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Ohhh boy another hourly rate question?!?

Discussion in 'Business Operations' started by shelbymustang616, Mar 2, 2012.

  1. shelbymustang616

    shelbymustang616 LawnSite Member
    Messages: 117

    This was my first year in business out of college and it was very succesful. I want to hire help for next year. I see post on here that avg rate per man hour lets say is 35 per man. Is my personal pay included in that 35 if im not on the job doing somehting else? So if i have 2 guys thats 70 an hour. If i come on the job is it another 35 and hour? Follow me.
  2. crazymike

    crazymike LawnSite Senior Member
    from Ontario
    Messages: 452

    That's on the low scale. $45-$55 is more realistic

    You need to add up all your expenses for the year. Including your salary. That's called your overhead.

    Then you need to calculate your labor burden. That's how much it costs you for an employee per hour. Include your workmans comp, taxes, etc... then add a percentage for downtime. This is about 10%. This is for the times they are being non productive. Run a machine out of gas, can't find keys, stop on the way to a job to use bathroom and buy smokes, get lost, etc...

    Now estimate how many man hours you will work through the year. Say a 2 man crew, 50 hours a year each. 100 man hours a week, 50 weeks a year.

    So you're going to work 5000 hours for the year.

    Divide your overhead by this number, add your labor burden and you have an hour figure you can work with.

    Now depending on your overhead, this number might be $30 it might be $55. It might be $150. If it's more than $55, you need to make adjustments.

    Pretend you're going to settle for $50, even though your numbers say you can work for $45.

    So when you bid a job, say it's 4 man hours including drivetime, cleanup, etc... You're going to be at $200 and it will take your guys 2 hours to do. Then you add a profit of say 20%. Also add some incidentals of 2% on a small job. In case they screw up, run over time, whatever. I always add this. Now you have your bid!

    Now, say you find out that Jimbob can do it less. But you really want this job because it will lead to a $20,000 job. You know your costs, your profit margin and you can adjust accordingly.
  3. shelbymustang616

    shelbymustang616 LawnSite Member
    Messages: 117

    awsome thanks for your help since im salary that would be considered overhead and figured into my man hour rates?
  4. crazymike

    crazymike LawnSite Senior Member
    from Ontario
    Messages: 452

    Sort of. Depends on your structure and goals.

    Running a business is not easy. You need to pay yourself for your troubles. That part of the salary is figured into the man hour rate.

    But if you are working on a job as a laborer, you should also be paying yourself as a laborer in addition to your base salary.

    So if you're pricing a job, and you plan on being at that job working, you count yourself as one of the laborers.

    Now if you plan on doing all these jobs, you would obviously pro-rate your base salary into your man hour. If you want to make $1200 a week. You can't put that all into your overhead. But you can put in $600 a week into overhead and make the other $600 as a laborer. Make sense?
  5. shelbymustang616

    shelbymustang616 LawnSite Member
    Messages: 117

    ahhh i c Thanks for the help
  6. crazymike

    crazymike LawnSite Senior Member
    from Ontario
    Messages: 452

    I should mention, if you're a new company and in an area that gets snow. You're going to have adjust your estimated hours.

    Chances are you will only work 5 days a week, all summer long. Winter time hours are a different ballgame. Same with numbers and overhead recovery.
  7. bustutah

    bustutah LawnSite Member
    Messages: 52

    We mow at $60 an hour per man. 2 guys at your place for 15 min =$30.00.
    Once you establish a good name and relationships that can be raised slightly. It is easier to control expenses than to raise prices. Good luck, run legal.

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