# Does this seem right..........



## Driftweed (Nov 7, 2012)

Frank makes a very good point about factoring in volume. Very underestimated thing if you ask me. I can do 10 $500 jobs and come out making more than someone who does 1 $5000 job. Both done in same timeframe, etc... About 4 months ago I was discussing this very point with a fellow contractor from another forum. We compared our 2 markets (high volume rentals vs high end residential). He was shocked at the long term numbers.


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## FrankSmith (Feb 21, 2013)

Driftweed said:


> Frank makes a very good point about factoring in volume. Very underestimated thing if you ask me. I can do 10 $500 jobs and come out making more than someone who does 1 $5000 job. Both done in same time frame, etc... About 4 months ago I was discussing this very point with a fellow contractor from another forum. We compared our 2 markets (high volume rentals vs high end residential). He was shocked at the long term numbers.


I am more specifically talking about how a companies actual volume for the year compared to their projected volume effects how much money is available to cover the overhead budget more so than how jobs are coming in. In the example I gave, if the volume manages to double the multiplier can be reduced to 1.21.

That means if a jobs cost is 100,000 you could sell it for $121,000 compared to the anticipated 158,300. If a business is that small and a trend develops where way more highly subbed jobs are coming in it is very possible to have a seller year where volume doubles. Of course it would be better to double volume and keep your multiplier as is. If volume is down it creates huge probables even if jobs are sold right where they should be. 

Any ways this all comes down to the fact that doing math and making money are fundamental skill of people in business. You have to have a plan but as important as the plan is the ability to adjust and capitalize on real circumstance. When jobs are coming in behind or I have to sell them low I don't get that stressed out. I change my overhead budget mid year and or ramp up volume. It always works out. When volume is down however I get very uncomfortable. 

So the reason I don't like such firm advise or harsh warnings against those who don't follow it is that the advise is massively limited and is as likely to put someone just getting started out of business as it is to help them succeed. We need to be hear to help each other operate successfully and with confidence. When you figure out the jobs can come in behind the target budget and you can still have a record year for profit it is liberating.


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## thehockeydman (Dec 19, 2012)

Metro M & L said:


> There must not be any mexicans in alberta. With #s like yours there will be. I can here the burrito wagons rumbling by on the interstate; remember what the going rate was in 1982? Thatll be the new normal. PROGRESS.


Doubtful. As a born and raised Prairie Boy, I've seen plenty of immigrants come in to Canada. They pretty much all hate the cold. Doesn't matter if they're from Mexico, Africa, Asia, or Europe. Even a lot of Americans hate it. In my short 22 years, I've seen a _lot_ of immigrants leave higher paying jobs in the trades, to take much lower paying indoor jobs with temperatures they can handle.

That being said, some do manage to tough out our winters. And while some are hacks, some do great work and charge accordingly. There's plenty of white guys like me who are hacks and give lowball prices. And there's a decent number of ethnic workers I'd enjoy working alongside. Just goes to show you can't judge quality of work by race.

I genuinely believe that that our freezing weather, along with having no developing nations on our border, has made it so we face much less of a problem of foreign workers dragging down our prices. The ones that can handle the cold and can do decent work have no reason to dramatically lower the price, since they can justifiably charge a decent rate.


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## FrankSmith (Feb 21, 2013)

EthanB said:


> I took a $15k hit last year because I didn't realistically project what would happen to my overhead when I upped my gross by 20% and I thought I was too busy to sit down and recalculate a few months later. That was dumb. By the time I did, I had signed enough jobs that I worked at that margin for nine months.



If your increased your sales for the year by 20% and used the same multiplier I would assume you would have 20% more money to operate your business(overhead) as well as 20% more profit. The only way I can see a loss occurring is if you attempted to increase sales but left your overhead budget at its previous level there for reducing your multiplier. I would not imagine this would be the case because it would be doing more work for the same profit. That of course is not the goal. Either way there would be an overhead budget in place and volume should be the only thing that effects if a loss occur assuming the jobs are coming in on budget.


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## EthanB (Sep 28, 2011)

In that instance, my overhead spiked quite a bit more than I had anticipated, largely because I ended up spending a lot less time with my bags on. A fair bit of my overhead, at that time, should have been paying for my management wages. Over a period of nine months I allowed less than I should have and it resulted in me having $15k less profit than I should have had. I always subtract job costs first, then overhead, then profit. The $15k was really a overhead shortfall that should have paid for my time running the business and managing the projects.


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## FrankSmith (Feb 21, 2013)

EthanB said:


> In that instance, my overhead spiked quite a bit more than I had anticipated, largely because I ended up spending a lot less time with my bags on. A fair bit of my overhead, at that time, should have been paying for my management wages. Over a period of nine months I allowed less than I should have and it resulted in me having $15k less profit than I should have had. I always subtract job costs first, then overhead, then profit. The $15k was really a overhead shortfall that should have paid for my time running the business and managing the projects.


If you manage projects you should be a job cost even if your bags are off. If you manage employees who manage projects you are overhead. In that instance the project managers working for you deal with additional man power on their jobs and schedule subs. Even if you are not personally building the project, but your time is going to it, it should count as a direct job cost. The project can't be done without that time. 

Time spent building or managing projects is a job cost. Aside from that there should be a planed amount of time per week that is spent running the business. This portion of pay is salaried. If you are working your way out of the field and will be paying employees to manage jobs, you increase the time spent per day or week as well as the portion of your wages coming from salary vs hourly. Eventually all your wages are from salary and you manage employees but not projects. So far I have tried to work 40 hours a week in the field and 10 hours a week managing the business. Of that 40 hours a week some times I spend all 40 with my bags on and some times none. Regardless I am in the field making sure the jobs are on track. 

Even if you sub out entire projects you have to have a budget for managing it. All types of projects require a different amount of time to manage. That has to be costed to the job directly to have a proper understanding of where the money is going and what to charge for a job. For example I personally make an appearance on all of me interior jobs every day and make sure I am there the first time a subs shows up. This is not necessarily true of an exterior job. If a painter will be working outside I make sure the customer know they are coming and if there is anything they need to do or know. I talk to the sub at the end of the day. I might not see it that day as long as I trust my sub and see it before I bill for it. The point being interior jobs require more of my time to manage. The are budgeted for accordingly. 

If you spent less time with your bags off but you where still managing projects rather than the business, I would say you are underestimating labor for the job not overhead.


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## pcplumber (Oct 12, 2008)

I don't understand all this forecasting your overhead and making adjustments according to variables. It sounds like you are adjusting oil prices for OPEC. I shoot for the highest price I think I can get for every job and do my overhead calculations at the end of the year. Really, I never calculate my overhead. All I really care about is my net profit. I think I sort of understand that when you are bidding jobs you may think that you will get more jobs when you lower your overhead, but at the same time you get more jobs I would think you are mistakingly leaving money on the table. That is why I don't pre-calculate overhead. We've been bidding jobs near $1 million and we do put in a number of about 3% to 5% for overhead and this overhead does not include tax burdens. 

Regardless, after my current underground utility job is finished I am breaking up with my construction partner and I will not do any more new construction. I am too spoiled with the small jobs that are finished in 1 to 3 days and I passionately hate having a partner.


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## Calidecks (Nov 19, 2011)

pcplumber said:


> I don't understand all this forecasting your overhead and making adjustments according to variables. It sounds like you are adjusting oil prices for OPEC. I shoot for the highest price I think I can get for every job and do my overhead calculations at the end of the year. Really, I never calculate my overhead. All I really care about is my net profit. I think I sort of understand that when you are bidding jobs you may think that you will get more jobs when you lower your overhead, but at the same time you get more jobs I would think you are mistakingly leaving money on the table. That is why I don't pre-calculate overhead. We've been bidding jobs near $1 million and we do put in a number of about 3% to 5% for overhead and this overhead does not include tax burdens.
> 
> Regardless, after my current underground utility job is finished I am breaking up with my construction partner and I will not do any more new construction. I am too spoiled with the small jobs that are finished in 1 to 3 days and I passionately hate having a partner.


Yep, if I'm having to calculate my overhead to see if I'm going to make money, I'm cutting it way to thin.


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## EthanB (Sep 28, 2011)

I'd suggest that you two guys(PC and Mike) know your actual costs so well, after decades in the business, that you know exactly how low you can go and you know your market well enough that you know how high you can bid. That's not something a lot of us know without doing the math, whether it's do to being a new business, changing the business, economic downturn, whatever.

I do know that if I were to guess the price of the next five jobs I look at, I'd most likely be low on four of them. It's my inclination. My market is also pretty tight so if I overbid a job by much, it's gone. If I do the math(correctly) and use the numbers, I can make what I want to make. Every time I see the end number I think "That's way too high" but I know it's what it has to be.


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## CarpenterSFO (Dec 12, 2012)

If this is your first bid, and you are positive that you can make money on it, and you are certain that you can get the job for that number, and you trust that guy's advice, then you are in a typical starting position and you should bid the job at that number. You'll run the same risk as everyone else starting out, that you've missed something important, and you'll lose some money, or make much less than you expected.

You will put yourself in a way-above-average starting position if you account for every penny you spend on the job, every mile you drive, every minute late at night you spend on the computer; if you pay your workers comp premiums as soon as possible (can you make multiple payments in the period?); pay any tax obligations in the same week as you make payroll; and do Ethan's math (L+M+O+P) as you go. That math isn't just a prescription for bidding, it's an immutable truth, and the question at the end will be this: Is P greater than zero, and if so, is it enough for you to stay in business? If you keep your accounting clean and up to date (think about finding a bookkeeper or accountant) then you will know where your business stands on a continuing basis, and you can use L+M+O+P to bid jobs.

Some guys (Mike, e.g.) are in a position to bid differently. Mike is selling a unique product, and he can price his work accordingly.

Whether your specific number makes any sense for you, no one here can tell you. The guy may be giving you his best, honest advice, but that still doesn't mean that it's right for you. You'll know when you're done, as long as you keep those books. Let us know how it all comes out.


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## pcplumber (Oct 12, 2008)

EthanB said:


> I'd suggest that you two guys(PC and Mike) know your actual costs so well, after decades in the business, that you know exactly how low you can go and you know your market well enough that you know how high you can bid. That's not something a lot of us know without doing the math, whether it's do to being a new business, changing the business, economic downturn, whatever.
> 
> I do know that if I were to guess the price of the next five jobs I look at, I'd most likely be low on four of them. It's my inclination. My market is also pretty tight so if I overbid a job by much, it's gone. If I do the math(correctly) and use the numbers, I can make what I want to make. Every time I see the end number I think "That's way too high" but I know it's what it has to be.


I agree with you 100% when you are bidding a tight market. We have been bidding large jobs for the past year and we have not landed one new job out of about 35 bids. We have been playing with the overhead number because on a huge job we want to do the same as you and that is to get the job. Two weeks ago, I bid a very simple plumbing job for $31,000 and two other plumbers bids were $14,800 and $15,100. Those low number breaks my heart, but if that is what the market bears then that is a reality I have to learn to deal with.

I am very serious when I say that my problem is I am spoiled and it is psychologically very difficult to come to the reality that I have to come down to earth and sharpen my pencil.

My thoughts were that overhead should be a constant number, but later I realized that you are right because when you do larger or smaller jobs, or different types of work the overhead percent does change.


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## sailfish27 (Jan 25, 2014)

FrankSmith said:


> I don't know how you know this. I don't even talk about income with my close friends who operate business. Even when I know someone doesn't do well I have no idea how they structure their personal finances and deal with their spouse. I feel it is kind of out of line coment.
> 
> There are a few additional things I will mention
> 
> ...


Exactly!

It's frustrating when people throw around the phrase ''lose money"
when someone here mentions lowering their profit a little to obtain a job and stay busy. It's not "losing money". You are still paying the bills and making a profit. "Losing money" is pricing a job below cost, totally different than making a small profit instead of a large one. 

We all want to make the largest profit possible on every job but the reality is the only important number is the one at the end of the year. In order to maximize that number some of us have to lower our profit on some jobs rather than not work.

To the OP, if you get the job, win or lose, you'll at least know where you stand for the next one.


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## Inner10 (Mar 12, 2009)

Californiadecks said:


> Yep, if I'm having to calculate my overhead to see if I'm going to make money, I'm cutting it way to thin.


I hear ya but it pays to take a step back and look at a job and break down your hard costs every once in a while. It can be a shocker sometimes.


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## Spencer (Jul 6, 2005)

You have to take the comment about coming in 10-15% below the top of the market with a grain of salt. That has to be taken IN LIGHT OF your own hard numbers. 

In most any given market, especially construction, 90% of the business will not be there in 10 years. I don't put a lot of stalk in the competitions numbers because in reality most of them are cutting their own throats. It can create a giant false illusion by using "going rates."

That being said. I agree wholeheartedly about knowing the "going rates" or "what the market will bear" so as to not leave money on the table.

If a company with employees went head to head with me on some projects with me being a one man show they would loose their shirts because I can work some jobs much more efficiently than they can. 

And visaversa there are some jobs I just cannot compete on even if I am matching or even getting jobs at a higher rate than the competition because I am not either skilled or equipped to make money at it. That is one reason I don't do much custom built in cabinetry, if I went even with the top of the market price I would be out of business i no time because the market is to competitive here and I am not properly equipped. To heck with coming in 10-15% lower than the top of the market.


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## FrankSmith (Feb 21, 2013)

pcplumber said:


> I don't understand all this forecasting your overhead and making adjustments according to variables..


The point is that if you have a budget of $300,000 to operate the business for the year but volume is down replacing the truck might have to be taken off the budget for the year and you still make the target profit for the year. I was responding after Ethan mentioning that he took a 15k hit because he didn't calculate his overhead increases. In his instance he was doing 20% more volume, which should have produced more money to run the business and more profit. In all reality the profit increase should have been huge because overhead shouldn't grow by 20% in once year even if volume does. It worked out opposite. That was after many rants about m+l+o+p=p. I still say that is a tool worth mentioning but it is limited and potential bad advise.


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## Calidecks (Nov 19, 2011)

Inner10 said:


> I hear ya but it pays to take a step back and look at a job and break down your hard costs every once in a while. It can be a shocker sometimes.


Yep, where a lot of guys screw up is not taking a good look at their indirect costs.


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## EthanB (Sep 28, 2011)

FrankSmith said:


> The point is that if you have a budget of $300,000 to operate the business for the year but volume is down replacing the truck might have to be taken off the budget for the year and you still make the target profit for the year. I was responding after Ethan mentioning that he took a 15k hit because he didn't calculate his overhead increases. In his instance he was doing 20% more volume, which should have produced more money to run the business and more profit. In all reality the profit increase should have been huge because overhead shouldn't grow by 20% in once year even if volume does. It worked out opposite. That was after many rants about m+l+o+p=p. I still say that is a tool worth mentioning but it is limited and potential bad advise.


If you're talking about me having "many rants" about L+M+O+P then I would like to point out that the reason I made a lot less in that time period is because I DIDN'T sit down and run those numbers. That was the whole reason I shared that information.

I have yet to see a good reason for not doing those calculations even if it's only to determine a minimum price, as Mike suggested. There are plenty of reasons to find that number and then adjust the price for another reason, such as a slow time of year, having multiple product lines that sell for different markups, etc. but you need the number even more if you're varying your prices, IMO.

As I said earlier, some people are able to guess a price and come out ahead, many can't. If you take a guess then you won't know what you're making until after the job is done, and if you haven't figured out your monthly overhead you won't know it until tax time. If you figure out your costs ahead of time, either in your head or on paper, then you have a good idea of what you're going to make before you even sign the contract.


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## FrankSmith (Feb 21, 2013)

EthanB said:


> As I said earlier, some people are able to guess a price and come out ahead, many can't. If you take a guess then you won't know what you're making until after the job is done, and if you haven't figured out your monthly overhead you won't know it until tax time. If you figure out your costs ahead of time, either in your head or on paper, then you have a good idea of what you're going to make before you even sign the contract.


You are presetting it softer as the conversation goes. You make it sound as though the guys above used to do this until they new their numbers so well. If that was the case they would have said "I remember having to do all this". That's not what they where saying at all. I don't care if you use it and how rigid you are about it. I just don't think presenting it to up and coming guys without a lot of further warning and examples is wise. 

Here are two examples of projects both 16 man hours with a multiplier of 1.55 that might be performed by a residential contractor. A 16 hour job could be completed 125 times in a 2000 hour year.



Project 1- Rebuild 4 rotten storm windows for a customer in a historical home. Reglaze and paint.

16 hours labor at $40 an hour cost = $640 

$230 material

$0 sub

total cost $870 x 1.55= $1,348 ($478.5 overhead and profit) 

One guy doing this job all year could produce 168.5k a year


Project 2- Replace counter tops with courts, appliance, light fixtures and pulls in kitchen

16 hours labor at $40 an hour cost = $640 

$4,300 material

$5,100 sub

total cost $10,040 x 1.55= $15,562 ($5,522 overhead and profit) 

One guy doing this job all year could produce 1.94 million a year


I worked for a remodel for 7 years whose multiplier was 1.8. That makes the difference even more dramatic. 

The problem with the formula is it treats material, subs and labor equally. They are not. Particularly for a one man show. 

I could talk for days about how using that formula can cause a person to miss out on opportunities to use there time to make more money. Like i said above. If it is working well for you that is a good thing. It just needs to be explained way more to some one who doesn't understand how these things effect their business, especially a new business.


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## EthanB (Sep 28, 2011)

If you think I'm backpedaling then you're reading my posts wrong. I have presented two ways for someone that I have never met to establish their pricing. I also recommended a book that covers one of the methods in great detail. You have mentioned a couple times that it's a bad idea to recommend this method without a lot more info. Yeah, that's why I listed a friggen' BOOK on the subject.

You've gone on and on about what you don't like about L+M+O+P, that's fine. Aside from typing all those reasons, here's what you recommended.



FrankSmith said:


> Figure out the going rate for people doing the quality of work you will do and start off 15-20% less. If you can't sell work reduce it, if you sell work easily increase it. Do this and figure out what kind of volume you can do. At that point you can identify what kind of money you have for overhead and profit. Create a budget for overhead that is in line. This is how a person will know what kind of shop they can have and how often there vans or trucks will get replace. It is the market telling you your numbers and I find it to be a much better we to get started. If I would have started by calculating my overhead and charging accordingly I would have undercharged for every job and restricted all growth. I probably would not have made it. I let trial things work themselves out and by year three I was shocked at what kind of money was coming in.


That sounds a hell of a lot like guessing to me. It worked for you, great. So what happens if you find out after your first job that you just worked for peanuts for a month? Are you just going to guess again or are you going to pull out a calculator and try to figure it all out?

On a final note, your examples in the last post aren't remotely what LMOP is about. It's a straw man argument. A business projecting $168k in business per year, self-performing all the work wouldn't use the exact same numbers as a business doing $1.94 million heavily using subs.

I don't think this is really helping the OP any more and you certainly aren't interested so I'm going to move on from here.


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## Spencer (Jul 6, 2005)

FrankSmith said:


> Here are two examples of projects both 16 man hours with a multiplier of 1.55 that might be performed by a residential contractor. A 16 hour job could be completed 125 times in a 2000 hour year.
> 
> 
> 
> ...





> *The problem with the formula is it treats material, subs and labor equally. They are not. Particularly for a one man show.*


Amen. Amen. Amen.

I went through this starting out when I read "Markup and Profit." Sure it is a great book but as I sat down and read it I saw the same flaw that you just pointed out in your two examples and that is, how the heck do you know what kind of jobs you are going to sell for the year in the remodeling business? I can see using the formula if you're say framing sub, where things stay pretty consistent. But how can you use it when you are a one man show who bounces from labor only jobs, to high end tile showers and bathrooms. How much money you make is completely left up to the luck of what jobs you land that year. I haven't ever been able to see how the whole multiplier idea would work in my business at this time.

I have found much more success in basing my prices on a variable that I actually know with a measure of certainty is going to be accurate at the end of the year and that is HOURS WORKED PER YEAR.

I figure my overhead, profit, and salary that I want for the year and then divide that by the realistic number of billable hours I will work that year. That is my hourly rate, although I bump mine up because I can still get more in my market.

I then markup all the materials on my jobs for whatever I think I can get on the job. All the income from material markup and hours worked over my billable hours/yr target is gravy money. It is a substantial amount. This has been a very safe way for me to operate and has also been very profitable. The better I get at getting jobs where I can make more money on material markup the better I do.


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## JT Wood (Dec 17, 2007)

KingDHoude said:


> I live in Edmonton Alberta Canada and ive been sub contracting insulation drywall and taping for the past 12 years. I'm trying to start up my own business now and bid and quote on residential jobs.
> 
> If i take on a duplex for Insulation, drywall, taping, texture and attic blow in. I was told to charge $9 sqft(between $7.50-$9).
> The duplex im quoting is 3,344 sqft. Multiplying that number by $9 is $30,096, this is supposed to cover materials, labour, scrap removel , wcb and my overheads and profits. I do not have an office or anything so my overhead isnt much at all.
> ...



its high.....


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## FrankSmith (Feb 21, 2013)

EthanB said:


> If you think I'm backpedaling then you're reading my posts wrong. I have presented two ways for someone that I have never met to establish their pricing. I also recommended a book that covers one of the methods in great detail. You have mentioned a couple times that it's a bad idea to recommend this method without a lot more info. Yeah, that's why I listed a friggen' BOOK on the subject.
> 
> You've gone on and on about what you don't like about L+M+O+P, that's fine. Aside from typing all those reasons, here's what you recommended.
> 
> ...


it is exactly what it is about. Every dollar that runs through a business caries an equal burden of overhead and profit. It doesn't matter if you sell 10,000 (cost) of labor or $10,000 of counter tops your business receives equal overhead and profit. The difference obviously being that one job requires very little of the business time and the other requires a lot. As you mentioned these two businesses wouldn't use the same numbers if they only did one of those kinds of job as their only kind of work. This really proves my point. Most of us don't do just one of those kinds of jobs all year. We would do both of them and many other kinds, and based on everything you have mentioned we would come at them using the same numbers. Of course the variable that makes them so different is potential volume per year based on how many hours they take to produce divided by their volume. 

As far as my advise and taking a hit. At least you would know after a job. I advised to increase someones bid come in higher than what they account for just running the number based on the going rate. At that point adjust based on ability to sell. Still great advise. If it comes in low it comes in a lot less low than if they used there original numbers that where even lower. The way you where running with things you took a hit for 9 months. 

I must now go install windows or I will be having to adjust my multiplier next year to off set my low volume for this year. After all the costs of doing business won't decrease even if I am inefficient.


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## sailfish27 (Jan 25, 2014)

Spencer said:


> Amen. Amen. Amen.
> 
> I went through this starting out when I read "Markup and Profit." Sure it is a great book but as I sat down and read it I saw the same flaw that you just pointed out in your two examples and that is, how the heck do you know what kind of jobs you are going to sell for the year in the remodeling business? I can see using the formula if you're say framing sub, where things stay pretty consistent. But how can you use it when you are a one man show who bounces from labor only jobs, to high end tile showers and bathrooms. How much money you make is completely left up to the luck of what jobs you land that year. I haven't ever been able to see how the whole multiplier idea would work in my business at this time.
> 
> ...


Yes, I couldn't agree more. After working on my taxes, I went back and read M+P for the third time. His numbers aren't even in the same planet as mine. 

Can't work here because of the snow so I thought I would post some of my numbers from last year on a new thread and hope you, Frank and some of the other guys would critique or comment.


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## Spencer (Jul 6, 2005)

sailfish27 said:


> Yes, I couldn't agree more. After working on my taxes, I went back and read M+P for the third time. His numbers aren't even in the same planet as mine.
> 
> 
> 
> Can't work here because of the snow so I thought I would post some of my numbers from last year on a new thread and hope you, Frank and some of the other guys would critique or comment.



Go for it. Just be mindful of not using hourly rates and numbers like that or you might get shut down. Annual numbers would probably be fine.


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## Tinstaafl (Jan 6, 2008)

Good exchange here; I can see valid points on both sides. I tend to favor the formulaic approach for a guy just starting out simply because it forces you to quantify all (or most) of the variables in a way that a seasoned old-timer doesn't need to do [consciously] because he's had enough time and experience to learn some rules of thumb that work.

One aspect of what the market will bear that's only been glancingly touched upon here is that how long you've been in business has a significant bearing on both the volume and profitability you can expect. The impact of repeat customers, referrals and general reputation can be difficult to quantify, but is very real. Matter of fact, that's probably the single largest factor that prevents a solely formula-based approach from being a one size fits all solution.


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## ohiohomedoctor (Dec 26, 2010)

If you sell at 1.8 all year and dont make money then the problem is you, and not your numbers.

My advice to the young guys is during your first year, figure your costs as close as possible then x2. The first year will be full of suprises and costs. If you make it past the first year, then get busy learning the numbers and reading books. 

If you cant sell at x2 with almost 0 OH and self preforming alot of the work, you will never be able to sell when your true numbers start to develop.


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## TNTRenovate (Aug 19, 2010)

sailfish27 said:


> Exactly!
> 
> It's frustrating when people throw around the phrase ''lose money"
> when someone here mentions lowering their profit a little to obtain a job and stay busy. It's not "losing money". You are still paying the bills and making a profit. "Losing money" is pricing a job below cost, totally different than making a small profit instead of a large one.
> ...


It's relative to target. I have a min margin, target margin and like Mike a sky high I'll never get this one margin. 

If I come in below my target I have lost money. My projections and budgets are based on my target.

But my price is my price. I don't negotiate after giving my price.


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## sailfish27 (Jan 25, 2014)

TNTSERVICES said:


> It's relative to target. I have a min margin, target margin and like Mike a sky high I'll never get this one margin.
> 
> If I come in below my target I have lost money. My projections and budgets are based on my target.
> 
> But my price is my price. I don't negotiate after giving my price.


I get what your saying, I say the same thing. Oh, "I lost money on this job". The reality is for someone like myself, that does most of the work it would be practically impossible to literally lose money on a job. Coming under target, yes, too often. Losing money never. 

The other misconstrued word is profit. I can make a huge profit on every job, all I have to do is take less of a cut in salary. 

I know it's just semantics but words have meanings. Some people really think their "losing money" by taking a job below their target. For the small guys like myself who do a lot of the production the only way I can lose money is by staying at home.


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

You sure about that sailfish?


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## Calidecks (Nov 19, 2011)

sailfish27 said:


> I get what your saying, I say the same thing. Oh, "I lost money on this job". The reality is for someone like myself, that does most of the work it would be practically impossible to literally lose money on a job. Coming under target, yes, too often. Losing money never.
> 
> The other misconstrued word is profit. I can make a huge profit on every job, all I have to do is take less of a cut in salary.
> 
> I know it's just semantics but words have meanings. Some people really think their "losing money" by taking a job below their target. For the small guys like myself who do a lot of the production the only way I can lose money is by staying at home.


If I normally make 10000 on a job and on this one I made 9000 because of a phuck up. How is that not losing 1000 dollars?


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## FrankSmith (Feb 21, 2013)

If you charge for the material and your labor and there is not enough money to cover the business overhead then money was lost and no profit was made. You can say, well I still got a pay check but that is thinking like a bad employee not a good business owner. The only reason people think they don't loose money as a business is because they are pretending they have no labor costs.


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## blacktop (Oct 28, 2012)

TNTSERVICES said:


> But my price is my price. I don't negotiate after giving my price.





:thumbsup:......:thumbsup:


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## sailfish27 (Jan 25, 2014)

Californiadecks said:


> If I normally make 10000 on a job and on this one I made 9000 because of a phuck up. How is that not losing 1000 dollars?


You just said "made" 9000. That's the opposite of "lose". You can't make and lose simultaneously. 

A 10,000 job with my numbers looks like this. 


material =3,300
L/O/P =6,700


Job Costs

Material 3000 
Labor 1783 8.3 days at 213/ for helper


Actual Job Cost =$4,1783 

For me to lose money on this job I would have to bid less than half the value of the job. I like an occasional drink but not when I am bidding on work.

Now, I know what everyone's thinking where is overhead, profit, owners salary. If I were to do this 10000 job for only 4,178 I make no profit and work essentially for free. I haven't actually lost money unless you figure in my overhead at 100/day. If I choose not to take this job at 4,178 and stayed at home my overhead expense would be pretty much the same. 


My break even on this job would be 4,178 + OH =5,883 anything over that I made money. That doesn't mean I would take this job for 7k or 8k I'm just saying in order to actually "lose" real money, not factoring in "opportunity cost" I would have to really phuck up.


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## sailfish27 (Jan 25, 2014)

FrankSmith said:


> If you charge for the material and your labor and there is not enough money to cover the business overhead then money was lost and no profit was made. You can say, well I still got a pay check but that is thinking like a bad employee not a good business owner. The only reason people think they don't loose money as a business is because they are pretending they have no labor costs.


Yes, I agree with your sentiment and theory. I am just arguing semantics just to make a point. If someone chooses not to work instead of taking on a job with small profit they still pay roughly the same overhead. If you are a 2 horse operation like me anything over job cost >50% is compensation. 

Now I am not suggesting working for less I personally would rather stay home than take on Mike's job at 7-8k even though I would be technically "making" money. The reason is "opportunity cost". I know as well as you guys that even though I can make money on Mike's job at 7-8k I have just lost the opportunity to make even more from another job.


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## TNTRenovate (Aug 19, 2010)

sailfish27 said:


> You just said "made" 9000. That's the opposite of "lose". You can't make and lose simultaneously.
> 
> A 10,000 job with my numbers looks like this.
> 
> ...


It's still a loss. Simply put, something taken away. If I normally charge 10k but have to charge 9k I have a loss of 1k. I have effectively lost 1k. Lost is the past tense of loss.


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## BamBamm5144 (Jul 12, 2008)

TNTSERVICES said:


> It's still a loss. Simply put, something taken away. If I normally charge 10k but have to charge 9k I have a loss of 1k. I have effectively lost 1k. Lost is the past tense of loss.


Not necessarily.

Do the job for 9k and work for the week or quote out at 10k so you sit home for the week and lose 4k.


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## ohiohomedoctor (Dec 26, 2010)

Id rather make 3k 5 times a week than 10k once..


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## Calidecks (Nov 19, 2011)

If a phuck up causes me to lose money it doesn't matter what I profited on the job I still have a loss caused by a phuck up.


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## TNTRenovate (Aug 19, 2010)

BamBamm5144 said:


> Not necessarily.
> 
> Do the job for 9k and work for the week or quote out at 10k so you sit home for the week and lose 4k.


I never said anything about sitting at home. I just said that it was a loss.


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## Tinstaafl (Jan 6, 2008)

You guys are playing at semantics. Forfeit the job and you make zero.

Earn a little more, earn a little less, you're still making money vs sitting on the couch.

Try claiming that loss with the IRS. :whistling:


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