# my confusion



## Dirtywhiteboy (Oct 15, 2010)

griz said:


> and "entertainment"....:whistling :thumbup:


He's not going to be 15 forever ya know:no:
How old is he now:blink:


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## summithomeinc (Jan 3, 2011)

Dirtywhiteboy said:


> How old is he now:blink:


I was wondering the same thing....


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## JT Wood (Dec 17, 2007)

summithomeinc said:


> I think alot of "contractors" miss that personal income is their salary for being the owner. If they are the person doing the actual work they should also get an hourly wage just like any other employee. So really simplified the customer should pay for materials, any materials used on the job. labor, for anyone actually working on the job. Overhead, all the things that need paid for but don't cover just one job. This includes the owners salary. profit, profit is the companies "paycheck"



That is what I personally do. I make the same amount on my cheque 24 paydays a year. I pay myself the same if I am working on the tools or estimating or even on holidays. The business keeps the profit in the account.

Nick is 15 or 16 though, so I wanted to keep it basic.


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## J L (Nov 16, 2009)

Nick,
Sounds like you've got a handful of questions here. First, I commend you for even thinking about this and for keeping records. You're already way ahead of lots of other contractors.

For the zoom boom - you're likely going to get a loan to purchase one. The whole price wouldn't hit your profits in 1 year. You would get depreciation for a certain number of years but your accountant can tell you this. For my accountant, it is my job to keep accurate records of everything. She helps me sort it out at the end of the year. The better records I keep, the less she charges :laughing:

When running a company, you'll have some expenses that are monthly and some that are yearly. Some examples of my yearly expenses are: home shows (marketing), insurance (GL, W/C, Auto), vehicle maintenance, NARI memberships, tool purchases, etc. Well I total these up and divide by 12 and come up with a monthly number. Then every month I transfer that amount to a certain savings account for when those expenses come due.

So I may do 3 jobs and not have any tool purchases or have to put tires on any vehicles, when they come due there is money there and it doesn't have to come out of the profits from just 1 job.

I was just a bit older than you when I got into construction. My goal was to purchase a new tool for every job. I made less money up front but soon I had a full arsenal of tools. :thumbup:


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## ranteso (Nov 11, 2010)

"at the bottom i have a section for expenses, where i list like this:
$45.68-workboots
$140-Bosch radio "

You see that's the problem, your expenses are all screwed up, 

Beer, Cigars, fishing tackle, guns, ammo, should be the first of the expenses, then stuff related to work goes after that.


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## FramingPro (Jan 31, 2010)

ranteso said:


> "at the bottom i have a section for expenses, where i list like this:
> $45.68-workboots
> $140-Bosch radio "
> 
> ...


screwed up in what sense? i bought a radio with my hard earned money so i can have some more enjoyment (don't know if thats even possible :laughing when working


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## FramingPro (Jan 31, 2010)

summithomeinc said:


> I was wondering the same thing....



16:wheelchair:


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## TimelessQuality (Sep 23, 2007)

Take an accounting class at school if you can...


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## FramingPro (Jan 31, 2010)

TimelessQuality said:


> Take an accounting class at school if you can...


i am


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## Astrix (Feb 23, 2009)

As you’ve already figured out, business accounting can be very complex. That is why many established contractors hire an accountant to do their books. You’ve already gotten some good advice here and taking an Accounting class is a great idea because it will teach you the basic principles of accounting. Once you have a good understanding of the basics, then the finer details will start to make sense to you.

It is difficult to try and decide how to answer your question. On one hand, I know you only need a simple answer because you are just starting out and you don’t have a complex business operation yet. On the other hand, you should learn the correct way of keeping books so that when you do grow into a fully professional operation, you don’t have to un-learn an incorrect short-cut and re-learn accepted accounting practices. 

There are some points that I would like to add to the advice already given. As usual, I am long-winded, so I’m going to split them into separate posts so that they are easier to read. Sorry for the length of it, but as you can see, it is not an easy subject to explain in 25 words or less.


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## Pearce Services (Nov 21, 2005)

I agree about adding up what you spent on tools last year, but do not agree with the fact that it will be less next year as you will already own stuff. 

It seems that everytime I think I have what I need, I find something new that I need, or have to replace something I already own. 

Have a yearly allowance for tools, and divide it equally into all your jobs for a year, unless it is very specific to a particular job, then expense it to that job.

Do not wait until you are on your own to start charging for all the overhead that effects your job. This extra charge will help you build up a cushion to start your business on, and it will establish a pricing structure for your customers that they can expect to pay later.

Many years ago, I had a customer that I did cheap work for when I was working by myself, but that rate didn't work for me when I started adding employees. It took me a long time to get this customer to pay what I really needed to run a business. There were a few instances where he really thought that I was just getting greedy. It wasn't until I was willing to walk away from his work, that he realized I had no choice but to charge more money. Don't get in this situation, it could cost you money and customers.


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## Astrix (Feb 23, 2009)

As you probably already know from your Accounting class, there are many different accounting worksheets that businesses use: Balance Sheet, Annual Financial Statement, Per Job Cost Analysis, Profit/Loss Projections, and more depending on how detailed you want your info to be.

Here is a website that has free Excel worksheets that you can adapt and simplify for your own use: Finance Templates

As these are standardized accounting forms, they will still be useful when your business grows and becomes more complicated. I would suggest looking at the Breakeven Analysis and the Profit and Loss Projection forms. 

Start with the Profit/Loss Projection form, and just start filling in the monthly figures. As the months go by, you will be able to project relatively accurate numbers for your variable expenses. You can then use the numbers from the P/L Projection form to complete the Breakeven Analysis. Then, you can work backwards on that form and determine what your hourly rate needs to be. 

It will be a constant work in progress as you will have to keep adjusting and fine-tuning your numbers as the months go by. The key is to invest the time in entering dollar figures that are as accurate as possible. If you are just guessing and assuming then your final analysis isn't going to be accurate. GIGO - Garbage In, Garbage Out.


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## Astrix (Feb 23, 2009)

The full cost of $45 workboots and a $140 Bosch radio are not really Expenses or Costs. The full money you paid for these items is an in-and-out entry in the Assets section of your Balance Sheet. You deduct the $45 from the Cash line and increase the Equipment line by $45. 

It is the depreciation of these items that is the Expense. So, if a pair of boots is going to last you 5 months, then your monthly depreciation expense is $9. If you are on the same job for 2 months, then you would deduct $18 on the Depreciation line of the Expense section when doing a separate Job Cost Analysis worksheet. 

If you understand it this way, then a future purchase of a Zoom Boom will make sense. Let‘s say you spend $48,000 on a used telehandler. You figure that there is still 8 years of life in the machine. Therefore, the monthly depreciation works out to $500. Same as with the workboots and radio, you now know that you can deduct $500 for every month that you are on a job. If a job lasts 1½ months, then you deduct $750. If you do shorter jobs, you may want to be more specific and work the depreciation back to a weekly amount instead of monthly.


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## Astrix (Feb 23, 2009)

You may be spending money on miscellaneous items and forgetting to mark them down as business related expenses. For example, do you mark down every time you buy gas for your vehicle and what % of your driving is to-and-from work vs. pleasure? Something as simple as buying a Timmy’s coffee once a day with loose change in your pocket will still add up to over $30 a month ($360 a year). Even items such as bank fees or credit card interest needs to be taken into account because these are all items that reduce your final net take-home pay. 

Maybe keep a log of every dime you spend for the next few months, and you may be surprised to see how much spending is unaccounted for.

Last, it is a good idea to have a “rainy day fund”. Add a fixed expense line for a set amount of monthly savings into the business; for example, an extra $50 or more (whatever you feel comfortable with). That way, down the road, when all of a sudden you have an unexpected repair bill or need to buy an item that you hadn’t planned on, then you have a savings fund you can dip into.

Okay, I’m done yapping and am sitting back down.


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## Pearce Services (Nov 21, 2005)

Thanks Astrix....

you have become a "must read" for me. Great posts throughout!


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## Astrix (Feb 23, 2009)

Thanks; but Mr. Astrix thinks I talk too much. :laughing:


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## Dirtywhiteboy (Oct 15, 2010)

I don't know what we did with out her:blink:


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## dom-mas (Nov 26, 2011)

I agree, astrix's posts are must reads for me. Well thought out and very legible.

Framing pro. The biggest thing you have to understand is about profit. Profit is NOT the money you earn. it is the money that your business earns. I know others have said it but it can't be stressed enough. Essentially it is money left in the bank to assure that your business can grow.


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## VinylHanger (Jul 14, 2011)

So what you all are saying is that the box in my console of my truck isn't where I stuff all my receipts and then go and try to find them at the end of the year.  I knew I was doing it wrong.

I think Quickbooks is my next purchase.


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## FramingPro (Jan 31, 2010)

ranteso said:


> "at the bottom i have a section for expenses, where i list like this:
> $45.68-workboots
> $140-Bosch radio "
> 
> ...


oh sorry
i didnt mean to be an ass
i didnt read the bottom part, i thought it was your sig
so i thought you were saying i wasted money on a radio :whistling


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## FramingPro (Jan 31, 2010)

Warren said:


> I know the temptation is to track every single expense Nick, but in reality, we just group the little things together and don't give it a second thought. This is what happens when the scale of your operation gets larger. I classify nails, small hand tools, drill bits, saw blades, etc. as supplies. If I have to get a job specific blade or bit, I will expense it to a job. Eventually, you will end up with a nice inventory of small "supplies" that will enable you to do many jobs without buying small quantities over and over. The trick is to figure out what quantities to buy things in. I always hate buying a 1lb box of 3" screws when I know I can go through about 20 lbs of them in a given year. On the other hand, I still have a few 50lb boxes of misc nails that I have owned for at least 10-15 years. Thats what you try to avoid.



yea, but say if i had a section for fasteners as a subcategory of supplies i could write the amount i have in fasteners i buy nails in bulk, so i have like 4 or 5 50lb boxes

I could also keep all my chalk, tapes, pencils, blades and bits in supplies too. could i not?

i don't even know what im asking anymore.
Im just paranoid now because i bought abunch of blades and staples and piddly ****, and i don't know how to record it.


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## EthanB (Sep 28, 2011)

I used to track things pretty specifically with catch-all categories for the little stuff; Paint sundry, building sundry, and blades and bits. 

Now I only use categories for; Building materials, paint materials, shop and tools.

I figure that the $100-$1000 I spend on inefficiencies is more than made up by the amount of time I save not tracking this crap in detail.


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## Dirtywhiteboy (Oct 15, 2010)

FramingPro I think you need to include an amount on each job for these things. Like 2 blades , 1 box nails, chalk and 1 chalk box for this job and price it in:thumbsup:


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## r4r&r (Feb 22, 2012)

Ok so does it really matter if you charge a box of nails to every fifth job or split it up over 5 jobs? It gets deducted either way and over time it impacts your O&P the same way. 

Not trying to be a smart a$$ it is an honest question.


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## Rich D. (Oct 14, 2011)

Small things like pencils, chalk, bits, etc. Go into a tool section of my overhead. I have enough money alloted to replace a tool or 2 if needed and cover all the little stuff like hand tools and non job specific supplies. I also have a small inventory of fasteners for small jobs that require a couple screws etc in that categorey

If im bidding a job and i know i will use 5 lbs of screws, need a specific tool for that job (specialty) and i know i will go through alot of bits i will add these items directly to the bid/proposal price.


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## EthanB (Sep 28, 2011)

r4r&r said:


> Ok so does it really matter if you charge a box of nails to every fifth job or split it up over 5 jobs? It gets deducted either way and over time it impacts your O&P the same way.
> 
> Not trying to be a smart a$$ it is an honest question.


It matters if you are trying to analyze your specific job costs or profitability but it doesn't change your numbers over a longer period of time.

You should either apply small costs to the specific job or avoid applying them to any job. Applying the whole purchase, a box of nails in this case, to one job will artificially inflate the costs of that job for reporting purposes.


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## BamBamm5144 (Jul 12, 2008)

I am surprised by how in depth some guys are.

If I order two boxes of nails and only use one on the job, I still attribute two boxes of nails to that one job. Then on the next job, I don't order any nails.

If I buy a pack of blades and whatever miscellaneous items (the consumables) - I don't credit it to any job.


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## FramingPro (Jan 31, 2010)

BamBamm5144 said:


> I am surprised by how in depth some guys are.
> 
> If I order two boxes of nails and only use one on the job, I still attribute two boxes of nails to that one job. Then on the next job, I don't order any nails.
> 
> If I buy a pack of blades and whatever miscellaneous items (the consumables) - I don't credit it to any job.



but like if it was a whale bone trim job and you needed a special whale bone blade you would charge it to that job ya?


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## r4r&r (Feb 22, 2012)

FramingPro said:


> but like if it was a whale bone trim job and you needed a special whale bone blade you would charge it to that job ya?


Well that's what I did on my last saber tooth door install cuz you gotta have a saber tooth blade to cut those suckers down. I wasn't gonna just eat the cost cuz those kinda jobs don't come around every day.


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## dom-mas (Nov 26, 2011)

FramingPro said:


> but like if it was a whale bone trim job and you needed a special whale bone blade you would charge it to that job ya?


Yes specialty tools can be paid for and charged to a particular job. If another job comes up that also needs that tool, don't be shy to add some in for that tool also which can help pay for it's maintenance.


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## BamBamm5144 (Jul 12, 2008)

FramingPro said:


> but like if it was a whale bone trim job and you needed a special whale bone blade you would charge it to that job ya?


Yes there have been times I need a diamond blade. I credit it to that job but it lasts a very long time.


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## Warren (Feb 19, 2005)

In the long run, these things really even out. I may bill someone for a whole box of specific staples and only use 1/3 of the box. But at the same time, I will also use 5 or 6 other fasteners on the same job and not bill them if I just use a small quantity from existing stock. My goal would be to actually bill them for an amount the covers all of the fasteners used. So in 100 jobs, if I bill 1/3 box of whatever to each job, the total amount billed more than covers my total expense of all the fasteners purchased.


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## FramingPro (Jan 31, 2010)

so should i stop trying to get things down to the cent, as far as charging for consumables.
i mean for example i pay $21.95 for a box of 7200 roofing nails.
i usually charge it too one job, so that my next jobs i can use that tool and **** allowance to cover my equipment. But what i normally do is charge like $25 a box.. i mean i gotta go get em right, and thats worth something.
So, i guess stuff like my sds bits, and blades and chalk lines, i just keep an approximate value of it and throw it into the cost? 
I will attach my chart i use to track stuff now.
and the way i see it, is my 15% tool allowance is my profit and the remainder is my take home pay. Its backwards but if i did it anyother way i would take home nothing.. 
That was on jobs before i got smart, but now when i do a job, say i want to make $20/hr for a 4 hour job, using $15 of nails and $5 of chalk and blades
i would charge $100. the $20 is for stuff. and it does not effect my pay. The way i used to do them, was i would say $200 then take out my nails and ****.. no more losing money!
attached is the chart i use to organize my stuff.
i want to make a ledger so i can keep track of stuff better. I mean rather then doing a transaction analysis sheet i can just write beside my transaction (date and what not) 
So that allows me to see, "oh my dad paid for my gun on this day, therefore i owe him x amount"


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## Rich D. (Oct 14, 2011)

Just wait until you have to figure out adding for taxes and overhead costs!


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## FramingPro (Jan 31, 2010)

Rich D. said:


> Just wait until you have to figure out adding for taxes and overhead costs!


gotta learn to walk before i can run


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## dom-mas (Nov 26, 2011)

FramingPro said:


> so should i stop trying to get things down to the cent, as far as charging for consumables.
> i mean for example i pay $21.95 for a box of 7200 roofing nails.
> i usually charge it too one job, so that my next jobs i can use that tool and **** allowance to cover my equipment. But what i normally do is charge like $25 a box.. i mean i gotta go get em right, and thats worth something.
> So, i guess stuff like my sds bits, and blades and chalk lines, i just keep an approximate value of it and throw it into the cost?
> ...


I didn;t look at your chart because.... fill in your own reason.

NO ypou don't need to get things down to the cent but instead of having a random round up # you need to multiply the cost of what you buy by your markup %. you can do it your way but it isn't real business like. SDS bits, chalk, etc.. doesn't get thrown into any cost..it is part of your overhead which is a percentage of your labour/estimated labour cost. I know it has nothing to do with your labour...it's a material it should be included in your material costs but when you think about it....they are products that you need on a DAILY/WEEKLY etc.. basis in order for you to labour correctly/efficiently so they become part of you labour cost which is a part of your overhead.

Lets take your example...4 hrs, $20/hr and $20 worth of materials. So you've figured out from past experience that you need $5/hr of sundry....pencils, gas, sds bits, blades etc... you also want to make $5/hr profit to ensure that you have some retiterment $ and so if you want to make an equipment purchase you can. So... 4 hrs you made $120. $20 goes to materials. it's already gone forget about it. $5(profit)+$5(overhead)=$10 x4hrs=$40 goes in the bank-the business bank that Nick graves the employee doesn't touch- $20 to pay for sds bits etc.. and $20 for the future, the rest, $60 goes to Nick Graves who made $15/hr. Then the feds come around and take...both sides of CPP, next year WSIB, and you have to pay tax so really about $10-$12/hr


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## FramingPro (Jan 31, 2010)

dom-mas said:


> I didn;t look at your chart because.... fill in your own reason.
> 
> NO ypou don't need to get things down to the cent but instead of having a random round up # you need to multiply the cost of what you buy by your markup %. you can do it your way but it isn't real business like. SDS bits, chalk, etc.. doesn't get thrown into any cost..it is part of your overhead which is a percentage of your labour/estimated labour cost. I know it has nothing to do with your labour...it's a material it should be included in your material costs but when you think about it....they are products that you need on a DAILY/WEEKLY etc.. basis in order for you to labour correctly/efficiently so they become part of you labour cost which is a part of your overhead.
> 
> Lets take your example...4 hrs, $20/hr and $20 worth of materials. So you've figured out from past experience that you need $5/hr of sundry....pencils, gas, sds bits, blades etc... you also want to make $5/hr profit to ensure that you have some retiterment $ and so if you want to make an equipment purchase you can. So... 4 hrs you made $120. $20 goes to materials. it's already gone forget about it. $5(profit)+$5(overhead)=$10 x4hrs=$40 goes in the bank-the business bank that Nick graves the employee doesn't touch- $20 to pay for sds bits etc.. and $20 for the future, the rest, $60 goes to Nick Graves who made $15/hr. Then the feds come around and take...both sides of CPP, next year WSIB, and you have to pay tax so really about $10-$12/hr



whos Nick Graves?
are those costs supposed to pay for Nicks (my) grave?
im not that far along, i don't need a grave yet :blink:


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## dom-mas (Nov 26, 2011)

FramingPro said:


> whos Nick Graves?
> are those costs supposed to pay for Nicks (my) grave?
> im not that far along, i don't need a grave yet :blink:



I must have met a Nick or dick or rick graves recently. Sorry...Graudes is that right? But yes...these costs should pay for your grave eventually. At least pay for the life ins. And medical ins and optical and and and and and all the stuff that your parents employers pay for them...and you...now....but not later


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## EthanB (Sep 28, 2011)

You are now talking about something totally different from expenses which is what the thread started out with. There's nothing wrong with a change in topic but I want to make sure that you understood that there is a huge difference between estimating/billing and expenses.

You track expenses to measure the profitability and assets of your business(and for the IRS or whatever you have up there). It's not really related to estimating or billing unless you are doing a T&M job.


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## Milhaus (Feb 11, 2007)

I didn't read the whole thread but anyone mention Michael Stone's book Markup and Profit yet? It may be the best $35 you ever spent trying to figure all this stuff out. There will still be variables, but it will head you in the right direction and clarify a ton of things. 

And ditto on the insurance man. Worth every bit of the safeguard if you're going to put yourself out there. Don't mean to bust your balls, looks like you've been around here a while, but if you're doing your own jobs, you should have insurance. 

mark


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## Oconomowoc (Oct 13, 2011)

My wife told me you should google "Generally Accepted Accounting Principles" (GAAP) and do some reading.


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## FramingPro (Jan 31, 2010)

Oconomowoc said:


> My wife told me you should google "Generally Accepted Accounting Principles" (GAAP) and do some reading.


i learned them in class


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## Oconomowoc (Oct 13, 2011)

You didn't learn them you read them.

Read it again because wanting to put down a $19 stapler as a $40 stapler is wrong but a very simple concept.

Focus on earnings growth. Buy quickbooks. Hire accountant.

Seriously, I know that sounds rather rash but your having a hard time understanding something that's not worth fretting over. A 45 minute meeting with an accountant will answer all your questions. Spend time marketing and making money. 

I don't even have my wife do my accounting. I enter it in quickbooks and slap a pile of stuff off with my business accountant at the end of the year. Your not saving money bythe doing any of this, in fact it's costing you thousands. Probably 10's of thousands.

Most small business accountants will meet with you for free to explain all this. It's just that simple.


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## Oconomowoc (Oct 13, 2011)

Ya know what your really missing here? History. Experience.

It's an easy trap to get into, and it's not your fault. I mean, hey, you're a young guy starting out so obviously it's perfectly normal to get caught up in these little things. But without the phone ringing and without your truck driving around doing work your missing out on the most important ingredient.

Take some of the experienced builders on the forum for example. After years of pounding out buildings you get to a point where the details sometimes become irrelevant. That doesn't mean it's not important but if some of the guys on here have a customeras call and ask if they could general out a 50' x 100' pole barn within seconds they know a ballpark number and there's a good chance it's accurate to within $10k. After a few minutes and a couple questions the GC can probably guess the number and be accurate within a few thousand. After he gets the print he can browse through the plan pages and he knows dam well where the numbers will be.

An experienced guy can look at a project and just assume they will burn up $400 in nails and screws. A lot of guys, myself included, don't worry about the small stuff. We don't miss it, we know it's real and it has a cost but we don't get real technical. If you're framing a garage and you had to buy a stapler the customer and the competition doesn't care where you post the journal entry. 

So accounting wise weare know we have a base of certain things that get filed in a certain way. The accountant will tell us later on if we are smart or stupid. Fortunately, many of us focus on earnings and sales and that keeps us safe. Over the years we just sort of gained that "all knowing" feeling. It becomes a non-event.

Being that you're young and eager you don't have that but you will, it just takes time. My advice to you is pretty simple. Start tracking jobs and do a post-mortem when completed. In a notebook scribble down what you spent, and your actual time invested. All of it.

Compare it against the original bid. 

Then go buy your accountant lunch and show him what you wrote down. The rest is history. Profit in this business is a learned thing.

The world of construction is a lot like poker. Poker has a price or you can't sit at the table. The price of poker in construction is experience. Get busy marketing and networking and you will not only gain bidding and cost experience but accounting fundamentals.


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## EthanB (Sep 28, 2011)

I would just put the stapler under my Tool Expense. If I had to sell off all my hand tools I doubt I would get more than $1k so it's just not worth my time trying to depreciate them as assets. 

You are confusing the value of an item with the retail price. In most cases the retail price is what you use as the first year asset value, it is then reduced by a predetermined percentage depending on the life of the item and historical values. If you buy something for $10 grand but nobody else will pay more than $50 for it used then it's actually worth $50 and that would be it's asset value. Conversely, if you buy something for $50 and the usual sale price on the second-hand market is $10k then the asset value is $10k(but be prepared to prove it).

The stapler you bought for $19 retails new might be retailing for $40 but only worth $10 used on ebay. You are very unlikely to run into trouble valuing the item for what you paid but listing it at $40 would be wrong.


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## Spaint90 (Dec 26, 2011)

I think your confused, absolutely. 

Go pick up some work

Then when you have enough of it comming in worry about your 10 dollar box of nails and your 20 dollar swingline stapler.

Otherwise its pointless.

And just because you buy something for a certain price, it does not mean it will hold its value on the books. Depreciating assets is something you will want to learn when you get some. Tools, Trucks, Equipment. 

Staplers a drop in the bucket, so are nails..that should be included up in your job costing. Expenses. Not assets.

Always keep reciepts though, and get yourself an accordian folder. Stay organized.


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## Mr Latone (Jan 8, 2011)

If you sold it for $40, you would have a gain of $21, but you didn't.

$19


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## FramingPro (Jan 31, 2010)

my accounting class confuses me.. its catered towards a not construction company


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## Spaint90 (Dec 26, 2011)

FramingPro said:


> my accounting class confuses me.. its catered towards a not construction company


Its probably just a basic financial accounting course if you are in high school. They go over things like bookeeping, and financial statements. That is all pertinent to any business.

In my expierences, of the accounting courses i have taken none were specifically geared towards our industry, or any really. But it is all the same, you have to take the knowlege they are giving you and apply it to your own.

Learn how to keep your books, learn the basic principles. Assets+Liabilities= Owners Equity

Learn how to take your books and create your financial statements(most software will do it for you)

But i think the key for you is, focus on the PEOPLE right now. Accounting is extremely important, but you wont have a business if you cant get the people part down. Like mike said, start networking.

Until you really start getting things going, all this is not going to make much of a difference:thumbsup:


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## ryanshull (Nov 1, 2012)

This is the way over simplified bass ackwards version, but it should get you going.

T= the tools and the equipment you want to buy within the next year. 

E= your total yearly expenses such as shop rent/ utilities (if you are using your garage or basement, how much is it costing you?), work clothes, legal fees, Insurance (must have, and not as expensive as you would think), licensing (you will want to do this), office expenses, advertising, etc. and the hours you spend working that you don't charge out.

I= the income you will need for the year.

P= What you want the buisness to profit (not _your_ salary, the business' salary) without profit, you will find your buisness can't run.

M= Mark up on yur total yearly sales. If you sell $50,000 worth of materials in a year and your mark up is 10% then $50,000 times .10 equals $5,000 

H= the number of hours you expect to bill out in a year



T+E+I+P-M Divided by H equals what you should charge for your hourly rate. Then add atleast 30%, to pay your taxes and the things you probably forgot to factor in.

Example: $5,000 in tools in a year, plus $20,000 in expenses, plus $40,000 Income, plus $5,000 profit goal minus $5,000 markup Equals $65,000 divided by 1800 hours you hope to charge out in a year equals $36.11 per hour multiply by 1.3 for taxes etc. equals $46.94 per hour. (Again, this is only an example, have no idea what your numbers are, use your own projections)

If that is more or less than you think you are worth, adjust your expenses, or income, or profit goals accordingly and live by the budget you set forth. But As far as the deductions and taxes, etc., leave it to an accountant, because you just aren't getting it. You have to know your strengths and weaknesses.


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