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Old 03-13-2002, 07:48 AM
LawnLad LawnLad is offline
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Join Date: Jan 2002
Location: Cleveland, Ohio
Posts: 738
Grassman - this post isn't necessarily directed at you. But more of a suggestion for others looking on trying to do the same thing as you.

One thing that will be difficult to ascertain from the poll is what percentage of the the owners in the income categories are working or billable as opposed to strictly over head. As the business grows, the nonbillable functions or requirements of the business grows for the owner, pulling him away from production work.

Frank Ross suggests that an owners salary plus adminstrative help does not exceed 10% to 13% of gross sales. Is this hard and fast? Will this be different for design/build companies versus maintenance versus application companies? Sure it will. Each has a different overhead structure. Different sales cost, etc.

If the owner provides the labor or not, someone has to fill the production postion. So if an owner makes $40,000 a year, but 30% of the time is spent producing, then I would recommend to try and simplify and compare apples to apples, then assume $12,000 direct labor (which you would have to hire anyways), and $28,000 in overhead. Tracking the amount of time is not difficult - but can be cumbersome if you're not used to "punching" yourself in on a time sheet/clock. I would recommend using just the hours of the work day - 7 am until 6 pm ish. As an owner, you're going to put in more hours burning the midnight oil. This is sweat equity, and something that will skew your assumptions if you try and consider all the time that you spend in your business. If you were to hire someone else to run your company, they will not work until 10 pm at night. Make normal business assumptions for your comparisons.
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