Figuring Overhead

Schwartz04

I am new here and fairly new to the business. I am having trouble figuring in what my overhead per job would be I know what it is overall but is there a formula or something that can break it down on what I need for each job or is it just an educated guess or something along that line.
Thanks in advance
Adam

Schwartz04

I am an owner operator with just one machine and several attachments along with my truck and trailer. I have been charging by the hour because I am having trouble with this issue and would like to start charging by the job I know what my profit should be but cant figure out a way to add my overhead into every job.

I dont know if this helped but either way there is some background.
Again Thanks
Adam

Cat385

Not to sound like a broken record but only you know what your overhead is.
In this line of work one of the biggest factors and costs is how long the job takes. Everyone one is different in there speed and skills. Not everyone will use the same piece of equipment to do the same job. Its actually pretty easy to figure out the basic cost equipment,fuel,labor ect. Once you do enough jobs you will have a good idea how long things take. Some jobs get done faster than you think and sometimes they dont. Hourly rates are ok but there is a lot more money to be made bidding. If your not very productive you wont make out bidding. This is only my 3rd year on my own. I lost quite a few jobs when I started out because I bid high just to be safe. It wasnt a big deal then with just a skid steer now we have 2 dumps,2 excavators,skid,shop,3 guys and a dozer coming soon. Good luck if you have the drive anything is possible

denick

Sch,

You should spend some time in the business sections of this forum. do a search on "overhead" and it should bring up many posts on the subject.

You say you know what your overhead costs are. If that is true the only trick is to divide that total cost number by a number that defines how you make your income.

As an example, If your costs are $50,000. And over the year you are going to work that machine and get paid for 1,437 hours your overhead is $34.80 an hour. Now you could be charging by the ton, cubic yard, LF, SF,

To give further advice we would need to know you and the way you work.

After this is all figured you need to keep track of your real costs. And the actual hours you do get paid for or tons, yards....... So that next year you refine that number.

__________________
Nick

"Every day I remind myself that my inner and outer life are based on the labors of other men, living and dead, and that I must exert myself in order to give in the same measure as I have received and am still receiving" Albert Einstein

Blas

You won't really know what your overhead is until you have some historical data. Keep good track of overhead expenses for a season and then divide them by hours worked. Remember you have to keep track to the last Penny Garbage in Garbage out. Then you will be able to figure a percentage that you can break out into your hourly rates. For now I would take a snapshot of your business expenses for a month and figure your overhead for the season based on those numbers adjust during season as numbers go up. For extra work on public jobs you are allowed 5% (this number varies by region) but can bury the rest into your unit prices if needed. GOOD LUCK WITH YOUR SEASON Pretty much what Denick said, I just read his post sorry for the ECHO.

__________________
"It is what it is"

Schwartz04

Thats what I was looking for now that you say that it is simpler than I thought I guess I was just overthinking or really worried about not getting it right and get busted on it in the end
Appreciate the help alot.
Adam

rino1494

Yeah, you need to keep a good log. Write down the amount of hrs worked for the year and all of your business expenses for the year. Divide your costs by the hrs worked and you have your operating cost per hr. Then figure in your profit and you have a hourly rate.

__________________
Life is hard. It is harder when you are stupid

Uncle Sam wants YOU....to speak ENGLISH

denick

Schw,

Yes it is that simple. That being said it's not easy. You could spend years reading what has been written on figuring your overhead and your profit in construction. Many very smart people have worked on explaining it.

It takes effort and attention to detail. Taking into consideration what all your "fixed costs" (overhead) are takes time to fine tune. Getting a handle on the number of hours to divide your costs by is a magic act. These are the hours you will be "paid" for. Not hours on the machines meter, or the hours you work.

Good Luck

__________________
Nick

"Every day I remind myself that my inner and outer life are based on the labors of other men, living and dead, and that I must exert myself in order to give in the same measure as I have received and am still receiving" Albert Einstein

Vinny

I'm going to basicly re write what I just bloged up in the buisness section.

To paraphrase: there are probably as many ways to figure overhead are there are contractors trying to figure it out.

Meaning theres little suprise as to why we, as an industry, have such a huge failure rate. No formal finacial training that teaches a singular, proven method of running your buisness.

I am so F n tired of low ball competitors, gurus, consultants, ego's, conjecture, assumtions, variations, gut instict and people that just shoot from the hip that if I F n died right now, I wouldnt miss a thing about this buisness.

Sorry for the rant

__________________
Roccies Asphalt Paving
The Right Way Driveway Company
If you say you cant, your a loser. If you say you wont, your a quiter. Which one do you want to be?

denick

Gee Vinny,

Put a pot of espresso on and i'll bring a bottle of anisette, I'll be right down.

__________________
Nick

"Every day I remind myself that my inner and outer life are based on the labors of other men, living and dead, and that I must exert myself in order to give in the same measure as I have received and am still receiving" Albert Einstein

Vinny

Sorry Nick, but I had a bad hair day and since you've seen my folicly challenged dome, you undrstand, I cant afford a bad hair day.

__________________
Roccies Asphalt Paving
The Right Way Driveway Company
If you say you cant, your a loser. If you say you wont, your a quiter. Which one do you want to be?

denick

Vinny,

What are you apologizing for! The truth is the truth no matter what level of aggravation it is delivered at.

__________________
Nick

"Every day I remind myself that my inner and outer life are based on the labors of other men, living and dead, and that I must exert myself in order to give in the same measure as I have received and am still receiving" Albert Einstein

Double-A

Vinny, I agree that there are many ways to figure overhead and that our industry as a whole could really use some more education when it comes to running a business.

I had someone years ago who gave me a piece of advice about how to tell the difference between job costs and overhead.

"If it moves when you move or quacks back at you, its job costs. If it just sits there and lets you shoot it, its overhead."

I took all this to mean simply, if you can take a good bead on the price of it, day in and day out, it goes in overhead. If you can't, because its moving around all the time, depending on what you (your business) is doing, its a job cost.

I have no idea if this helps, but after rereading this, I need some of Nicks anisette.

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

Blas

What is Annisette?

It sound soothing.......I think I need some.

__________________
"It is what it is"

Double-A

Anisette is an anise-flavored liqueur. Mighty tasty with coffee.

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

Vinny

Me too, But i may need more than that

__________________
Roccies Asphalt Paving
The Right Way Driveway Company
If you say you cant, your a loser. If you say you wont, your a quiter. Which one do you want to be?

tgeb

Didn't you just get back from a vacation in Florida??

I'd hate to see you when you need a vacation.

__________________
Tom

www.gebcon.com

denick

Make no mistake all anisette is not equal. Buy the italian import.

__________________
Nick

"Every day I remind myself that my inner and outer life are based on the labors of other men, living and dead, and that I must exert myself in order to give in the same measure as I have received and am still receiving" Albert Einstein

Vinny

Tom, with every season i get worse and worse. I figure this year I will be ready for the end of the season by the end of April.

I'm already a pile of stress.

If you see on the national news anything about a crazed gunman opening up on a local asphalt plant, it may be me (J/K, dont want the FBI at my door tonight)

But really, I need more vacation, like another 3 months

__________________
Roccies Asphalt Paving
The Right Way Driveway Company
If you say you cant, your a loser. If you say you wont, your a quiter. Which one do you want to be?

Blas

You fricken paving guys....Always so stressed out.....Hurry up get out of the way etc. etc. etc. J/K I work with a paver that does some prime contracting and we team up with him when we hit our bonding capacity, nice guy but he is sweating bullets this year. Reminds me of you vin

__________________
"It is what it is"