View Full Version : determining overhead
12-10-2005, 05:49 PM
Alot of posts I read say that when you price a job, you need to first determine your overhead. How would you determine cost of operation per day, or per hour? Do you add up your yearly insurance, equipment, fuel, employee costs, etc., and then divide it by however many 40 hr weeks you work? I am new to this business and I would appreciate anyones insight.:)
12-10-2005, 11:36 PM
Add up all indirect expenses. That is all expenses not directly used in jobs. I believe these will all be fixed or won't change as a result of the amount of work you do. Then divide this number by the total amount of production hours you expect to have in a year. Man, sure wish I would have paid better attention in accounting classes in college.
12-11-2005, 07:06 PM
overhead is EVERY expense you have to pay.. keep good records for 6 months..every penny u spend..(better if u can do it for a year).
add all repair bills, elecrtical, phone, insurance, payments... etc..
this is part of your overhead....
next look at the total number of hours paid to you and employees... subtract the number of hours you billed... the remainder is non billable labor...
add this into your number..
this is your per hour overhead recovery rate. ADD this to your labor pay rates to get a BREAK EVEN rate...
this is the labor rate you have to charge to break even.. then add whatever percent profit you need to make.
remember NOT to add in any job materials.... they are not overhead as they are billed seperately....
and do not add in the number of labor hours u bill.... they are also seperate...
12-15-2005, 11:39 AM
Mind if you can break it down with an example using actual numbers lets say someone with no employees who has just a maintance business no install other then mulch?
12-15-2005, 03:30 PM
here is an example. My insurance is $402/yr. Right now I am a start up company with only a few jobs. So... if I plan on mowing 20 hrs/wk and I plan to mow for 30 weeks this year, the math works out like this. 20 x 30= 600 hrs worked this year. My insurance is $402. 402 / 600 = $.67. What this means is that for every hour I work, I have to add $.67 to my bid to cover this cost. If I am bidding on a job that I think will take me two hours to complete, I will add $1.34 to my bid to cover it.
Do this for all of you expenses that are similar (cell phone bill, trailer license, anything you pay for by the year, month, etc.).
Other expenses are easier to figure. how much gas does your mower guzzle in an hour. how much does it cost in fuel to drive 5 miles to a job. These items you will be able to figure without guessing how many other jobs you will have.
Hope this helps. PM me if you have more specific questions.
12-15-2005, 06:15 PM
so on top of the insurance bill you would add cell phone and divide the total by 600 also?
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