[donb1959]

I recently bought a book authored by Michael Stone. I have read the entire book and have gleaned some very useful information. However, I'm not sure how to apply the formulas to the painting industry, even though he has "specialty contractors"(painters) listed in the book as using the same formulas.

For example: In the chart 2-8 he has 1 employees volume at 350K yearly, he uses the remodeling model for this chart, but says "specialty contractors" should fall within a few percent of this number. I primarily do residential repaints. I figure my average job is $1200. If I as an employee of my company am able to complete and collect on two of these jobs weekly then my total yearly volume would be $124,800. That's a long shot from 350K

Now. The formula used to establish my markup is this: And I'm using numbers that I've projected for the year:

Dollar volume=$124,800
Overhead= $ 13,350 *
Net profit @ 8%=$9,984

*The book suggest 18,500 as a low overhead for specialty contractors I had the dig to find 13,350.

Ok, now the really interesting part. To compute markup we:
Add overhead and net profit
13,350
+ 9,984
--------
23,334

Then subtract that total from our dollar volume to find job cost:
124,800
-23,334
--------
101,466 yrly job cost

So...projected job cost for the year is 101,466 this is the amount we expect to spend to do our jobs for the year..now keep in mind I'm using MY projected numbers.

Ok, then Total dollar volume divided by job cost=Markup
So:124,800 divided by 101,466=1.22% markup.

Ok...I don't know about you guys, but my average job cost is about $125.00-$150.00 for a repaint. Now to review the math. Lets say Sally wants her bedroom painted, I calculate my job cost (matierial etc..) to be $150.00
$150.00 (job cost)
x 1.22 (markup)
----------
$183.00 Sales price??!!

Now the author Mr Stone assures me the same formula can be used for any contracting business...but in my business my job cost just are not high enough per job for matierials purchased solely for that job to make any money with this formula...I would love to figure this thing out because it seems a fool proof way to figure mark up.

Generally...without any estimate software programs at this time, I will look at a job, figure my time to do the job, the multiply that by my hourly rate. I figure in the matierials then tack on 15% to matierial cost. Input anyone?

 

[PipeGuy]

I figure my average job is $1200...but my average job cost is about $125.00-$150.00. Input anyone?

What else is ther to say? Your making an average 960% profit - right?

 

[Mike Finley]

Hey profit is everything after expenses right? Your salary should be included as an expense. Profit is what the company makes at the end of the year after every penny is paid out, it is the reason you are self-employed and paying yourself a salary as opposed to working for somebody else and being paid by them a salary, right?

 

[PipeGuy]

II as an employee of my company am able to complete and collect on two of these jobs weekly then my total yearly volume would be $124,800.
Dollar volume=$124,800
Overhead= $ 13,350 *
Net profit @ 8%=$9,984

Ok, now the really interesting part. To compute markup we:
Add overhead and net profit
13,350
+ 9,984
--------
23,334

Then subtract that total from our dollar volume to find job cost:
124,800
-23,334
--------
101,466 yrly job cost

I don't know about you guys, but my average job cost is about $125.00-$150.00 Now to review the math.

You must be using that Illinois crack whore math that Glass likes. My east coast, white bread, yankee boy, parochial school math tells me that at (2) jobs a week, or 104 jobs per year, annual job costs of $101,466 leaves you with about $975 in costs per job; not $125 - $150.

 

[hatchet]

A book can never tell you what your business is or isn't. Like Pipeguy said - you're making 960% (O&P). You're trying to mix the numbers from a book to your existing business model. Why did you have to dig to get your overhead %? Again a book doesn't know what your costs on a yearly basis is. Does the book tell you to increase that amount if you are in a very competitive market to account for increased marketing campaigns? I highly doubt it.
My suggestion is to disregard the charts and figures and read about what Overhead is and what profit is. Yes the formulas are the same - but don't use the numbers from the book - use your own numbers.

 

[Jim Johnson]

I recently bought a book authored by Michael Stone. I have read the entire book and have gleaned some very useful information. However, I'm not sure how to apply the formulas to the painting industry, even though he has "specialty contractors"(painters) listed in the book as using the same formulas.

For example: In the chart 2-8 he has 1 employees volume at 350K yearly, he uses the remodeling model for this chart, but says "specialty contractors" should fall within a few percent of this number. I primarily do residential repaints. I figure my average job is $1200. If I as an employee of my company am able to complete and collect on two of these jobs weekly then my total yearly volume would be $124,800. That's a long shot from 350K

Now. The formula used to establish my markup is this: And I'm using numbers that I've projected for the year:

Dollar volume=$124,800
Overhead= $ 13,350 *
Net profit @ 8%=$9,984

*The book suggest 18,500 as a low overhead for specialty contractors I had the dig to find 13,350.

Ok, now the really interesting part. To compute markup we:
Add overhead and net profit
13,350
+ 9,984
--------
23,334

Then subtract that total from our dollar volume to find job cost:
124,800
-23,334
--------
101,466 yrly job cost

So...projected job cost for the year is 101,466 this is the amount we expect to spend to do our jobs for the year..now keep in mind I'm using MY projected numbers.

Ok, then Total dollar volume divided by job cost=Markup
So:124,800 divided by 101,466=1.22% markup.

Ok...I don't know about you guys, but my average job cost is about $125.00-$150.00 for a repaint. Now to review the math. Lets say Sally wants her bedroom painted, I calculate my job cost (matierial etc..) to be $150.00
$150.00 (job cost)
x 1.22 (markup)
----------
$183.00 Sales price??!!

Now the author Mr Stone assures me the same formula can be used for any contracting business...but in my business my job cost just are not high enough per job for matierials purchased solely for that job to make any money with this formula...I would love to figure this thing out because it seems a fool proof way to figure mark up.

Generally...without any estimate software programs at this time, I will look at a job, figure my time to do the job, the multiply that by my hourly rate. I figure in the matierials then tack on 15% to matierial cost. Input anyone?

Don,
I know what it is you're trying to do. Paint contractors however are a differant breed of contractor then any other. The mark up formula Mr. Stone uses is primarily remodeling. Although he does have speciality contractors listed the numbers are hard for a paint contractor to adjust.

Like you stated job cost are just not high enough on residential repaints to add an adjusted mark up to. Over the years I have tried a number of differant approachs to mark up...and for estimating properly which is essential. I used to go solely by production rates, and sq ft. For the past several years I have been using a differant methodlogy. First you have to know as close as possible your projected overhead for the year (including your salary).

You then figure what percentage of profit you would like to make..I've set mine at 10% yrly. I assume you know what your production rate is. I can look at a room and calculate within 1-2 hours of what it will take me to complete any given project. I have then figured what my hourly rate has to be projected over the course of a year to pay ALL my overhead and retain a 10% profit...thus far I haven't missed my projections by more than 1-2%.

If you have any employees it is VERY important that they know what the time frame for a given job is. When I figure labor (time) to finish a project I calculate that time knowing any employee I have can finish it in that time provided there are no surprises...which there never really should be.

Don't get too complicated with the mark up and profit. If you are calculating your jobs time correctly and watching the books closely it should fall into place. This is just the method I use....I can hear others contractors jaws hitting the floor as I type .
But it works well for me. Have a good one.

 

[George Z]

Recovering overhead and profit hourly
would be the best way to go.
If you know your annual numbers and
account for every hour,everything
should fall into place.

 

[C.Davis]

I agree. Recovering all direct costs and overhead in your hourly rate is the only way to go. There are great articles on that subject in PWC magazine written by Irv Chasen. Just saw his seminar at the PDCA convention in LAs Vegas. Great stuff.
C.

 

[Teetorbilt]

Dad gum, you guys are working for less than 10 % profit? No where near in my world.