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Estimating Question

6342 Views 57 Replies 25 Participants Last post by  ChrWright
What is a good way for me to come up with an overhead percentage to add to hourly rate ?

If I add that on every job, wouldn't I be overcharging?

Eg. If total OH for month is $1000, and i figure that on every job am i double dipping?

In this economy, every penny counts.
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If your total overhead is $1000, divide that by the number of hours you average in a month, add that to the hourly rate. Over-head is covered if you work that many hours. If you want to be safe, figure less hours, you make more if you stay busy all month!!
If your OH for the month is $1000.00 (I wish mine was only that!), divide that by the number of hours you estimate you are going to work and that should be your number. If you work less than what you have budgeted for, you are going to be in the red - work more and you are in the black.

ie. if you have 4 solid weeks of work @ 40 hours per week you should add $6.25 to your hourly rate.
What is a good way for me to come up with an overhead percentage to add to hourly rate ?

If I add that on every job, wouldn't I be overcharging?

Eg. If total OH for month is $1000, and i figure that on every job am i double dipping?

In this economy, every penny counts.
but then you risk not working as much as your hourly rate will be higher
Being in business IS risk management. Any business. It is a risk, that's why not everyone is cut out to run a business. If your price is higher, you better be able to justify it to your clients. If not, find a new business, or go work for someone else.
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.
Hey Genius,
I already had it worked out, actually I was just trying to make sure I wasn't missing anything, as well as getting additional input, but thanks for the vote of confidence REMOVED.
Your question is wrong.

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 little harsh of a response for an honest opinion.

You gotta have PROFIT above your overhead,or you may as well work for someone else.
Hey Genius,
I already had it worked out, actually I was just trying to make sure I wasn't missing anything, as well as getting additional input, but thanks for the vote of confidence REMOVED.
maybe it is harsh, but that's my honest opinion.
A little harsh of a response for an honest opinion.

You gotta have PROFIT above your overhead,or you may as well work for someone else.
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.
maybe it is harsh, but that's my honest opinion.
No need for that here! That was a flat out personal stab.

You're posting on a website where you are going to get honest responses from a variety of people. Deal with it, fit in, or leave.
Hey Genius,
but thanks for the vote of confidence REMOVED.
asking for advice and receiving it is one thing, but judging someone's performance or business without knowing any details and calling them a failure is another. Why did that have to be said ? What was the purpose ? was that advice ?
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.
OK OK Lets play nice..... Just add ...TREE FIDDY to everything and you will be just fine.

:clap::clap::clap:
asking for advice and receiving it is one thing, but judging someone's performance or business without knowing any details and calling them a failure is another. Why did that have to be said ? What was the purpose ? was that advice ?
Jumping to negative conclusions and responding as such doesn't usually win anyone friends. Who ever drops the first name calling bomb gets to clean up the resulting mess. Have fun cleaning this one up.:thumbsup:
asking for advice and receiving it is one thing, but judging someone's performance or business without knowing any details and calling them a failure is another. Why did that have to be said ? What was the purpose ? was that advice ?
This place cracks me up...it's like going to my son's middle school sometimes.:blink:
That is an insult to pubescent boys everywhere! :shifty:
This place cracks me up...it's like going to my son's middle school sometimes.:blink:
It hard to catch the tone of comments online sometimes, but that statement mad eme cock my head a little. The post came across as good info topped with maybe a slap in the face.

D, I don't know what your situation is (how long in business, etc.), but I thinkwhen you ask a question concerning something you need to know, you may be on the road to success.
The fact that your asking it is a good indication that you are already on the road to failure.
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I have yet to hear of anyone that was shot out of the womb knowing everything they needed to know about running a business. Hmmmm maybe I should google that.

I could be wrong, but I thought one of the fundamentals of learning that was taught to all of us at a very young age was..... If you are seeking answers, you must first ask questions.

Never give up on your dreams young grasshopper :thumbup:
Thank You. My business is 1 year old. The reason I participate in this forum is to learn and meet people, get a different point of view etc.. with this economy things haven't been easy, but i'm making it work. When I read the end of that post it was like a gut punch, on top of a lousy day.
It hard to catch the tone of comments online sometimes, but that statement mad eme cock my head a little. The post came across as good info topped with maybe a slap in the face.

D, I don't know what your situation is (how long in business, etc.), but I thinkwhen you ask a question concerning something you need to know, you may be on the road to success.
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