Costs vs profits (related to billing)

[Anonymity]

Breaking down all of your expenses to a cost-per number is difficult. It took me some college courses to learn how to do it; that’s the best way to figure it all out.

Another option is to pay your accountant to help you figure out what you should be charging, that’s a great way to learn how to do it and to be sure you have good numbers to work with.

Probably the easiest way to figure things out is to work backwards, start with the profit you want to see at the end of the year, add up your projected expenses, your salary included. Divide the total by your estimated number of working hours for the year, and that will be an hourly rate to use.

Unless you’re working with multiple crews, or really specialty equipment, your cost per hour really does not change enough to count whether you’re using everything on a job or not. A skidloader sitting in the shop costs almost as much to own as the same machine working, so you need all your customers to help pay for it.

If you have multiple crews, things can get more complicated, you can bill one crew at a higher rate than another, but if you’re a one crew operation, your costs per hour will basically be the same for each employee, after the first crew member - that one has to cover the cost of the overhead (all your fixed costs, like the phone bill, website, insurance, truck payments…)

As I’ve said in many other threads, hire a good business coach, it will be well worth the money!

That is EXCELLENT! help I believe, seems clear! Easy to understand, something I can work with and build on! Thank you for your answer! Much appreciated!

 

[Anonymity]

No way I'd itemize hours in a quote. I quote how much it will cost to do a job...I have hours and rate in my mind.

I disagree a little with @Reach 's statement: "so you need all your customers to help pay for it." Instead I'd charge more per hour for the clients who "need it". (Exception: if you use it to manage the shop yard...then everyone needs to pay.

What I'd propose:
How many hours per year do you expect to use the equipment. Say 1000. What is your yearly cost? Include: replacement cost (I'd propose cost of new machine/5 ... or 3 if you want to be more aggressive), maintenance, extra insurance, fuel. Let's say $10,000 (I'm just making my math easy!). So that equipment is costing you $10 per hour to use. I'd charge $12-15 per hour to use it.

So quoting a job:
3 crew: $180 per hour
Equipment A: $20 per hour
Equipment B: $15 per hour
It will take 4 hours to do the job..."$860" is all the client sees.

Very good info!!

 

[burtonbc1400]

I have a hard time making enough hours for staff, I generally only pay out $20,000/year.
I've been trying to increase this to keep someone around, but this year I'm trying something different...
I want to minimize staffing, find multiple casuals maybe.

If I need staff, I charge a flat $300/day , aside from that I'm aiming to get:

3500/week
15000/month

$1000/day no cleanup
$600 1st machine+$400 2ndmachine/day (500/machine)

15 days no cleanup/month
10 days 1 machine
7.5 days 2 machines.

Or in practice

7.5 days @ 1000/climbing only
+3.5 days @1500/1 machine
+1.5 days @2000/2 machines
+9 days quoting &/ maintenance

Per tree quotes never work because everything is so different.

Also charging minimums is necessary,
I charge 300 min climbing, 500 min climbing + cleanup. 3 small cutting +cleanup jobs @ 500 = 1500

Sometimes I get the job, sometimes I don't.

How the customer views the rates is the tricky part:

Sometimes it's easy selling 400-500 for an hour or half a day! , but other times it's hard selling 250/hour.

Sent from my SM-G950W using Tapatalk

 

[southsoundtree]

No way I'd itemize hours in a quote. I quote how much it will cost to do a job...I have hours and rate in my mind.

I disagree a little with @Reach 's statement: "so you need all your customers to help pay for it." Instead I'd charge more per hour for the clients who "need it". (Exception: if you use it to manage the shop yard...then everyone needs to pay.

What I'd propose:
How many hours per year do you expect to use the equipment. Say 1000. What is your yearly cost? Include: replacement cost (I'd propose cost of new machine/5 ... or 3 if you want to be more aggressive), maintenance, extra insurance, fuel. Let's say $10,000 (I'm just making my math easy!). So that equipment is costing you $10 per hour to use. I'd charge $12-15 per hour to use it.

So quoting a job:
3 crew: $180 per hour
Equipment A: $20 per hour
Equipment B: $15 per hour
It will take 4 hours to do the job..."$860" is all the client sees.

Would you elaborate on " 3 crew: $180 per hour?

$60/ employee- hour?

 

[ATH]

Would you elaborate on " 3 crew: $180 per hour?

$60/ employee- hour?

Just an example...but in that example, yes.

We each need to figure out our own crew costs.