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Estimating Question

 
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Old 12-04-2009, 06:25 PM   #41
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Re: Estimating Question


In order to answer his question I'd have to know some intimate things about his business. I do not, so I'll make some assumptions.

He's new, so I'll assume his overhead is minimum, carrying all necessary insurances, or scrambling like mad to get them in place. I'll also assume he has no debt that he's carrying, that his hourly wage won't cover. He said he's wearing all the hats so Its safe to assume he's a belts on contractor.

Im going to assume he's going to 1099 his workers, He'll probably go through guys like toilet paper, till he gets one or two that fit. Also if he's smart he'll try to network with other guys like him, team up for bigger jobs. Collude as opposed to compete. Great way to keep Overhead down at first.

Labor Burden: Call your broker find out what worker's comp is going to charge you per $100 payroll, add in a % for general insurance too. Im going to take a wild guess and assume 10% should cover both, since he's new.

Overhead: Crap man, You ain't got none! congratulations! Half the guys on this forum, would slit their bookkeepers throats to get in your shoes. Charge 10% overhead anyway, you ain't got to admit your a free spirit, best get in the habit of looking like your carrying Overhead, and charging for it. Ouch! almost forgot, materials! Allways charge something for this, 10% is fine. If you don't mark up mats, customers will think your a bank. Also if you buy materials through your business and get audited, your general liab insurance can go up, they base it on gross receipts not net. So don't pass materials through your business for free. Keep track of your Overhead. As you grow, it will too. Buy the books, mentioned above, as soon as you can.

Profit: Totaly up to you. zero to a gazillion percent. What ever the market can bare. You'll be hated or loved by what you do here. If anyone asks what your charging for profit say "10%" that's the standard answer I guess. Might as well use that at first, till you settle on what your market will actually bare.

If you can't get away with charging a percentage for profits at first, don't let anyone tell you; "your better of working as an employee" thats horse bunk. Nothing better than being your own man, Its the best thing about going into the trades. (well.... except for profits). But being your own boss is almost as worthwhile as the profits. Also telling D*ck Heads to Stick it in their ear, when ever the mood strikes, is a third great reason to go your own way. Good luck...
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Old 12-04-2009, 06:56 PM   #42
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Re: Estimating Question


you came very close. I do have insurance and worker's comp. the comp for me in NYC area is 13%, the taxes I pay to match an employee is 12 %. so I know I add 25% to base pay instantly. I figured in all other stuff as well, payroll service,liability, vehicle insurance, vehicle maintenance , gas tolls etc etc etc...I figured out what it costs daily (on average), but i still haven't figured out how to change that into a percentage to spread out. I just added the daily OH number to base wages plus 15% profit.
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Old 12-04-2009, 08:28 PM   #43
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Re: Estimating Question


Quote:
Originally Posted by NormW View Post
If you can't get away with charging a percentage for profits at first, don't let anyone tell you; "your better of working as an employee" thats horse bunk. Nothing better than being your own man, Its the best thing about going into the trades. (well.... except for profits). But being your own boss is almost as worthwhile as the profits. Also telling D*ck Heads to Stick it in their ear, when ever the mood strikes, is a third great reason to go your own way. Good luck...
You gotta have PROFIT above your overhead,or you may as well work for someone else

I'm the one who made that statement,but it wasn't meant as a jab,just common business sense.
In the long run,if no profit is earned than it would be better if he worked for someone where he would get benefits and retirement.
Just saying,he gotta look at the whole picture and whats needed for his future.
If he also wants to grow his business, or just enjoy the rewards for the extra time and effort that a company constantly needs than he should realize a profit.
It's just another component of pricing,and should be considered in any formula he comes up with to figure his percent markup.

Maybe I should have elaborated a little more in that post so I didn't get accused of spewing horse bunk.

I started out without having a good financial plan,but realized in time that I needed to change things.
Tried working for someone else for the benefits, etc.Didn't last 2 months.
Decided to get a plan and stick to it.
If someone had told me earlier how to figure all overhead and profit,I'd have been farther ahead and not worried about slow times or retirement.

So Norm,don't shoot the messenger.
Just trying to make a point that I felt was important to consider.
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Old 12-04-2009, 08:35 PM   #44
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Re: Estimating Question


Quote:
Originally Posted by thom View Post
Your question is wrong.

A fair price is whatever you and the customer agree on. It is your job to maximize your income. It is not your job to save money for your customer.

There are many ways of calculating markup. Start with wages. You can start with direct wage cost then add a percentage to cover all overhead or you can calculate actual wage cost. Actual costs include:
...Direct Wages
...Workmens Compensation
...Liability insurance
...Health insurance (if provided)
...Vacation costs (if provided)
...Employers FICA and FUTA
...State unemployment ins
...Federal unemployment ins
...Office burden
...Management burden
...Cost of tools provided
...Cost of vehicle (if provided)
...Cost of payroll service (if used)
...any other employee costs.

These will get you what your employee actually costs you hourly. To this you must apply a factor to cover indirect overhead costs (phone, licensing, office expenses, training, etc.) then you will have a cost to use for each employee that just might get you to break-even on an employee. As a practical matter, there will be days when the employee doesn't perform up to speed and days he screws up materials, costing you money. You better include a fudge factor to cover those costs. Depending on the competence of your employees, this could be substantial.

Of course you're not in business to just cover your costs. Consider your investment in time and effort as well as tools and equipment and factor in a fair return on that investment. Add this to your employee hourly cost also.

Now, you've covered your employee costs, add another factor to provide you with a profit.

Generally you must charge at least 3X your employees hourly rate. If you provide a truck/van, tools, training, etc. you will probably need to charge 5X your employees hourly rate, and possibly more.

There is no simple answer to your question. The fact that your asking it is a good indication that you are already on the road to failure.
A perfect answer to this FELLOW contractors question. What I dont understand is why even respond with such great knowlwedge and advice only to end it with such a ignorant remark. And yes, contrary to what you or anyone of your yes men think, it was ignorant.

This is exactly why I mainly read when coming to this forum. 97% of what gets posted here is excellent. The other 3% is complete bullsh!t.

Percent #1...the occasional ignorant response to a question. See the above red highlight

Percent #2... the occasional azzhole that helps the ignorant poster deflect the ignorant response with a "these guys were legitimately trying to help you crap." actually theres a whole bunch of yes men on this forum.

Quote:
Originally Posted by dayexco View Post
and my honest opinion is your a REMOVED....you've got no reason to come here, ask help of somebody, these guys were legitimately trying to help you........and then do what you did, treat them like that?...i hope your as* gets banned.
Percent #3... the moderators that continue to allow this to continue.

Easy to be a punk on the internet isn't it?

...REMOVED...

Drock, pay no mind to some of these miserable idiots

Last edited by ChrWright; 12-05-2009 at 12:07 PM. Reason: Removed
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Old 12-04-2009, 09:07 PM   #45
 
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Re: Estimating Question


Quote:
Originally Posted by Metrojoebarbs View Post
A perfect answer to this FELLOW contractors question. What I dont understand is why even respond with such great knowlwedge and advice only to end it with such a ignorant remark. And yes, contrary to what you or anyone of your yes men think, it was ignorant.

This is exactly why I mainly read when coming to this forum. 97% of what gets posted here is excellent. The other 3% is complete bullsh!t.

Percent #1...the occasional ignorant response to a question. See the above red highlight

Percent #2... the occasional azzhole that helps the ignorant poster deflect the ignorant response with a "these guys were legitimately trying to help you crap." actually theres a whole bunch of yes men on this forum.



Percent #3... the moderators that continue to allow this to continue.

Easy to be a punk on the internet isn't it?

...REMOVED...

Drock, pay no mind to some of these miserable idiots
And now you are guilty of the same 3% of BS you accuse others of.

Last edited by ChrWright; 12-05-2009 at 11:44 AM.
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Old 12-04-2009, 09:23 PM   #46
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Re: Estimating Question


Quote:
Originally Posted by Metrojoebarbs View Post

Easy to be a punk on the internet isn't it?

...REMOVED...

Drock, pay no mind to some of these miserable idiots
Metro, you had me hooked until this. Do you realize that you just did exactly what you were condemning?
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Last edited by ChrWright; 12-05-2009 at 11:40 AM.
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Old 12-04-2009, 09:26 PM   #47
 
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Re: Estimating Question


Quote:
Originally Posted by d-rock View Post
you came very close. I do have insurance and worker's comp. the comp for me in NYC area is 13%, the taxes I pay to match an employee is 12 %. so I know I add 25% to base pay instantly. I figured in all other stuff as well, payroll service,liability, vehicle insurance, vehicle maintenance , gas tolls etc etc etc...I figured out what it costs daily (on average), but i still haven't figured out how to change that into a percentage to spread out. I just added the daily OH number to base wages plus 15% profit.
Divide the annual overhead amount by the estimated annual earnings.
Example:
Annual GL insurance $1480.00 / Total estimated annual billings $100,000= .0148 round up to .015 overhead percentage rate equals 1.5%

If you earn more it lowers the rate and the reverse holds true as well.

So if your base rate is 35 multiply by 101.5% and the adjusted amount is $35.53
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Old 12-04-2009, 09:28 PM   #48
 
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Re: Estimating Question


RS you worded that much better than I did.
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Old 12-04-2009, 09:39 PM   #49
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Re: Estimating Question


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Metro, you had me hooked until this. Do you realize that you just did exactly what you were condemning?
Yes I do. Really helps send the message home doesn't it.

Just keepin it real rs.
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Old 12-04-2009, 09:55 PM   #50
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And now you are guilty of the same 3% of BS you accuse others of.
I am guilty of enlightenment. That is all
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Old 12-04-2009, 09:57 PM   #51
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Re: Estimating Question


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Yes I do. Really helps send the message home doesn't it.
Honestly, no it doesn't. It makes you sound juvenile. I am a bit surprised at you.
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Old 12-04-2009, 10:00 PM   #52
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Re: Estimating Question


:j ester:
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Old 12-04-2009, 10:03 PM   #53
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Re: Estimating Question


im not sure but i think the guy with the big red house is gonna fight the guy with the big tractor... oh my!!!!
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Old 12-04-2009, 10:07 PM   #54
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Re: Estimating Question


Speaking of Pinehurst NC, I really want to golfing down there
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Old 12-04-2009, 10:13 PM   #55
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Settle down.. you'll see
I am not "un settled" and never was. Just answering your question and offering a ringside opinion. But now that you mention it, the whole tough guy thing is pretty funny when you get a little older. YOU'LL See.

Ommmmmmmmmmmm Ommmmmmmmmmm.
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Old 12-05-2009, 09:32 AM   #56
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Re: Estimating Question


hey oldfrt,

When a thread goes this long, I forget who said what. I don't have any problems with anyone on this thread, including Thom. I've read enough of his posts, and I agree with much of what he says elsewhere.

Its fine to dust up here and there, at the end, we all have to go back to work the next day. Sometimes you have to be loud to get heard, I guess.

From the Original Post, It sounded that D-rock is the real deal. Not posing. HO and DIYs do not ask about O&P (most of em anyway). Nor do hacks. Sounded like someone who wants to do it right.

We all hate competition. But heck its a forum. One of the few places we can go to get peer support. Anyway, if I take the time to call you a D*ck Head, means I like you. If I didn't like you, you wouldn't hear from me at all... k?

Oh, and just so you all know, In a fight.... I'd win!

I can out run anyone, and I throw things.
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Old 12-05-2009, 11:31 AM   #57
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Re: Estimating Question


Well, I can't believe the ****storm I started with my initial answer. But here is my response.

Asking that question did indicate you are on the road to failure, it did not prove it, merely an indication. There are far more unknowns here than knowns so based on the one very incomplete known, you are on the road to failure.

This does not mean you will fail.

To quote the wisdom of Yogi Berra, "when you come to a fork in the road, take it". Do what you want with that information but underpricing your employees labor will destroy a business before it gets started.

Quote:
Originally Posted by PA woodbutcher View Post
Thats easy. If you add 20% and you are getting every job, but still have no money you add accordingly until you stop getting everything you bid on have a little money in the pocket
And, that's exactly what I'm talking about. adding 20% to direct wages will put you under in no time. Just a few things like employers FICA, FUTA, SUTA, Medicare, and Workmens Comp will cost you significantly more than 20%. You're losing money on every hour you work.

But, you're the genius, let us know in 6 months how losing money worked out for you.

For any others out there who really want to succeed, starting a business by losing money won't get you far. You're probably better off staying home watching TV. At least your unused start-up money will last you a bit longer that way.
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Old 12-05-2009, 11:55 AM   #58
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Re: Estimating Question


I just spent 20 minutes cleaning up this mess.

Nathan prefers we moderate in private, but I say this in the open as a reminder. If you see this happening, then report it so we can nip it in the bud. This forum remains productive so long as we keep it clean from this kind of BS.

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