Where does he think those cost should go?pcplumber said:Funny, I took on a partner for large underground utility projects and we are bumping heads regarding how to bid the jobs. He doesn't think we need to factor in the bid the worker's comp, general liability, matching payroll taxes nor the cost to operate the business. I am very stubborn and since I am taking the risk with my license and my money I will not allow him to bid another job until he agrees to a system that accounts for every penny in the bid. This is the only way we can know our bids are accurate. This is an image of a breakdown that is not completed. The software is not completed and it does not include overhead. My theory is; if we get the bidding process down to a science we will get more jobs and we will be able to know where our mistakes are when we don't make the profits we want.
I look at worker's comp, general liability and matching payroll taxes as a fixed and direct cost because we know the exact cost for these items at the time we bid a job. It is possible to calculate very close to the exact cost for advertising and this could be thrown into a bid as a direct cost, but we don't do this for large jobs because we don't advertise for them. I consider overhead to be the costs for running the office, gasoline, telephones, accounting, office supplies, running around town to meet contractors when bidding, legal fees, etc. and overhead is the most difficult item to calculate because there are too many variables. Overhead should probable be calculated by totaling annual costs and dividing the cost for each job with a sliding scale based on the total contract amount of each job.Insurance, advertising, etc is overhead. Over head will be added to the total job cost (labour and materials) as a percentage based on your total projected sales for the year. If your overhead is $50 000 a year and you can sell $150 000 in sales then you need to mark up your labour and materials by 1.5 . If you can sell more than $150 000 but still keep job costs at $100 000 then you are making a profit.
The "Free Advertising" based on a website should be added to your overhead as what you want to be paid to do the work to keep it updated (adding pics, content, etc) plus registration fees, etc.
Advertise as much as it takes to get the quality leads you need to sell profitable jobs. Track your advertising based on where you are getting those leads from. Free advertising site will get you low quality leads. A good website takes a lot of time to build and is far from free advertising.
Probably should not answer that question on CT because some people get a little excited when I tell the answer, but many times more than that and with only 1 part time secretary.Pcplumber - You are telling me you do close to 2 mil in sales a year with an overhead of 20 to 100 grand?