Lol, Businessmen, See Again - I Left Out Something Crucial

dirt diggler

wait - ok ... i thought about it ... (see thread "alright, businessmen ..."

i left out crucial information

overhead - 200K/year

each project will take approximately 200 of your hours.


40 hrs/wrk wk

52 of them (ok, fine 50 for allowing holidays)


2,000 working hours (leave weekends out here for now)


so you need to earn $100/hr ... for 2,000 hours ... and you will earn that 200K



NOW ---


(here's what ive been trying to say)


that job will take 200 hours of your time. (Don't argue - it just will, ok? lol)



THAT means you ONLY have time for 10 projects. (They will all be 200 hours)

200 hours x $100/hr = $20,000
Therefore --- your gross profit (after project cost but before overhead)


MUST be $20,000





am i nuts? where am I off if so??

ruskent

First off, maybe hire someone, so instead of 2k billable hours, you have 4k.

But i really don't see what this thread is about. It seems like you awnsered your own question.

But we all know that each job won't be 200 hours. Unless your doing the same exact thing 10x each year.

So what is this thread really about?

ProWallGuy

Mr. Diggler, you like to post early and often, but they are always very interesting threads. But, you post 3 or 4 for the same topic, and that makes it real hard for someone coming to the party later to understand. If they don't find the other threads, they miss out on all the fun. Can I merge these threads for you?

__________________
Wallpaper Hanger St. Louis
Digital Murals Installation

dirt diggler

the numbers are hypothetical - don't look at them - look at what they're doing

your overhead is fixed (to some degree)


the thread is asking ... and me kinda thinkin out loud ...


how many jobs do I need to provide the gross profit that I need in order to pay this overhead.


If one job takes 100 hours ... and another takes 400 -- yes, numbers will change

but they won't change the fact of what your overhead is and what you will need to charge in order to meet that



like i said, i could be way off...

dirt diggler

i know, im sorry


but i been thinkin out loud ---

this is my 1 out 100 serious thread


do what you must

kevjob

For gods sake merge them, its like having a bag of cats in the backseat

__________________
Kevin
Basement Finishing Highlands Ranch Colorado
Littleton Colorado, Basement Remodeling
Kitchen Remodeling Denver

dougchips

A few problems with your formula:
1- Your goal should be more than your actual cost. Your company should have "profit", not just enough to cover the nut.

2- If you plan "just enough jobs", you will fail if just one job falls through.
3- If only one person is able to cover your P&O, what happens if that one person gets sick or hurt?

dirt diggler

Daggonit Doug

#1 - Extra profit is either added into that overhead already - or can be added seperately

#2 - yes - so make Murphy Law plan

#3 - question for another thread ...


(good points im saying - they're skipping ahead though)

dirt diggler

ruskent

Basically, we all have a set overhead. This year i am going to try and actually pay myself.

I tihnk my actually #s for overhead were in the 200k range for over head.

I never really thought about how many jobs i would need based on gross profit.

I always just looked at gross sales numbers. Another thing i was proably doing wrong.

Hmm, this is almost a marketing thread. Figuring out how many jobs you need. Now figure out how many leads ya need. Then figure out how much each lead cost you so you know how much you need to spend on advertising.

dirt diggler

ok Rusk ...


(guys I am using hypothetical numbers)


you have an overhead of $200,000 in the year 2007

Now ... (keep in mind what you do ... )


you have 2,000 working hours in a year

(leave out the seasonal factor unless you do go full-year)

each project, takes up 50 of your hours (again, hypothetical)

put hiring others and everything else out of your mind ...


if your hourly rate is $100 ($200K divided by 2,000 hours)

and each project took an [average] of 50 hours


your gross profit should be $5,000 per job

BUT - you will need 40 projects


OR ... a gross profit of $10,000

and you will need 20

again ... a gross profit of $20,000

and you will need 10 projects





what will your market bear? Can you find ONE project for $200,000 gross profit?? It'd be cool ... but unlikely, right?




How much gross profit will your market tolerate??

now ... is it 5K??, 10K?? 20? 30? 40? etc.

Look at the overhead ...


then look at that "tolerated" gross profit ...

and it will give you a general idea of how many sales you will need to make




like i said, i am not claiming this gospel ...

PressurePros

I'm throughly confused. Pass that fatty.

Dig, you're a riot. If you are ever in Philly, look me up.

__________________
Ken Fenner
Pressure Washing PA
Roof Cleaning Services PA

ruskent

Dirt- Are you telling us something? Or are you asking us something?

dirt diggler

i know, im sorry, i boogered this one up from the start



i will gather thoughts and just repost it at another time

dirt diggler

both ...

im more or less telling



but am asking for feedback

dirt diggler

ken - i know the rest is jumbled - but look at the recent post (contains a quote from Ruskent)


what is not clear there ... kinda took it step by step.

i know you're pretty straight --- so something must be missing

ProWallGuy

Its too late. The posts would merge in chronological order with the other thread. The order of posts would make it very confusing.

Carry on!

__________________
Wallpaper Hanger St. Louis
Digital Murals Installation

PressurePros

I guess my first question is, how are you determining your overhead?Are you using the term as all inclusive (material costs, owner draw, company profit, fixed and variable expenses etc)?

I think whats screwing me up is that you are throwing in the term 'gross profit'. I think a better term would be gross revenue.

When you end with a question of 'what will your market bear'? Are you asking this in terms of profit margin? One neighborhood I work in thinks nothing of doing $100,000 remodels. The one closer to where I live which is a nice area but not nearly as affluent you probably would not get many jobs over $40K.

But I think a point others were making was this (and I agree) Ten high margin jobs will beat 1 lower margin job every day of the week. Since the larger a job gets the more variables come into play and eat profit, I would do the ten every day of the week.

__________________
Ken Fenner
Pressure Washing PA
Roof Cleaning Services PA

realpurty2

Ok Dirt, let me see if I even understand where your going here. Correct me if I'm wrong....

Your point is basically asking which group the majority here falls into.

Group A- Chooses to work more hours at a lower hourly rate because their market won't bear a higher hourly rate

Group B- chooses to charge more per hour and works less hours per year

I think your goal is to figure out if you are better off to raise your rates and work less hours in order to recover your overhead and turn profit but you are worried your market might not bear the higher rate.

Your last paragraph is telling the rest of us if this theory is correct and we agree with it, to give some thought if our own markets might bear the higher rate so that we too could benefit from working less hours?

Is that what you were saying?? Let me get that much cleared up and then I'll reply if I'm on the right track.

__________________
Woman in a Man's World.

dirt diggler

thanks for gettin back Ken (like i said, im not jokin as usual, lol)L...

ok

DO NOT look at the number. The number $200,000 is MADE UP
it is NOT my actual overhead. In fact, I chose that number to use as example for "quick math" purposes. Again, this number is MADE UP.

HOWEVER.

What is included in that overhead?

ok ... no ... material costs are not included in overhead. These are project expenses and they vary with the projects.

what is included are owner draws, office expenses (i.e. phone, printers, paper, etc), equipment, payroll, insurance, licensure, taxes to pay on non-deductible expenses (i.e. owner draws).

Essentially, overhead is the cost of running the business. All costs.

Materials are bid into projects. Project costs have nothing to do with your overhead



no, gross revenue is the sale. Gross Profit is the SALE - PROJECT COSTS.



ok... let's say you build decks. To keep it simple - you build the same kind repeatedly. It takes you 50 hours to build the deck.



there are 2,000 hrs. in the working year. with an overhead of $200,000, you would need to earn $100/hr to cover overhead.

at $100 per hour ... for 50 hours = $5,000

ok ...

50 hours per deck.
$5,000 gross profit per deck.

that is 40 decks per year.



THE QUESTION (not from me --- but one to ask for YOURSELVES) IS

HOW MANY DECKS DO YOU NEED TO BUILD IN A YEAR?

will your market allow you to have gross profit of $10,000 per deck???
(thus, only need to build 20 decks)

ok

how many decks are you going to build in 2007?

Don't know?? Ok --- but you have an overhead of $200,000 that WILL be paid for (or else, you're bankrupt)

it takes you 50 hours to build a deck.
if you build FORTY decks - you will need AT LEAST $5,000 gross profit

if you build TWENTY decks - you will need AT LEAST $20,000 gross profit


HOW MANY DECKS ARE YOU GOING TO BUILD IN 2007 TO PAY YOUR OVERHEAD??





im either doin somethin pretty cool here --- or just really f-in bassackwards