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Figuring Out My Own Labor/Profit Rates????

 
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Old 04-18-2013, 02:34 PM   #1
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Figuring Out My Own Labor/Profit Rates????


I'm not necessarily wanting a number here (but feel free to suggest some) but more or less I'm wanting to know how to go about deciding how much to charge for my services.

A little about my work/business:

I'm a carpenter and I own the business. I have no employees but I may hire one extra man every now and then if I need it. I'm 25 years old, newly married with everything paid for (house, truck, wife's car, toys) We only have our monthly bills which are pretty minimal.

I do remodeling baths/kitchens ect., small additions, decks, playsets, trim work, home maintenance and repairs, you probably get the picture.

Most carpentry work I do myself but I sub out drywall, electrical, plumbing, roofing, finish concrete, painting and the like.

I live in South Alabama (Dothan) in a town of about 70,000 with smaller towns surrounding. To give you an idea of what some rates are going for around here, residential framing is about $2.50 sq/ft (if you would like to compare that to your area)

Right now when I price out a job I figure my days and charge a labor rate of x $ per day for myself. On top of that I mark up the entire job (materials, subs, my labor, gas, extra for taxes, ect) enough to cover my yearly cost to run my business. I guess how much work I expect to do throughout the year and mark up the job the required percentage. I hope everyone understands that, difficult to explain.

I have a feeling I am charging to little but I have no way of really knowing.

How about some insight, some knowledge from all out there who have been in the game for a while?

Last edited by SailingandSuch; 04-18-2013 at 03:08 PM.
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Old 04-18-2013, 03:01 PM   #2
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Re: Figuring Out My Own Labor/Profit Rates????


Please dont use actual rates, its against this sites policy.

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Old 04-18-2013, 03:08 PM   #3
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Re: Figuring Out My Own Labor/Profit Rates????


Sorry about that. Thanks for editing for me.
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Old 04-18-2013, 03:22 PM   #4
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Re: Figuring Out My Own Labor/Profit Rates????


Don't forget insurance & retirement...

Read this:

https://www.contractortalk.com/f3/rai...y-rate-133723/

https://www.contractortalk.com/f16/pr...uccess-122452/
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Old 04-18-2013, 03:36 PM   #5
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Re: Figuring Out My Own Labor/Profit Rates????


Quote:
Originally Posted by SailingandSuch View Post
I'm not necessarily wanting a number here (but feel free to suggest some) but more or less I'm wanting to know how to go about deciding how much to charge for my services.

A little about my work/business:

I'm a carpenter and I own the business. I have no employees but I may hire one extra man every now and then if I need it. I'm 25 years old, newly married with everything paid for (house, truck, wife's car, toys) We only have our monthly bills which are pretty minimal.
It still costs money to buy those, even if you don't pay monthly payments they still cost something, and when or if they need replacing it will cost something again right?

I do remodeling baths/kitchens ect., small additions, decks, playsets, trim work, home maintenance and repairs, you probably get the picture.

Most carpentry work I do myself but I sub out drywall, electrical, plumbing, roofing, finish concrete, painting and the like.

I live in South Alabama (Dothan) in a town of about 70,000 with smaller towns surrounding. To give you an idea of what some rates are going for around here, residential framing is about $2.50 sq/ft (if you would like to compare that to your area)

Right now when I price out a job I figure my days and charge a labor rate of x $ per day for myself. On top of that I mark up the entire job (materials, subs, my labor, gas, extra for taxes, ect) enough to cover my yearly cost to run my business. I guess how much work I expect to do throughout the year and mark up the job the required percentage. I hope everyone understands that, difficult to explain.

So, do you think I am charging to little? I have a feeling I am charging to little but I have no way of really knowing.

Do your own competitive analysis, ask your customers. Although what the next guy charges means little to you in terms of your costs it is nice to know what they are charging just the same... If you can make more for the same you want to right?
This site is filled with contractors upset about the lower bidders in their markets but in truth the lower bidders may even make more then they do, granted they could make less too. Every tradesman or contractor has their own tricks of the trade, efficiency in the tasks they do and all come in at difference rates of speed and value so all costs should vary, but in reality it is all what you need to make to live.

Starting out most guys are lower the seasoned contractors but that by no means guaranteed lesser quality so it is very misleading to stereotype lesser money with lesser quality.


How about some insight, some knowledge from all out there who have been in the game for a while?
I will say this, if your schedule book is full you need to charge more.

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Old 04-21-2013, 06:47 AM   #6
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Re: Figuring Out My Own Labor/Profit Rates????


I posted this over in file swap:

https://www.contractortalk.com/f65/ho...-excel-133699/

It's pretty basic, but it is what I first used to establish rates. You just fill in all or your expenses (including future expenses if you want to grow that year) and fill in how many guys you have working, their yearly rate and hours, and fill in your desired profit and owners pay. It automatically calculates your workers comp (you insert rate) and ultimately gives you a hourly rate to charge. It doesn't factor in money made from markups of subs.... but you can figure that out.

It is pretty basic, but I hope it helps to at least point you in the right direction.
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Old 04-21-2013, 07:51 AM   #7
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Re: Figuring Out My Own Labor/Profit Rates????


Search "Hourly Flat Rate Calculator". Contractor Selling has a free download. Add that name to the search if needed. The final calculation is likely to be shocking so don't change the numbers to lower your rate...as in I don't need paid vacation, health care, vehicles, office equipment, and I'll be paid for 40 hours every week. Use the real number and charge accordingly or get a job with someone else.

The master (IMHO) at charging correctly in contracting is Frank Blau...check his free articles at Shubee.com.
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Last edited by Tiger; 04-21-2013 at 07:55 AM.
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Old 04-24-2013, 12:51 PM   #8
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Re: Figuring Out My Own Labor/Profit Rates????


Quote:
Originally Posted by Tiger View Post
Search "Hourly Flat Rate Calculator". Contractor Selling has a free download. Add that name to the search if needed. The final calculation is likely to be shocking so don't change the numbers to lower your rate...as in I don't need paid vacation, health care, vehicles, office equipment, and I'll be paid for 40 hours every week. Use the real number and charge accordingly or get a job with someone else.

The master (IMHO) at charging correctly in contracting is Frank Blau...check his free articles at Shubee.com.
Wow, just looked at that puppy.... nice tool!

It is important to note that if the hourly rate needed to meet your goals is too high to compete, you need to employ more guys and keep them busy - if you want to keep your same business goals(O/P). Also, if you are a GC you can factor in any mark-ups into meeting your financial goals.... or not and just consider it a bonus

So how do you keep these guys busy?

Marketing is the next step..... but make sure you are developed enough to handle a large influx of prospects and work. Have systems built for everything so you can process a work order as fast as possible to a contract.... this helps out even more when you get customers who tend to change their mind.

Branding is important. The more brand recognition you have, the more trusted you are, which makes people more will be willing to pay top dollar for your services. You achieve brand recognition by having your name and/or logo or even a slogan in as many peoples' faces as often as possible.... without catching a restraining order of course.

Check out this awesome thread if you'd like to get some incite into marketing:

https://www.contractortalk.com/f16/whats-secret-127646/
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Old 04-24-2013, 12:59 PM   #9
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Re: Figuring Out My Own Labor/Profit Rates????


Quote:
Originally Posted by SailingandSuch View Post
have a feeling I am charging to little but I have no way of really knowing.
Sub out everything on your next job and get a handful of quotes from your competition
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Old 05-29-2013, 04:42 PM   #10
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Re: Figuring Out My Own Labor/Profit Rates????


Great tips in this thread, and thanks Tiger for the mention! We're proud to have Frank on our team!

Working with Frank and offer a number of other contributors we have a few hundred articles available for you on all types of topics ranging from how to determine what you should charge, P&L basics, marketing, etc.

Here's a few posts to get you started. We publish content every week for free. Best of luck!

Overhead
Negotiating Price
Flat Rate Pricing
Do's and Don'ts for Contractors
Earn a Decent Living
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Old 05-29-2013, 04:46 PM   #11
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Re: Figuring Out My Own Labor/Profit Rates????


Be sure you know the cost involved with the employee you may hire as well.

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