Calculating Your Hourly Rate

little_hammer

This question is primarily for service companies.

What formula do you use to calculate your company's hourly rate to ensure all of your costs are covererd and there's a profit?

For the sake of argument, please use these numbers.

Monthly Fixed Overhead --- $10,000
Desired profit----20%

Assuming you hold your fixed expenses to 40% of projected sales....
1. How many trucks do you need?
2. What's the hourly rate you need to charge?
3. What your break-even for the month?
3. What do you have to hit in sales revenue to hit desired profit?

Pearce Services

1- 0ne truck
2- $187.50/hour
3- $25000/month
other 3- $30000/month


BUT......there is a lot more to this than you are looking at...You should spend a few hours with the Search function of this website. You will find that many people in this site have donated their knowledge on this subject, I do not think that they are going to do the math for you too. good luck, and feel free to ask any questions if you need some help.

Brian

1. The number of trucks is impossible to know. What is your average sale? How many actual production hours do you get per day per employee?

2. See number 1.

3. If your overhead includes your salary, then your break even would be $25K. Your direct expenses would need to be 40% of sales for you to realize a profit of 20%. Direct costs of 40% would be very low, and in my opinion not realistic.

3. (Part 2) $31,250. You must divide by the reciprocal. 20% of $30K is $6K, which leaves $24K-- but the break even is $25K. 20% of $31,250 is $6,250, which leaves $25K.

Brian Phillips

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L. B. Condulet

Every time I calculate what my hourly rate should really and truly be, I get a number that, if I were to actually use it, I would price myself out of the market.

mahlere

get a better market....

L. B. Condulet

Funny you should mention that, I'm in the process of changing the focus of my business from electrical to a sub-speciality/niche market.

mahlere

gonna use inuits as labor now? that would be special...

L. B. Condulet

Inuits are just Mexicans that traveled too far north. No problem, amigo!

mahlere

i seem to remember someone else making that point long ago in another galaxy far far away

L. B. Condulet

mahlere

is good? no?

L. B. Condulet

Es muy bien! Vamanos!

kevjob

hey at least he used tape!

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Kevin
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