How much is everyone on average adding percentage wise as profit on their guys for a T&M job?
Thanks!
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Replies
98,500%
SamT
working on making yurself go broke???Life is not a journey to the grave with the intention of arriving safely in a pretty and well preserved body, but rather to skid in broadside, thoroughly used up, totally worn out, and loudly proclaiming<!----><!----><!---->
WOW!!! What a Ride!Forget the primal scream, just ROAR!!!
25 to 30% kjell
Around here the painters cover the carpenters overhead so you only need to bill $ for $ to the customer of what you pay your carpenters. No profit billed to the customer either, your profit comes from the roofers.
Around here the painters cover all the other trades with overspray and spilled paint."Put your creed in your deed." Emerson
"When asked if you can do something, tell'em "Why certainly I can", then get busy and find a way to do it." T. Roosevelt
>Around here the painters cover all the other trades with overspray and spilled paint.<
For no extra charge too. They are such a charitable crowd.
And of course, if you want to cut materials......
the plumbers will cover that for sure.A great place for Information, Comraderie, and a sucker punch.
Remodeling Contractor just outside the Glass City.
http://www.quittintime.com/
Yep, those plumbers surely know how to drain the profits out of a job!
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
The recip saw should have been named-Plumb-all, they use it with such success.A great place for Information, Comraderie, and a sucker punch.
Remodeling Contractor just outside the Glass City.
http://www.quittintime.com/
>The recip saw should have been named-Plumb-all, they use it with such success.<
Recip saw? All mine need is a straight-claw hammer. Who needs a stinking saw?
The sawzall was invented because plumbers were getting thrown off too many jobs when they fired up a chainsaw inside somebodys house..
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I have Transcended the need for Pants....oooohhhhmmmmmm......
That is not true, most plumbers use electric chainsaws, I biz one, lol.
I've made some pretty good money, fixing what plumbers have cut apart.
There's those that make money fixing.
But, there's those that lose time (money) dealing with the carnage.
Best to be on the winning side.
How bout those Indians!A great place for Information, Comraderie, and a sucker punch.
Remodeling Contractor just outside the Glass City.
http://www.quittintime.com/
You .... are kidding, right ..??
Nobody here ever kids about anything!He did point out that the roofers cover it all
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
Gotcha ..,!!
haven't learned who's a kidder here, yet ..it seems most in the wood trades .. want to work for freewe mark up wages X 2.25, minimum $68/ hr.
andwe are not making money at that .. it takes material mark up to put things in th green
When I started hiring people back in the seventies, my accountant told me that as a generic rule of thumb starting point, I should take what I was paying the guys and double it, then after a year, he would let me know how to figure based on actual.
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
Ohhh... no kidding at all.
Unless he's actually figured his costs to operate to include insurances (including WC), tool attrition, misc hardware, vehicle costs, gas/mileage, taxes, office costs, licensing fees and a plethora of other factors and then add to that how much he want's to make each year divided out over his employees and also figures other risks involved with having employees then, no, I wasn't kidding. That's how to do it.
Actually I was going to give the 98,500 standard figure but SamT beat me to it. Asking questions like the OP says you haven't really factored the costs of doing business. Hopefully he's openminded and is gonna learn a lot from what others will post or have already posted in the Business folder.
I used to add $2.50 an hour (seriously) but then I started getting divorced, so now it's whatever I can get away with and that still ain't enough.
Actually, it depends on the job to some degree, but in general I bill 1.5 times my payroll rate. And that's not as bad as it sounds; most of the big contractors around here are paying a lead carp $24-28/hour and billing $60-75. I have trouble believing they can get away with that but they do....
Dinosaur
How now, Mighty Sauron, that thou art not brought
low by this? For thine evil pales before that which
foolish men call Justice....
1.5 times payroll is very fair.
J. D. ReynoldsHome Improvements
Fair for who?say you pay a guy ten bucks an hour.Then you get 15% FICA, 20% worker's comp, 6% other insurances and OH, 4% unbilled hours for vacation shop cleanup, etc. a couple percent for the bookkeeper and payroll service....So 10 x 1.15= 11.50
x 1.20 = 13.38
x 1.06 = 14.628
x 1.06 = 15.5056or
10 + (15 + 20 + 6 + 4 + 2 )% = $14.70So a 50% markup to $15 means one would need to accept a measely thirty cents profit for all that risk taking!
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
Piffin, I don't know about where you are but as employers the rest of us pay only 7.65% for FICA. http://www.ssa.gov/OACT/ProgData/taxRates.html You have 6.35% added too your payroll costs I don't have if you are actually paying 15%.
Better check you bookkeepers private accounts. 10.00 x .0765 = .76 FICA
10.00 x .06 = .60
10.00 x .20 = 2.00
10.00 x .04 = .40 Total Added to actual hourly rate = $3.76, or $13.76 $15.00 - 13.76 = $1.24 1.24/ 15.00 = 8.26% Profit. Now I am not arguing against 2 x wages, just pointing out the error in your profit calculation.."Poor is not the person who has too little, but the person who craves more."...Seneca
Edited 9/16/2007 2:30 pm by dovetail97128
I know - and knew somebody would be along to pick it apart. It is a rhetorical discussion for educational purposes.Notice that I am probably not paying a ten dollar an hour wage either?
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
Piffin,
I don't know may who do pay a $10 hr wage. Like I said, I wasn't arguing the 2 x figure, just the 15% for FICA. I have been paid $45.00 hr for some work I did ( that is $45.00 on payroll) doubling that rate would profit a business owner handsomely as most of the OH , payroll accounting costs etc. do not go up in relationship to the wage. Only those taxes based on a percentage that the owner is liable for do. On the other side of it I am currently making about $31 on payroll, double that and the owner isn't making all that much off my back.
Burden is about $18 (60%)so he is clearing $13.00 or about 40% for no risk at all since I am so good . ;-)"Poor is not the person who has too little, but the person who craves more."...Seneca
you are failing to account for the approximately 20% lost time in construction ...
I must be missing something. What 20% lost time? I haven't ever lost 20% of my working life. (Wish I had though!!) If what you mean is the labor isn't working 20% of the time then they should be the ones demanding more per hour as a wage since the company cannot keep them full time employed. If the time is lost in terms of not working then you have no payroll costs during the no work times. One more time here: I am not arguing against the 2 x rate charge at all."Poor is not the person who has too little, but the person who craves more."...Seneca
I must be missing something. What 20% lost time?Lost Billable Hours. When ya gotta pay the men, but it isn't being charged to the HO's job.Rule of Thumb is that you'll only be able to Bill for 1600 hours per 2000 hour year.SamT
Sam, Thanks for the explanation. When I was the owner I didn't have that problem, every hour got billed off to some job. Even shop clean up or yard maintenance around the shop was broken down into bite sized pieces and added to the bill for each customer being billed at the time. That is part of what I call overhead myself"Poor is not the person who has too little, but the person who craves more."...Seneca
Mostly, Overhead is that part of company expenses you can't credit to Production.Those yardwork hours would be considered part of the non-billable hours which make up the 20% slack Piffen was talking about.Easier bookkeeping. Roll the slack into Mark Up once a year and your BK never has to break those little chunks of time into billing 3 or 4 clients.SamT
Sam, Makes sense. I just always hated coming to the end of a month and not having the customer paying enough for me to keep the doors open. I mostly did T7M work , so that made it easy to bill out ."Poor is not the person who has too little, but the person who craves more."...Seneca
Yeah. I'm beginnig to think that small contractors should only plan on being able to bill 3 weeks a monthSamT
Carpenters at $10/hr.?
Not around here.
J. D. ReynoldsHome Improvements
OK, add a zero.;)
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
well.... yeah...he couln't possibly screwup more than 30 cents worth of stuff in an hour....
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I have Transcended the need for Pants....oooohhhhmmmmmm......
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1.5 times payroll is very fair.
>>>
no .. it's not fair .. it's death by a 1000 cuts
payroll doesn't cover burden. there are additional charges to add to payroll to arrive at BURDEN
in my case .. if i send a guy out.. his burden is 1.6
so his wage x 1.6 = BREAK EVEN for wages
now you have to add company overhead
and company profit
either that or go work for someone else... because you will make more money
if you do payroll x 1.5, YOU WILL GO BROKE
so let's start again
let's try wages x 1.5 ( some burdens are less than mine )
then let's add overhead ... say 30 %
then let's add profit.. say 20%
typical.... $18 / hr x1.5 = $27
$27 x 1.5 ( .3 + .2 ) = $40.50
but that doesn't cover risk, or callbacks... or anything else
so let's say we'll bill the $18 guy at $45/hr
AND we'll add a percentage to the materials & the subs we handle also
but i still prefer not working T&M
i'd rather work fixed price contrant
Mike Smith Rhode Island : Design / Build / Repair / Restore
Mike, it was me who said I'm billing about 1.5 what I'm paying. It works out like this:
Suppose I hire a 2nd carp at $20/hr. That's a contract rate; I would bill his hours at $32.50. He provides hand tools and labour, I provide power tools, equipment, and transport (if he wants to come here in the morning instead of driving to the jobsite, his choice). But he's an independent contractor, not an employee so there's no payroll tax etc on top of the $20.
The 'invisible' burden on top of that is small: (a) any non-billable hours he works, and (b) risk of theft or damage of anything beloning to the client or me. (The client's homeowners' policy covers temporary workers for injury while on the premises and every resident has provincial health coverage which pays for the rest.)
Overhead consists of
...for a total of $5.87 per hour based on 160 hours worked per month 6 months out of 12.
So, $20/hour plus $1.00 hour (5%) hidden risk cost plus $5.87 overhead = $26.87; billed at $32.50 leaves $5.53 'profit' on which I would pay about a buck fifty provincial and a buck twenty five federal so I wind up with something like $2.75 clear per hour. That's by the book of course; my real depreciation on tools is much lower so I actually would make out better.
Yeah, not a lot, but I'm not losing money....
Dinosaur
How now, Mighty Sauron, that thou art not broughtlow by this? For thine evil pales before that whichfoolish men call Justice....
i was just pointing out to jay that "1.5 x payroll" is sloppy wording
and to someone asking the question they would arrive at the wrong conclusion
like :
$12/ hr pay x 1.5 = $18/ billing..... gud luk to that
BUT... you are further complicating the issue.. because an Independent Contractor is NOT an employee ( even though in MOST cases they really are )
so we are really talking about charging 1.5 x the subcontract cost
another kettle of fish altogether
Mike Smith Rhode Island : Design / Build / Repair / Restore
Edited 9/17/2007 1:21 pm ET by MikeSmith
You are right; but for small outfits handling one job at a time, using individuals as independent contractors works out better for all parties--the contractor, the carp, and the HO. If I hired a carp as an employee, I'd have to pay him less and bill the HO more for his time, and he'd wind up getting laid off every time a job was punched out anyway. And he'd have to pay income tax on the full paycheck amount instead of being able to deduct his expenses as an independent contractor. And I'd have to do 9 times the paperwork and eat 9 times the aspirin. Everybody loses.
Yes, there are companies who abuse this system and keep their 'independent contractors' working 12 months a year, year after year...but there is a legit category of labour between employee and sub.
Dinosaur
How now, Mighty Sauron, that thou art not broughtlow by this? For thine evil pales before that whichfoolish men call Justice....
you guy's work way to cheap ......overhead = 5$ / hr ..??? ????????
I didn't do an exhaustive accounting of all my overhead cost items, but the figure ($5.87) is pretty close. I operate out of my home, only do construction about 6 months of the year, and don't have a $2500 mortgage or a truck costing me $900/month in payments. So that's about what it adds up to, based on four 40-hour weeks per month.
Since I almost never have anyone working for me that many hours in a month, there could be some adjustment to reflect that, but in principle it's about six bucks an hour for standing overhead. Sorry if that's not enough for y'all, but I can't invent expenses I don't pay, and I'm not gonna incurr expenses for stuff I don't need just to bump up my overhead numbers. What good would it do me?
(Except for new tools, of course. Any excuse to buy new tools is good....)
Dinosaur
How now, Mighty Sauron, that thou art not broughtlow by this? For thine evil pales before that whichfoolish men call Justice....
A smokin hot 20 y/o secretary would be one way to bump up the over head for something you really don't "need" but who's to say whats really "needed" after all?
A smokin hot 20 y/o secretary would be one way to bump up the over head for something you really don't "need" but who's to say whats really "needed" after all?
R-U NUTZ??? Don't I have enough trouble already???
Dinosaur
How now, Mighty Sauron, that thou art not broughtlow by this? For thine evil pales before that whichfoolish men call Justice....
mebye he's got you confused with Boss this week, LOL
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
Please don't tell me Boss has some 20-y-o bimbo keeping track of his truss...!
Dinosaur
How now, Mighty Sauron, that thou art not broughtlow by this? For thine evil pales before that whichfoolish men call Justice....
Do your independent contractors carry GL & WC insurance? If they are paralyzed on your job, will your insurance cover them if they don't have insurance that will, or will the HO be named in the suit as well?
Jon Blakemore RappahannockINC.com Fredericksburg, VA
All residents of this province are eligible for the provincial health-care plan, which covers any treatement needed for any illness or injury, so there is no issue with health-care costs and I doubt if any of the guys have any extra health insurance; only extremely high-end execs have that sort of coverage, so they can 'jump the line' if they need to and go to a private health-care clinic in the States.
I would also doubt any of the guys carry workmen's comp; as 'autonomous workers' (the technical name for individual indy contractors here) they wouldn't qualify (ya gotta be a corporation).
If there are any injury-related liability issues, the HO's homeowner's policy must cover 'occasional household workers' who are injured on their premises, and that is stated clearly in my contract with the HO. The way my contract is written, everyone works for the HO (who is legally the GC); I am the project manager, have his power of attorney, and do the 'payroll' as a service to the HO and charge a fee for it (that diff between what I bill and what I pay out).
For theft, damage, and job liability, I am self-insured; that's what that additional 5% I added to standing overhead was for, a premium I pay to myself to cover such eventualities. (Five percent is what a commercial insurer would charge me to cover my tools etc.)
I seem to be a fairly good insurance risk; I haven't had to make a claim so far. (Of course, I just hammered my own damned thumb again today, but....)
Dinosaur
How now, Mighty Sauron, that thou art not broughtlow by this? For thine evil pales before that whichfoolish men call Justice....
billing $60-75. I have trouble believing they can get away with that
Just curious - what does your car mechanic charge per hour?
“Good work costs much more than poor imitation or factory product†– Charles Greene
http://www.bakersfieldremodel.com
A very good point, one I should try to keep more firmly in mind, too.
The problem I think is that from the HO's perspective, a car dealer has a big visible infrastructure--big building, lifts, stationary tools, parts department, computer system, support staff, yadda-yadda...while an independent builder or remod guy often operates out of his home and truck(s). And even builders who do have a separate office/shop/warehouse usually do most if not all of their customer contact at the HO's residence.
Of course, that doesn't mean at all we don't have investment in tools, trucks, office equipment, and hardware/fittings inventory...but the only thing the HO sees when you go out to estimate a job is a pickup truck, a tape measure, and maybe a ladder. And most of them have no idea at all how hard it is to hire good carps, nor how much it costs to do so, so they get bent when you try to make the comparison to a dealership's hourly labour rate.
I run a pretty small-scale operation, but even I've invested close to $30,000 in tools and equipment over the years. If you add in the cost of buying and maintaining the truck and whatever portion of my in-home office and shop should be allocated to business expense, that goes way up.
But marketing weenies are fond of pointing out that perception is more important than truth (even if it shouldn't be).
My problem is that I find if I have to start justifying how much I charge, I'm probably talking to someone I don't really want to work for. So when my regulars start raising their eyebrows, I start wondering if I've pushed the rate too high.
It'd be interesting to get the input from some of the HOs lurking on the board here on this subject. (Just to get their perception, of course....)
Dinosaur
How now, Mighty Sauron, that thou art not broughtlow by this? For thine evil pales before that whichfoolish men call Justice....
Home owner/DIYer here, I always fugue that when I see a hourly bill rate, that it is at least double what the highest paid guy on the job is getting. However, I might not be the stereotypical homeowner as I’m in the last class of a two-year Construction Technology degree. So after all the estimating, job management etc. classes, I know how much it costs to put a decently qualified and insured employee on a job site. Although I must also add that I’ve learned more here at Break Time U than half the classes I’ve taken.
nobody has mentioned yet that there are always costs that are unexpected in a job and usually must be eaten by someone. those costs should be built into the rate as well. I do a lot of renovations and I also sub contract trimwork for a couple builders. the latter has much less risk but also pays less. it's easy work but the real dollars come when I work direct. I figure about $50 / hr as my rate then go with the 10% on the job. That may seem low but around here that's actually high. Lots of competition in these woods. And getting back to the beginning statement, when I figure a job that way, I've had jobs end up with a rate closer to $40.00 due to unforseens or overuns in labor, etc. I'm just now begining to push the cost plus aproach."it aint the work I mind,
It's the feeling of falling further behind."Bozini Latinihttp://www.ingrainedwoodworking.com
Might look into "Cost plus a Fixed fee". I found that worked well for me. I covered my profit and overhead in the fee then did the costs to the owners on an agreed upon basis for timing: weekly , monthly or whatever is agreed to ."Poor is not the person who has too little, but the person who craves more."...Seneca
by cost plus a fixed fee, do you mean to figure your overhead and profit out in such a way as to know how much you need to make per hour to cover that and then add it to the cost? why not just increase to hourly rate to include that? I'm thinking I'm missing somthing here. can you elaborate?"it aint the work I mind,
It's the feeling of falling further behind."Bozini Latinihttp://www.ingrainedwoodworking.com
I estimate the job just as close as I can then I figure a percent of the cost as my fee. (8-10%) We agree the fee will be paid no matter what the job costs are, usually I got 1/2 up front and 1/2 at the end . Normally this percent is meant to include everything I think I would make on profit if the job went well and my estimate was good plus what I know to be my monthly "nut" in terms of overhead. My "nut does no include my wages, just overhead costs . I like this system because because I am certain to make "X' dollars without risk , and if the owner changes anything or everything then I still get paid for the time and materials anyway according to what we established as my hourly billing rate. I don't add anything to materials and have the owner pay the bill for them directly. I do charge my hourly rate for all office work etc."Poor is not the person who has too little, but the person who craves more."...Seneca
there are always costs that are unexpected in a job and usually must be eaten by someone
If the house has any 'surprises' for us--like major rot or whatever--that is billable to the client. On a T&M contract any work I have to perform to complete the job is billable to the client. If I do something stupid like waste my crew's time by scheduling them when there's nothing to do but wait for materials--or screw up and have to do something over--obviously that's not the client's fault so I should eat it.
The biggest risk under that heading outside of my control would be having to send everybody home because of weather. I guarantee my guys a 3-hour minimum on a call-out, so if we show up at 7:30 and it start pissing rain at 8:15 and is still pouring at 10:30, I call it a wrap and have to pay 3 hours per man but can only bill 45 minutes. But that rarely happens.
Dinosaur
How now, Mighty Sauron, that thou art not broughtlow by this? For thine evil pales before that whichfoolish men call Justice....
I agree with you completely on the billable items such as surprises, etc vs added costs due to my lack of planning. I generally do not ask $ for thing I feel I wouldn't want to pay for if I were the customer. that mentality encourages me to stay on task and on budget more so. but that is esentially unwritten anywhere, just a personal approach and motivator. I think the people who recomend me to others know I'm fair and the jobs perpetuate themselves. I like the 3 hour minimum idea. makes perfect sense. It's not often I have to cut the guys loose early but I sure feel bad when I do. I still remeber being sent home first thing in the morning by the contractor I worked for way back when with no pay. It felt demeaning to be told you weren't needed after getting up , packing a lunch, getting to work on time."it aint the work I mind,
It's the feeling of falling further behind."Bozini Latinihttp://www.ingrainedwoodworking.com
I think there's a provincial labour board rule about a 3-hour minimum for workers who aren't warned in time not to come in to work any given day. Even though those rules legally only applies to employees, I feel it is the ethical thing to do so I do it. I suppose I could send him to my shop and ask him to noodle around for three hours counting nails and screws and 2x's or sharpening the saws...but I don't have that 'corporate' a soul.
By the time a man gets his arse outta bed, makes his breakfast and packs his lunch, and drives here or to the site, he's already spent at least 1.5 hours on me he wouldn't otherwise have spent. If I send him home, he's gonna spend more time on the way back, and there's the gas for his ride, too.
Dinosaur
How now, Mighty Sauron, that thou art not broughtlow by this? For thine evil pales before that whichfoolish men call Justice....
hvtrimguy,
I live outside Albany. What is the name of your company?
"May the forces of evil be confused on the way to your house." -George Carlin
My company name is Ingrainedwoodworking Inc.I live in Saugerties which is just north of kingston.where about are you located? I'm assuming not chicago.later,Jason"it aint the work I mind,
It's the feeling of falling further behind."Bozini Latinihttp://www.ingrainedwoodworking.com
I figure their overhead is 50% of their wage so 150% covers their cost. to get profit I need to add 20% on top of that so 170% roughly. But we use fixed price contracts with variable (Perceived Value) mark-up so some things are marked up much more and others as low as 15%.
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"You cannot work hard enough to make up for a sloppy estimate."
You need to scroll the business folder for other discussions on mark-up and profit. Also Google for M stone's newsletter by that title.
There is a great difference between markup and profit. You seem to be confusing the two.
You need to calcualte for your own company what your labour burden is as a fist step. Too many times, a markup of 50% means you are losing money because you don't know whether your burden is more than that or not.
Make your markup fit YOUR costs plus the profit you need to make to have it be worthwhile to remain in business. Basing it on what ANYBODY else gets is insane.
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Taunton University of Knowledge FHB Campus at Breaktime.
where ...
Excellence is its own reward!