials or equipment rental is OVERHEAD.

To put it in other words the expenses you incur daily, weather you work or not are OVERHEAD.

How you calculate overhead is up to you. Some guys calculate hourly and figure it into their hourly rate. I prefer to calculate daily. If you do some searching in this forum you will find some good topics where overhead is discussed indepth. Like I said I calculate my overhead on a daily basis. What I do is take 365 days worth of overhead, that's a whole year if ya didn't know and divide it by 200 which is the average number of working days in my area.
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Old 09-05-2005, 09:03 PM   #7
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Re: Calculating Overhead


Quote:
Originally Posted by Grumpy
To sum it up... Every expense, including your salary and your office staff's salaray, which can not be directly billed to a job expense, such as materials or equipment rental is OVERHEAD.

To put it in other words the expenses you incur daily, weather you work or not are OVERHEAD.

How you calculate overhead is up to you. Some guys calculate hourly and figure it into their hourly rate. I prefer to calculate daily. If you do some searching in this forum you will find some good topics where overhead is discussed indepth. Like I said I calculate my overhead on a daily basis. What I do is take 365 days worth of overhead, that's a whole year if ya didn't know and divide it by 200 which is the average number of working days in my area.

Grumpy,

I do the same. Just looking to see what others do. Seems like in the painting game, overhead can kill your profit and then some--at least from what I have experienced. Since there is really nothing to mark up except for a few gallong of paint--it's really all labor and even one day over schedule will hurt you. Some will argue "tack on a day or two" if you are not making a profit. But if you are charging rates that will enable you to make a nice living in the first place, tacking on a a day or two's rate may put you out of the ball park.

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Old 09-06-2005, 07:41 AM   #8
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Re: Calculating Overhead


Wait a second here. You said charging rates to make a nice living... and you said a day over schedule will kill you. That's an oxymoron IMO.

I can be a day over schedule on my jobs and yes I won't make very much if any profit but I've enough markup that I certianly will not lose any money.
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Old 09-06-2005, 09:48 PM   #9
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Re: Calculating Overhead


Quote:
Originally Posted by Grumpy
Wait a second here. You said charging rates to make a nice living... and you said a day over schedule will kill you. That's an oxymoron IMO.

I can be a day over schedule on my jobs and yes I won't make very much if any profit but I've enough markup that I certianly will not lose any money.

Yeah--I guess that is an oxymoron. I guess what I am saying is that I ma "trying" top charge enough to make a nice living, but it's been a tough road. Yes, I do make salary--but I would also like to grow my business into something of value, which is why profit is so vital.
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Old 09-07-2005, 08:19 AM   #10
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Re: Calculating Overhead


Then the bottom line is figuring out how to ask for more. I meet each customer and explain what we plan to do step by step showing them photos and brochures. I have found this simple presentation earns their trust and wins me business at higher profit.

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