# need help labor rate and mark up/ firestopping



## firestop101 (Jun 27, 2015)

Hi everyone,
So I have some questions about my labor rates and material mark up.
Not sure If im in a safe margin or leaving money laying all over the place.

My company is a sole source firestop company. we also do patch work mechanical insulation as well as fireproofing. We have 2 of 9 people in the world who are IFC certified firestop inspectors and do 100% healthcare work. Also we are a union shop so my labor cost is up the a$$.

So i've calculated that if I have one man working full time (2080 hours a year) that my total overhead (insurance,shop,labor rate for him, etc etc) is about $72.00 per hour. I currently charge $88 per hour for the first guy on site, $79 per hour for the second and $67 for every additional technician.

On materials I am doing a 20% mark up on all materials shipped to site or shop. 30% mark up on materials requiring pick up by my guys. and 100% on the tiny crap from menards since its a pain in the a$$.

Now I have no idea is this is truly reasonable or if im cutting my own throat. I believe other contractors signed to the same locals as us charge $95-$115 per hour but don't know for sure.

Business is growing exponentially now sending us into 7 hospitals in the next two months with ALL time and material work......

Any input would be GREAT. My labor cost with Wcomp etc. is about $52.00 hours for my guys.


Thanks for any advice in advance!


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## Framer53 (Feb 23, 2008)

Raise your prices 10% and see what happens. if no one complains then raise them again. Soon you will know what you can charge.


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## firestop101 (Jun 27, 2015)

hmmm.... see i did the math and if three guys are working im paying out $23k a month (including overhead) but only taking in $15k (not invluding material mark up so ill be going into the red.....ugh


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## Pearce Services (Nov 21, 2005)

I am concerned that you have figured your overhead at 72/hour and labor cost of 55 per hour and are only selling at 88 per hour.

If you are really 22% of all the certified techs in the country, that means you are a specialty and should be in high demand. Your pricing should reflect this.

You should be $165/hour or more just because of the value of your service.

You need to add up all your billable hours for all your techs, subtract non billable hours, paid holidays/vacation/sick time etc, then divide your billable hours into your overhead.

I think you need to be sure you have properly calculated your overhead.


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## firestop101 (Jun 27, 2015)

How I calculated overhead was i took employee cost appr $52 x 2080 hours annually, office expenses, fuel, insurance, phones, etc and then divided the grand total by 2080 hours. 

Not sure if ive done this right at all. i cant get in with my CPA until two weeks out but am negotiating new deals next week...

Do you know of reading material or formulas for accurately calculating overhead and cost?

Might sound like a dumb line of questioning but things are growing faster than i anticipated.


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## pcplumber (Oct 12, 2008)

firestop101 said:


> Hi everyone,
> So I have some questions about my labor rates and material mark up.
> Not sure If im in a safe margin or leaving money laying all over the place.
> 
> ...


If I am correct, you are saying that your cost for labor with overhead, taxes, etc. is $72 and you are charging $88. You are making a profit of $16 per hour times 8 = $128 per day profit for one man. 

We are going back to the same questions we had in a thread about markup last week. Your goal when doing your calculations has to be to pay yourself for your time and your worth. Are you willing to put in 12 hours a day, like most bosses should, to earn $128 times the number of employees you have working on any particular day? I AM NOT!

I will not risk my money, risk someone getting injured or killed on the job, traveling to the job, or a customer injury or death, or the construction liabilities nor will I subject myself to the stresses of dealing with employee problems, customer service, insurance companies and claims, licenses, permits, inspections, etc. for a small amount of money.

What makes your calculations even worse is you based your numbers on 8-hour days, 5 days per week and for 52 weeks. That would be great if we lived in the perfect and ideal world, but we have holidays, sickness, days in between holidays, full and partial days employees cannot work many reasons including things like available access to job sites, unavailable materials, late deliveries, waiting for inspections, waiting for RFI's and change order approval, vacations, etc.

We try to give flat-rate prices and bill at $240 to $350 per hour. We only use an hourly rate when we have to and we try to get $95 to $150 per hour plus a 15%, 20%, 25%, or whatever percent we can.

In the plumbing business we figure that an employee cannot accumulate more than an average of 4 billable hours per day and this is based on the reasons above. We also calculated what we should be charging based on an employee earning $75,000 per year with benefits, 4 billable hours per day and we always come up with an hourly charge of $280 to $340 per hour. Plumber's Success International has several workshops every year. They have about 70 people calculate this hourly charge and those are the numbers they come up with.

The prices many business owners charge is based on how each owner perceives things that are identical. Someone can give you all the facts and the way you perceive what the correct pricing should be is different than what other people perceive. For example, many years ago (and even today) I did a specific job and perceived that the correct price for that job was $1800. I thought I was on top of my game. I thought that my price was high and I was making a profit of about $15,000 per week. Many people told me that my price was too low and I didn't care because I was rolling in dough. Then, one day one of my my employees charged $3,200 for the same job. My eyes opened up. I felt stupid for cheating myself for the past several years. From that day, we charged $3,200 for that job and we sold even more jobs than before because I pay my employees a percent of all jobs and a commission on $3,200 is a better motivator.

I don't know all the facts, but it appears that your prices are too low.


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## ScipioAfricanus (Sep 13, 2008)

Next time you calculate anything for our business, calculate the cost of an accountant or experienced business manager because this stuff is way over your head.

This will be money well spent.

Andy.


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## firestop101 (Jun 27, 2015)

my wife is the business manager but i didnt add in our cpa....i did calculate our office manager...****.


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## firestop101 (Jun 27, 2015)

the plus side is your responses are showing me i really have been basing my information on the wrong information. my CPA is calling me in a minute.

I greatly appreciate the input.


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## firestop101 (Jun 27, 2015)

*Update:*

So I got our CPA on the phone and i had left out some pretty important items
i.e new tools, equipment depreciation,right amount of taxes, etc.

With full labor burden i now have it at about $127.26 per hour.

Thanks for the help.


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## griz (Nov 26, 2009)

Your rates are way too low.

This is a very comprehensive list of overhead items courtesy of *480sparky*.

Business Cost List

Building
Building
Warehouse Space
Trash Removal
Lawn Care
Snow removal
Upkeep & Repairs

Office Expenses
Computers
Stationary
Copy machine
Fax machine
Forms
Printing
Software
Office Equipment
Computer maintenance
Files
Postage
Office Supplies

IT
Internet service
Email accounts
Web site
-Initial creation
-Updating
-Maintenance
GPS services

Benefits
Vacation Pay
Holiday Pay
Uniforms
Uniform Maintenance
Unemployment
Bonuses
Incentives
Retirement Plan
Christmas Party

Taxes
Property Taxes
Tangible Taxes
Pay Roll Taxes
Income Taxes
Sales Tax

Training
Management Training
Office Training
In-House Training
Tech Training
Mfg. Training
Training Equipment
Safety Training
Update classes
License testing
OSHA compliance
RRP compliance

Insurance
Building Insurance
Liability Insurance
Employee Insurance
Life Insurance
Business Insurance
Workers Comp.

Utilities
Gas
Electricity
Telephone / Fax lines
Internet Service
Toll Calls
Telephones
Pagers/Cell Phones
Radio Maintenance

Vehicles
Vehicle Maintenance
Ladder Racks
Interior bins
Fuel
Truck Signs / lettering / vinyl
Tires

Financial
Accounting
Loans
Tax Preparation
Interest
30+ Day Receivables
Bank Charges

Travel
Hotel
Meals
Airline / vehicle

Unique to the electrical trade
Permits
Licenses
Bonds
Inspections
Trade Association
Subscriptions
Memberships
Dues
Retainers
Safety PPE
-Lock-out/Tag-out kits
-Fall prevention harness
-Arc-flash clothing
-Hard hats
-Safety glasses
-Hearing protection

Tools
Company Tools
Safety Equipment
Ladders
2-way Radios
Test Equipment
Replacement Parts
Parts Storage
Damages
Tool Replacement
Job site storage

Misc.
Trips to Supply House
Theft
Uncollected Money
Collection fees
Unbillable Hours
Commissions
Call Backs / Warranty work
Shortages
Bad Checks
Delivery
Credit Card Sales
Drug Testing

Legal
Legal advice
Law Suits
Incorporation / LLC fees

Advertising
Marketing
Business cards
Signs
Radio / TV
Newspaper
Flyers / brochures
Material Purchases
Inventory

Labor
Wages
Salaries
Dispatcher
Answering Service


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## Metro M & L (Jun 3, 2009)

If you buy a candy bar from a convenience store you are paying 50 percent mark up. Given that you save people from dying in a fire I think you warrant at the absolute rock bottom least deserve that.

More importantly, your trade and your clients have very high barriers to entry to the market and potentially long 90 day payment cycles. Listen to what we are saying, if nobody says no to your price you're not charging enough. You should only close one third of your deals.


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## Metro M & L (Jun 3, 2009)

Another saying I heard on here that I think of frequently, "Busy Busy Busy Bankrupt."


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## firestop101 (Jun 27, 2015)

The network I work for uses the same contractor on all facilities so getting the work isn't an issue as long as productivity matches cost. Theyve actually asked me to not itemize the bill and just give a dollar amount plus its 30 bill cycle.

The advice is great. I sat with my CPA this a.m and finalized everything down to the nail. With my market I can get and safely operate at $117.26


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## pcplumber (Oct 12, 2008)

griz said:


> Your rates are way too low.
> 
> This is a very comprehensive list of overhead items courtesy of *480sparky*.
> 
> ...


This is a good list and close to what they do at Plumber's Success International to come up with their $280- to $340 per hour rate. The difference is; they put a dollar amount on each item and figure that a service employee does an average of only 4 billable hours of work per day due to travel time, customers not being home at the appointment time and customers who don't (or refuse to) pay when no physical service was provided.

When I look at this list I think of it as the cost to run a business and I think I would still need one more section for the wages and profit that I want to earn for myself. 

I don't like to think that I am performing the calculations for my profit like I am a manufacturing company that bases their profit on the volume of millions of parts where the factory makes only 5 cents on each part and still earns $millions.

When calculation my profit the goals I shoot for are:

(a) more than the amount I pay each employee daily, weekly, per job, etc.

b) no less than $2,000 per day for running my company

c) no less than 1/2 of what I pay my employees. 

If I am paying 3 employees $120 per day and I earn only $60 from each employee then that is only a $180 profit for the day and a very small amount of money for running a business.

The hourly amount I pay my employees is not the same as the hourly amount I charge the customer. I am paying my employees $120 per hour as an example and billing the customer at $95, $120, or whatever hourly rate you had to use to pay your employee(s) including the cost to run your company. Then, after calculating the costs I added the amount I want to earn for myself.

The costs for overhead, taxes and to run the business are fairly fixed and there are almost no variables. About the only thing that is variable is the profit you choose to earn. That is why I use my software that is similar to a spread sheet. I enter into the software the fixed costs i.e. insurance and tax percents, overhead percent that covers everything in the list above and all the costs to do the job. After I get my total is when I enter in a total contract amount and I fidget with the contract amount until I get the profit that I want for myself. My goal is to earn $2,000 per day because I can earn that much in my trades. Maybe, other trades can't demand that much, but I want to use $2,000 per day as an example so people realize that a person running a business should be earning many times more than when working for someone else.

To run my business, I get up at about 5:30 a.m., start working in the office at 6 a.m., go in the field until 4 or 5 p.m. (sometimes 9 p.m.) and go back into the office until 8 p.m. six days almost every week and sometimes I work on paperwork on Sunday from 6 a.m. until late in the evening. Even if you have secretaries and accountants, as the owner of the company you still have to go through all the records to make sure everyone is doing what they are supposed to do and there is always office work that only the business owner can and should do i.e. read important letters, read insurance documents, make decisions, write letters, check the accuracy of payroll and all other payments, create systems, design advertising, design forms and many more things.

How much are you worth for all that and that is how you come up with the price you charge your customers.


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## tgeb (Feb 9, 2006)

> I currently charge $88 per hour for the first guy on site, $79 per hour for the second and $67 for every additional technician.


I don't think you should drop the rate for the additional crew members on site. I'm sure the productivity goes way up when you have 3 guys working together.


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## Pearce Services (Nov 21, 2005)

tgeb said:


> I don't think you should drop the rate for the additional crew members on site. I'm sure the productivity goes way up when you have 3 guys working together.


I would have a fixed price per man for a standard technician and a higher hourly rate for the 2 that have the certification. The certification took time to obtain and costs your company money to maintain. This should be compensated for above your $117 rate, even if it is only a $20 bump, it is justified


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## Framer53 (Feb 23, 2008)

tgeb said:


> I don't think you should drop the rate for the additional crew members on site. I'm sure the productivity goes way up when you have 3 guys working together.


Good catch Tom.


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