Originally Posted by Sean Adams
No one can give you this answer. Only you, through breaking down your numbers, can determine what you should be charging per man per hour.
This is a rough example, but follow me here....
Company 1 has 4 employees. They have two trucks that cost the company $500 a month each. All of their equipment is financed and that costs them another $1,000 a month. They rent a garage for $800 a month. They pay all of their employees $15 per hour. They pay an accountant to do their payroll, they spend a lot of money on advertising and in general, the business is unorganized and not very efficient - neither are the employees.
Company 2 also has 4 employees and two trucks and the same equipment, but the trucks are paid for and so is the equipment. They do not rent a garage space and all of their employees are paid $12 per hour. The owner does all of the payroll work and they use the internet and word of mouth to advertise their business, which costs them next to nothing. ON top of that, the company is run well and the employees rarely waste time.
If company 1 and company 2 are going to bid on the same mowing job for example, who do you think can bid less?
If company 2 can bid less and provide as good (if not better) service than company 1, who is going to get the job.
Company 2 all day long....
What happens to company 2 when all the paid off equipment is worn out? Do they either:
Raise rates to cover new costs?
Take money out of their already lower net?
Remember when they lower their rate do to equipment being paid off they are not putting money aside for replacement due to the lower rate.
Doing payroll in house should cost the owner money also either paid to himself or a employee. Doing it yourself and lowering your rate due to it doesn't cost money says your time isn't worth anything. Paying an account reduces the risk of doing something incorrect and also gives you more time to sell or improve biz systems.