View Full Version : Business formulas
02-28-2006, 08:10 PM
I was wondering if everyone can discuss how they come up with their projected overhead and labor costs. In an earlier post, I saw a topic in which someone was telling how at the begining of every season he sits down and factors in everything (overhead) from insurance, licenses, etc.. and he is able to decide what to charge customers per man hr. Basically, I am wondering the best way to figure exactly what my costs will be. Should I break it into a 12 month period? Oe would that not work because most of the $$ is comming in 8 month increments? I was thinking if I figured what my expenses were every month included truck payments, gas, labor and subtract that from income, I would have net profits? Also, I do I factor in landscape and hardscaping jobs that I dont know I have yet? Any help appreciated! Thanks!
02-28-2006, 08:23 PM
figure it for the year.
you need to have it in two parts.
first all your expenses.. telephone, insurance, office expenses (including all office employees). add them up for the year
this is your overhead figure.
then make a guess at how much time you be able to bill for the year.
divide this first number and divide it by the second number.
this is your overhead recovery figure.
then you will need to figure labor burden.
this is payroll taxes and workman's comp insurance ( it is based on payroll figures), and unemployment.
add your overhead recovery and your labor burden to your employee's ( remember you are an employee also) pay rate and this is your break even number..
next decide what profit % you want and add it to the breakeven number.
02-28-2006, 08:50 PM
the way i do it is :
1. add up everything you now spend : ie.truck payment ,equipment payment ,business and commercial auto insurance ,cpa ,payroll ,etc.
2. then figure what it costs you pper day average for equipment expences :ie. blades ,oil ,fuel ,wear and tear .
3. add all of that together and devide by 12 months.
4. then devide by 4.33 weeks
5. then devide by the number of days per week you work .
6. then you can break it down as far as you want to go. you can go down to the square foot if you realy want to . at any rate by this point you know what it will cost you to run per day in expences .
03-01-2006, 02:25 AM
You also need to do a budget to estimate tool costs. You need to give all tools a life expectancy and have $ in the budget to replace them so your not taking $$$ out of your profit later to buy tools. You should also have $$ in the budget for things like rent even if you don't pay rent or own space yet you will never get it if the company is not generating the $$$ to pay for it. Put it in the budget and then you have a real number to work with so your not fooling yourself. Then its up to you to be able to sell yourself at that rate.
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