# Am I calculating this correctly?



## Zkmconstruction (Oct 27, 2017)

My husband and a friend started their own handyman/remodeling company. I do all the accounting and Bill pay for them. They way I have been calculating costs, seem to be working, until tried to make a profit and loss sheet, and now I am 100% lost. 

The guys split the cost of the jobs 60/40. So, I take the total job cost, and deduct material cost. Then I take out 10% for the company (I use this for insurance, Microsoft programs, office supplies, BBB..ect) We also take out 5% of job for gas to my husband (they meet every morning at our house, and my husband does all driving).

Once those are figured, I do the 60/40 split. For instance, we changed out a simple water heater for $275.

$275- total job cost
$93.19- material
$18.19- 10%
$9.09- 5%
$93.97- husband (60%)
$62.64- friend (40%)

How would I log this in excel? Am I doing this right? We do not have an "hourly labor" rate, because jobs range from a 10 minute quick fix, like $50 jobs to a $4000 kitchen remodel.

Help please!


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## 480sparky (Feb 1, 2009)

Something's not right because the last 5 lines don't add up to 275.

Are you asking how in create an Excel spreadsheet to generate those numbers?

Enter the following into each cell:

A1 Job Income
A2 Material
A3 Company 10%
A4 Gas 5%
A5 After Expenses
A6 Husband
A7 Friend

(I added cell A5 to generate a number which is easier to use when splitting the after-expenses total into 60/40%)

B3 =(B1-B2)*0.1
B4 =(B1-B2)*0.05
B5 =B1-B2-B3-B4
B6 *=*B5*0.6
B6 =B5*0.4

Cells B3 through B7 should generate the following numbers (when entering 275 and 93.19 into cells B1 and B2):
18.18
9.09
154.54
92.72
61.82

About half the time, you should end up with an odd penny somewhere. You can add the following to cell B8 to cross-check the totals:
=SUM(B2:B4,B6,B7)


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## Zkmconstruction (Oct 27, 2017)

480sparky said:


> Something's not right because the last 5 lines don't add up to 275.
> 
> Are you asking how in create an Excel spreadsheet to generate those numbers?
> 
> ...


Thank you! Is this a good way to do booking? How do I find my profit And losses?


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## 480sparky (Feb 1, 2009)

Zkmconstruction said:


> Thank you! Is this a good way to do booking? How do I find my profit And losses?


Well, it will allow you to do a quick-n-dirty breakdown of each job as it comes through. But it's not near comprehensive enough to do a profit/loss statement for the bank or your accountant.

You'd be far better off buying something designed for that purpose.


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## Zkmconstruction (Oct 27, 2017)

480sparky said:


> Zkmconstruction said:
> 
> 
> > Thank you! Is this a good way to do booking? How do I find my profit And losses?
> ...


I have no idea where to even start! The more I research, and read about Overhead, Profit margins, markups, ect... the more confused I am. I also can not find much on the type of payouts we do... is there a better way to calculate a job with the set up we have?

Like I said, each job varies, so hourly pay is not the way to go, and we are just started the business, so salary isn't an option yet either.


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## KAP (Feb 19, 2011)

Zkmconstruction said:


> How would I log this in excel? Am I doing this right? We do not have an "hourly labor" rate, because jobs range from a 10 minute quick fix, like $50 jobs to a $4000 kitchen remodel.
> 
> Help please!


You do have an hourly labor rate... you just don't realize it and based on what you are posting are probably not charging enough to cover it...

*L*abor 
*O*verhead
*M*aterials
*P*rofit​
Believe it or not, below is a crib notes version on this subject, so feel free to ask questions upon review...

For a small business, your annualized fixed and variable costs are contained within *L*abor and *O*verhead and will dictate what your hourly rate target should be... your *P*rofit is not what you use to cover these costs... if your husband for example, wants to make $100K/year, without even considering the loaded costs (i.e. - taxes, health ins., W/C. etc.), assuming a 40 hour work week, you are already at $48/hour... This doesn't take into consideration the partner, nor you (you get paid correct?)... but Labor and Overhead costs are where you will come up with an hourly rate, based on a 40 hour work week...

*M*aterials are what materials cost, PLUS you should be adding on a mark-up to cover the costs for getting, handling, and disposing of the material...

Your *P*rofit (i.e. - what you pay your company to develop Capital Reserves / Emergency Fund / Equipment purchases, etc.) is calculate ON TOP OF the Labor, Overhead and Materials at whatever % you've determined.

Now, based on what you posted, let's look at how that translates and how you're most likely not charging enough to be in business... We'll be generous and assume only 3 hours for picking up the water heater =, bringing it to the house, installing it, and disposal... 

*YOUR NUMBERS*
$275- total job cost
$93.19- material
$18.19- 10%
$9.09- 5%
$93.97- husband (60%)
$62.64- friend (40%)
*
NUMBERS SUBJECT TO ACTUAL COSTS BUT ARE FOR ILLUSTRATION*
$482.00
$93.00 - material
$288.00 *L*abor ONLY, two men, three hours @$100K/year (assuming no loaded costs, and assumes you are being paid nothing) - $96/hour
$57.00 - *O*verhead (you'll have to determine your annualized costs here, which would include gas, but we'll use your 10% and 5% for gas for now in the example)
$44.00 - This is *P*rofit in this example... what percentage you determine you need is based om your company, but in calculating what that is, you should calculate for a minimum of 3 months of Capital Reserves / Emergency Fund as well as any anticipated equipment purchases...​

I know this is a lot of information to digest, but once you get to know your numbers intimately and account for everything, your excel spreadsheet will make more sense... Keep in mind, if you do not have Capital Reserves / Emergency Fund, which is developed from Profit, the ONLY place money shortfalls can come from is DIRECTLY FROM YOUR POCKET and that $100K target gets whittled at and how small companies bleed money... because everyone else still expects to be paid (i.e. - suppliers, subs, insurance, taxes, etc.) and they could care less if you know your numbers or have reserves...

Best of luck... 8^)


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## 480sparky (Feb 1, 2009)

Zkmconstruction said:


> ......... I also can not find much on the type of payouts we do... is there a better way to calculate a job with the set up we have?.............



If this method of payout works for you, run with it.

But I agree with KAP. You're trying to learn to fly because the pilot has passed out. It appears you don't have any _real_ idea what your expenses are. I've got an 8-page list of various expenses that typical construction contractor needs to know. I'll post it if you're interested.

Problem is, many small business owners are slowly bleeding out and they simply don't know it until it's far too late. And too late doesn't mean the wolves are at your door. Too late as meaning it's past the point of redemption and lawyers get involved.

Take some business management classes. Your local community college, SCORE, etc might have some.


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## Zkmconstruction (Oct 27, 2017)

KAP said:


> Zkmconstruction said:
> 
> 
> > How would I log this in excel? Am I doing this right? We do not have an "hourly labor" rate, because jobs range from a 10 minute quick fix, like $50 jobs to a $4000 kitchen remodel.
> ...


So, in your scenario, they should get paid a labor rate even through they are the only workers/owners? 

When I read about owners draws, usually quartly, or one big draw at the end of the year, that is from profit only? So they still get a weekly labor check, but only a draw or 2 through the year?


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## Zkmconstruction (Oct 27, 2017)

480sparky said:


> Zkmconstruction said:
> 
> 
> > ......... I also can not find much on the type of payouts we do... is there a better way to calculate a job with the set up we have?.............
> ...


Yes, please post. I would love to read it! Also, as of right now, my expenses are in order. We have little as the business is ran out of my house. We have our Insurance, WC and llc and the licenses we need. Accounting software, business banking open, office supplies, credit card used for materials, not much else since it's ran out of home... I assume we already pay our house and utilitys, no reason to add that In. And I do not get paid. I do this for my husband, bc his split of the 60% includes him doing booking also. Since he is gone alot, I just do it for him. 

My husband and I have the house, 2 vehicles (truck and car) and the financial means. At the beginning, we purchased a new desktop, a work trailer, paid for LLC and state registration, basically anything start up cost. He specializes in Electrical, but also has knowledge in all areas of construction (worked on various government jobs doing all areas). With the tools needed for all iobs, plus some specialty equipment available for his use when needed. We can also pay out of pocket for materials that were missed during bids (customers usually buy materials).

The partner, started in with us broke, basic hand tools and some drills. He has a lengthy electrical background and experience and some general knowledge in other areas. Not 100% financially stable, no credit. He is the kind to go out on weekends and network and put our name out there. 

We do not go out and network, my husband works late, (stays longer than partner when needed bc of kids or other things) and if he isn't not physically working late, we are homebodies, and usually doing the paperwork aspect of the company. (Bids they do about 50% together), banking, invoicing, bookkeeping.) There is also the part that 75% of the time, my husband loads and unloads vehicle before and after a job.


Does a 60/40 split seem fair with the given information?


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## hdavis (Feb 14, 2012)

Wow!


Sounds like you get the worst end of this deal, unless you're part of the 60%.

The way this is set up, I'd be surprised if the company makes more than a token profit. As a rule, your %free cash flow (we'll say profit to make it easy) funds the growth of the business. You're set up in the single digits, but you're just starting out, so normally you'd be looking for 20% or more.

The excel answer has already been given.


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## hdavis (Feb 14, 2012)

60/40 split fair? The other guy is basically a worker and salesman. Compare what he makes now to a 5% commission plus usual hourly rate in your area. Is it more or less in line?


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## 480sparky (Feb 1, 2009)

*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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## cwatbay (Mar 16, 2010)

480sparky said:


> If this method of payout works for you, run with it.
> 
> But I agree with KAP. You're trying to learn to fly because the pilot has passed out. It appears you don't have any _real_ idea what your expenses are. I've got an 8-page list of various expenses that typical construction contractor needs to know. I'll post it if you're interested.
> 
> ...


I would seriously consider what 480 is saying. You need to slowly but surely get educated on basic bookkeeping and basic accounting. It's not real hard unless you have an aversion to numbers and math. 

Get your accounting terminology up to speed so that you, accountants and others are all on the same page. 

I worked with small businesses for many (too many) years and saw over 80% belly up within the first 5 years. Some lasted a little longer if they had more money sources to borrow from. And when I say borrow, I meant take the money and not pay it back. The main causes were: Excellent at their trade; not so good at basic business management, accounting, marketing, sales, etc.


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## Zkmconstruction (Oct 27, 2017)

hdavis said:


> 60/40 split fair? The other guy is basically a worker and salesman. Compare what he makes now to a 5% commission plus usual hourly rate in your area. Is it more or less in line?


They are currently out on a job that pays $3525.00. 

His 40% would profit him $1078.50

Carpentry labor is 20.81 per hr. For self employed. He has a total of 25 hours which came out to 520 (rounding) and 5% commission is $177. 

That way, it would be $694.

Again, they should be partners. My husband who has contributed everything to start this company, gets the 60%. I do not get paid. He is going on 38 hours (And still there alone) and profiting $1550 (rounding).

So given all the extras contributed, all office work, and staying more hours, is a 60/40 split fair? Should hourly be the way to go with both? Or just one?


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## overanalyze (Dec 28, 2010)

Fair is a subjective term. How do they figure their jobs? Do they have an hourly rate? Profit does not equal pay for work performed. Profit is what is left after you pay all expenses...including labor.


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## 480sparky (Feb 1, 2009)

Fair is whatever you all agree on.

50/50, 60/40, 75/25, 99/1.


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## Calidecks (Nov 19, 2011)

Hire a bookkeeper and hit the golf  course! 


Mike.
_______________


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## SectorSecurity (Nov 26, 2013)

Zkmconstruction said:


> They are currently out on a job that pays $3525.00.
> 
> His 40% would profit him $1078.50
> 
> ...


Only him and his partner can determine what a fair split is.

They need to have this conversation if they are truly partners. A group of guys on the internet can't realistically tell you what a fair split it.

If you think it should be 70/30 or 80/20 bring it up to him

Sent from my XP7700 using Tapatalk


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## hdavis (Feb 14, 2012)

SectorSecurity said:


> Only him and his partner can determine what a fair split is.
> 
> They need to have this conversation if they are truly partners. A group of guys on the internet can't realistically tell you what a fair split it.
> 
> ...


Except there are 3 involved now, not 2.

I see a few things headed south with this.


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## 480sparky (Feb 1, 2009)

Zkmconstruction said:


> ....... I do not get paid..........



Strike one. :whistling


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## 480sparky (Feb 1, 2009)

Zkmconstruction said:


> Just wondering, what area are you guys in? Maybe that's the difference in prices... I have done alot of research on big store chains, and small/medium companies, and we wanted to be somewhat cheaper than our competition. I had a friend a few years ago get a waterheater changed out for $325. I didn't think $275 was bad... ??


The $64,000 question is...... can you _afford_ to be cheaper than the competition? This is why most start-ups fail: They have no idea what their TRUE operating costs are. They merely base their price off what the competition charges. They just want to be The Cheapest In Town.


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## Leo G (May 12, 2005)

Well, my location is in my info, why isn't yours?


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## hdavis (Feb 14, 2012)

I can't believe she"s back. I figured some where around KAP's second post and fourthgeneration's first she bought a couple of bottles of Jack.:whistling


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## hdavis (Feb 14, 2012)

My advice would be to set up the spreadsheet so the info for tax forms is correctly generated.


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## FrankSmith (Feb 21, 2013)

I am concerned that you are trying to run your business on what should be profit. Seems like you are working with some impossibly small numbers.


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## SectorSecurity (Nov 26, 2013)

Once you stop trying to be the cheapest you will notice your business will take off

Sent from my XP7700 using Tapatalk


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## KAP (Feb 19, 2011)

Zkmconstruction said:


> Just wondering, what area are you guys in? Maybe that's the difference in prices... I have done alot of research on big store chains, and small/medium companies, and we wanted to be somewhat cheaper than our competition. I had a friend a few years ago get a waterheater changed out for $325. I didn't think $275 was bad... ??


Therein lies part of your problem... it's irrelevant what the competition charges... there will ALWAYS be someone cheaper and more expensive than you in your market, no matter where it is...

You prices should reflect what YOU need to charge to be in business, not what another company charges... especially considering your "competition" may be a one-man show, and you have partners and yourself (who should be) to be paid...

Once you get past the retail mindset (i.e. -we want to be the cheaper than the competition) you'll come to the realization that not everyone is your customer and that you need to focus on customers that can support what your business needs to charge...


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## 480sparky (Feb 1, 2009)

Years ago, Joe Sixpack got a job as a helper for Fly-By-Night Electric. He started out working with a journeyman wiring houses for Cut Corners Construction. Joe turned out to be a pretty good electrician, learning fast and working hard. As the years went by, Joe got pretty good at wiring houses. Soon, he was running the jobs himself, and had his own helper.

Then recently, Joe got to thinking. "Fly-By-Night charges Cut Corners ten grand to wire a house. I know I get paid about $1500, and my helper gets $1000. I know the material costs around $2500.......... so that means the boss is making five thousand just sitting at the office endorsing checks!"

So Joe decides to strike out on his own. "Man, this'll be great! I'll charge just $7000 to wire the houses, and with only $2500 in material, I'll pocket $4500 for each house I do....... Jeez, that's more than _three times_ what I was making when I was working for 'the man'!"

So Joe hangs out his shingle. He doesn't have any health insurance, thinking he'll get that later when things really get started. Suddenly, he realizes he needs to be licensed. So he takes the test, and spends more money for the test and license. He also doesn't understand that driving his own truck costs money, both in gas, repairs, insurance, etc.

All fired up, he gets his first job for Cut Corners. Right from the start, Cut Corners wants a current liability insurance certificate. So Joe forks out $3000 for insurance. A few weeks later, he gets a letter from the state saying he's not a registered contractor. So another $600 is spent. Oh, yea, the city says they need $1250 for a permit.

A few days into the first job, Cut Corners says they need temporary power. Joe didn't figure the cost of a temp pole into the job, but he builds one and gets it hooked up. Joe finds out he needs more than a 3/8" drill and 4-foot stepladder. So he goes out and buys more cords and a couple ladders. Every time Joe needs material or another tool, he'd drive down to Home Depot and whip out the plastic. Pretty soon, he realizes he's a couple days behind schedule. Why? He's working alone and doesn't have his old helper with him.

So Joe starts working 12-hours days, and a couple Saturdays as well. He skips his daughter's dance recital, and misses his son's Little League game. He comes home dirty, tired and grouchy, which cause his family to stay away from him.

By the time the house is roughed in, his credit card is maxed out and Joe needs to borrow money from his parents. "Just until I get this job done, then I'll be rolling in dough" he tells them. He borrows even more money just to buy the material he needs to trim the house. By this time, he has alienated his family and taken his credit rating down below 400.

And the sad truth is, by the time job is done, he's been paid only $7000 and has spent $14000 just to 'be in business'. So he tells Cut Corners the next job will be $8500, thinking he can 'make it up' on the future work. But even that 'extra' $1500 'from the next job' won't cover his $7000 shortfall. Besides, Cut Corners won't hire him again because Joe caused them to get behind on their schedule. And to add insult to injury, they found someone else to do the job for less.

Dejected, Joe goes home, only to find a letter from the IRS saying they want $3250 for the income tax Joe owes from that job. The state also wants $675 for sales tax. All the 'profit' Joe thought he was going to make went to pay his bills, leaving nothing to pay his parents back with.



And who did Cut Corners hire to wire their next house? Joe's old helper from Fly-By-Night!


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## Seven-Delta-FortyOne (Mar 5, 2011)

That should be a sticky here somewhere, Sparky. Lot of folks need to read that. 

:thumbsup:

Delta


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## B.Johnson (Sep 17, 2016)

Never try to be cheaper than the next guy, especially if they are working as a contractor for a big box store. The best way to make a living is to be BETTER than the next guy. Show up on time, do a good job, clean up after yourself. Then you can charge a little more than the next guy.


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## cwatbay (Mar 16, 2010)

I think 480 had it right with his story. And this story has been played out many times in my 45+ years of being in business.

Basically, a lot of people that switch from being just a one man operation making a little more than wages, or, from being an employee to actually starting a legitimate business..........don't know the entire costs of being a business..........at least one that is sustainable. 

The Op's original post was how to come up with a profit loss statement based on the 60/40 split on jobs. If I didn't know how to do this, I would get on the web and start looking at examples of profit loss statements for small business. If I saw what it was supposed to look like, I could figure out how to get to that point. 

However if I had little or no knowledge of basic business operations, math, computer skills, management, basic accounting and so forth, it would be pretty hard to this. Or, I would have to hire someone to do it that did have those skills. 

The problem is, if you are so small, that you are just making wages, and, a partnership at that, chances are you will not now, nor ever have enough income to hire a professional (or close to it). 

Based on the thread so far from the OP and others, this business model is not sustainable. It doesn't appear to have sufficient investment monies to get it above the "bottom feeder" level of the competition. Investment monies are: licensing, insurance, taxes, permits, marketing materials, advertising........plus most of the stuff off 480's list. 

I think the days starting a small business in an untapped and growing market are long gone.


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## 480sparky (Feb 1, 2009)

B.Johnson said:


> Never try to be cheaper than the next guy, especially if they are working as a contractor for a big box store. The best way to make a living is to be BETTER than the next guy. Show up on time, do a good job, clean up after yourself. Then you can charge a little more than the next guy.


Agreed.

Being the cheapest the THE most common business model, and exhibits more the attitude of an employee than a business owner. You're adopting the model that every Tom, Dick and Harry (and Joe!) are using. And Tom, Dick, Harry and Joe are usually flat broke withing a year or two because, while they may be fantastic craftsmen, they're _lousy_ business managers. 

Just because you're working DOES NOT mean you're making money. I can't count the number of new start-up electrical outfits in my area I've seen...... once. I see their fancy new van all purdy with a vinyl wrap going down the street and I never hear anything about them ever again. Every time I see one, I think to myself, "There goes Wal-Mart Electric, the Low Price King."

Every

Single

One




of them starts out with two mantras: Low Price, and 24-hour service. Proudly emblazoned on the side of their spiffy new $65,000 van.


And when the market is over-saturated with 24-hour Low Price contractors, they all look the same to the market. When the market has 20 to choose from, 19 of them will be gone soon. The 20th one might linger another year or two before it finally hemorrhages it's last dollar of capital.

If you are out to be 'cheaper than the other guy', there is NOTHING to distinguish you from all the OTHER 'cheaper guys'. This is why we call it The Race To The Bottom. First one to file bankruptcy wins!

And 'cheaper' contractors are just like the corner drug dealers. Take a drug dealer off the street, and there's a dozen others willing to take their place. A 'cheaper' contractor folds up shop, and there's a dozen more hanging out their shingles.

Yes, there is a market for the über-cheap contractor. But that market doesn't give a chit about whether you're still around next month. They got their water heater changed. Next month, when the roof starts leaking, they'll get on Craigslist and find yet another 'cheaper' contractor to fix it.

And when you're standing in line next to that other 'cheaper' contractor in a soup line, the homeowner will merrily be hiring a third 'cheaper' contractor to install his irrigation system.


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## greg24k (May 19, 2007)

You forgetting to add your profit margin cost into every job, by not adding that you losing money on every job and your profit is going out the window.

So lets say the small job you did per your sample:

$275- total job cost
$93.19- material
$18.19- 10%
$9.09- 5%
$93.97- husband (60%)
$62.64- friend (40%)

What does your profit margin .38 .48 or .65 of the total job cost?

So lets say your profit margin amount is .38 ... and you take $275 (TJC) x .38 (MC) =$105.5 (your profit margin) + $275 = $379.50 Total job cost... now deduct all your material and overhead you left with a profit of $259.03 now your husband's profit will be $155.42 and friend will make $103.61...I'm sure the little extra money they make from each job will not hurt anyone :thumbsup:

Of course, the profit margin amount fluctuates as you go, the smaller the job the bigger profit margin is, but that is up to you to figure what is the profit margin for each job is. If you doing piece work and your work is the same thing over and over you can set a yearly profit margin for each job and raise that margin annually... If you doing different work all the time, you adjust profit margin per job.

Add the profit margin to your estimate sheet in Excell and you set.

Good luck


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## Zkmconstruction (Oct 27, 2017)

greg24k said:


> You forgetting to add your profit margin cost into every job, by not adding that you losing money on every job and your profit is going out the window.
> 
> So lets say the small job you did per your sample:
> 
> ...


Thank you! I will run this by them. This is what I was looking for. An equation on How to do it.


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## Zkmconstruction (Oct 27, 2017)

KAP said:


> Zkmconstruction said:
> 
> 
> > Just wondering, what area are you guys in? Maybe that's the difference in prices... I have done alot of research on big store chains, and small/medium companies, and we wanted to be somewhat cheaper than our competition. I had a friend a few years ago get a waterheater changed out for $325. I didn't think $275 was bad... ??
> ...





B.Johnson said:


> Never try to be cheaper than the next guy, especially if they are working as a contractor for a big box store. The best way to make a living is to be BETTER than the next guy. Show up on time, do a good job, clean up after yourself. Then you can charge a little more than the next guy.





cwatbay said:


> I think 480 had it right with his story. And this story has been played out many times in my 45+ years of being in business.
> 
> Basically, a lot of people that switch from being just a one man operation making a little more than wages, or, from being an employee to actually starting a legitimate business..........don't know the entire costs of being a business..........at least one that is sustainable.
> 
> ...





480sparky said:


> B.Johnson said:
> 
> 
> > Never try to be cheaper than the next guy, especially if they are working as a contractor for a big box store. The best way to make a living is to be BETTER than the next guy. Show up on time, do a good job, clean up after yourself. Then you can charge a little more than the next guy.
> ...


I understand everyone's point. We feel that we do not need to have a million dollar company. We want to have relationships and repeat customers. Which we have established a few. In our area, (Dayton,Ohio) the prices are not that high. We live VERY comfortable on $50k a year. So we can afford to be cheaper. The water heater we installed, ended up with a follow up job of light installs costing $4000. So I think its worth it. We base our prices on how much we think is reasonable. We would never pay $500 or more for a water heater install, so why would we charge that amount?


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## 480sparky (Feb 1, 2009)

Zkmconstruction said:


> ...... We base our prices on how much we think is reasonable...........




​

As opposed to what your actual costs are?


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## Zkmconstruction (Oct 27, 2017)

480sparky said:


> Zkmconstruction said:
> 
> 
> > ...... We base our prices on how much we think is reasonable...........
> ...


 I have seen threads on this forum and a few others ranging from $300-$1500.


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## SectorSecurity (Nov 26, 2013)

There are many million dollar companies that have relationships and repeat customers.

You shouldn't sell yourself short.

Sent from my XP7700 using Tapatalk


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## 480sparky (Feb 1, 2009)

Zkmconstruction said:


> I have seen threads on this forum and a few others ranging from $300-$1500.


Apparently it's not getting through to you.
*
You base your price on YOUR COSTS.* NOT what the others charge.


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## KAP (Feb 19, 2011)

Zkmconstruction said:


> We live VERY comfortable on $50k a year. *So we can afford to be cheaper.* The water heater we installed, ended up with a follow up job of light installs costing $4000. So I think its worth it. *We base our prices on how much we think is reasonable. *


Then if that's the case, why did you start a thread asking if you calculated it correctly... :blink:




Zkmconstruction said:


> We would never pay $500 or more for a water heater install, so why would we charge that amount?


Because as it stands now, YOU are getting paid nothing for the work you do, and you're on here asking if you're doing it correctly...

Not understanding pricing doesn't mean you SHOULDN'T charge $500 if that's what is needed to be charged to support your business, and targeting the customers needed to accomplish that goal...

No need to be defensive, we're trying to illustrate for you a common problem... if you didn't have an issue, you wouldn't be posting asking... 

But to provide you a little outside perspective, which is what you're looking for in posting... You're looking at the $500 as just a number with no meaning and not giving it the context of long-term and depth as part of operating a business... Consider... You have a partnership... You are self-employed.. You're not being paid... you have fixed and variable costs, down-time, potential losses to absorb, etc...

So as a self-employed partnership, who's happy making $50K gross/year, do you have health insurance? Do you have savings? Do you have plans for you to be compensated for the work you do or are you going to be satisfied working for free forever? Do you have a retirement fund? Do you have 3-6 months of Capital Reserves / Emergency Fund? The list goes on... This is for a minimum of TWO partners BTW...

If you can say you have all that in place, then there you go, congrats... :clap:

But if not, that $500 takes on a whole new context doesn't it?... :whistling encompassing all the costs of doing business, as well as you being compensated as you should be (if you weren't doing it, they would have to pay someone correct?) will by definition RAISE your prices to cover these costs...




480sparky said:


> Apparently it's not getting through to you.
> *
> You base your price on YOUR COSTS.* NOT what the others charge.


Hopefully, the bolded font helped it get through... :thumbsup:


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## hdavis (Feb 14, 2012)

Sounds like a good set up , now that you have the formulas, you're good to go.:thumbsup:


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## Builders Inc. (Feb 24, 2015)

Watch this. And learn it. 




It applies to any business. 


Sent from my iPhone using Tapatalk


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## TxElectrician (May 21, 2008)

Zkmconstruction said:


> We would never pay $500 or more for a water heater install, so why would we charge that amount?


This is a terrible argument. 

Last month, I paid a painter $1,600.00 to replace a couple sheets of rock, re-texture my ceiling, and paint a bedroom. I am sure he never would have paid someone that much to do it.

I paid it, and gave his help a $50 tip, and will refer his company. They did a great job, showed up and finished when promised, and left my house clean.

While they were working, I was able to do jobs I know, and make money.

Everyone was happy, and profitable.


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## SectorSecurity (Nov 26, 2013)

What I'm starting to see from this thread is I need to move to where you are.

I could dial back work greatly to get to 50 Grand and you say I can live comfortably?

Sent from my XP7700 using Tapatalk


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## daffysplumbing (Oct 16, 2017)

Zkmconstruction said:


> Yes, please post. I would love to read it! Also, as of right now, my expenses are in order. We have little as the business is ran out of my house. We have our Insurance, WC and llc and the licenses we need. Accounting software, business banking open, office supplies, credit card used for materials, not much else since it's ran out of home... I assume we already pay our house and utilitys, no reason to add that In. And I do not get paid. I do this for my husband, bc his split of the 60% includes him doing booking also. Since he is gone alot, I just do it for him.
> 
> My husband and I have the house, 2 vehicles (truck and car) and the financial means. At the beginning, we purchased a new desktop, a work trailer, paid for LLC and state registration, basically anything start up cost. He specializes in Electrical, but also has knowledge in all areas of construction (worked on various government jobs doing all areas). With the tools needed for all iobs, plus some specialty equipment available for his use when needed. We can also pay out of pocket for materials that were missed during bids (customers usually buy materials).
> 
> ...


With the prices you are charging your partner will always be broke. You writing compares and justifies your personal expenses with your lifestyle. Instead, check out the competition's prices and jack up your prices, or you will not be in business long. Don't compare with handymen who always have prices that are too low. You mentioned $4,000 for a kitchen while a cheap kitchen in this area starts at $40,000. We pay our plumbers to install a water heater about the same as your total charge for labor and it takes 1 plumber no more than 2 hours from the time he gets the call to completion.

Personally, I don't like the 60/40 split and I don't like to have a partnership where partners always think one does more than the other. The $24 you paid your partner for installing the water heater probably comes out to about $8 per hour and less than minimum wage and even your husband made less than minimum wage since you say me puts in much more time.


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## Zkmconstruction (Oct 27, 2017)

SectorSecurity said:


> There are many million dollar companies that have relationships and repeat customers.
> 
> You shouldn't sell yourself short.
> 
> Sent from my XP7700 using Tapatalk





KAP said:


> Zkmconstruction said:
> 
> 
> > We live VERY comfortable on $50k a year. *So we can afford to be cheaper.* The water heater we installed, ended up with a follow up job of light installs costing $4000. So I think its worth it. *We base our prices on how much we think is reasonable. *
> ...





TxElectrician said:


> Zkmconstruction said:
> 
> 
> > We would never pay $500 or more for a water heater install, so why would we charge that amount?
> ...


Wow! I told my husband that and he almost crapped his pants! We charge $150 for painting a room (12x12 standard room sizes in this area), Stomping a ceiling is $100 And we charge $85 per sheet of drywall. Includes hanging, mudding and sanding. That's no materials included. 


SectorSecurity said:


> What I'm starting to see from this thread is I need to move to where you are.
> 
> I could dial back work greatly to get to 50 Grand and you say I can live comfortably?
> 
> Sent from my XP7700 using Tapatalk


Depending on HOW comfortably you cushion yourself, we feel like 50K a year is perfect. We do not live above our means.


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## hdavis (Feb 14, 2012)

$150 for a 12x12 paint job? Walls, trim, ceiling all different paint? 1 coat or 2?


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## Zkmconstruction (Oct 27, 2017)

hdavis said:


> $150 for a 12x12 paint job? Walls, trim, ceiling all different paint? 1 coat or 2?


Yes. Walls, base, ceilings. 1 coat. We did have 1 job last month where we charged $200 for same job, But the walls were dark maroon and she wanted white. And it took 3 coats. We figured no reason to charge alot more, because they were already there doing other work.


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## overanalyze (Dec 28, 2010)

Please do not take offense to this, but your mentality is what hurts this industry. You are not charging enough and it doesn't matter if you think the pricing is in line...it isn't. Charge more! You can not think of labor like an employee. "Making" 20 bucks an hour costs much more than $20 an hour.


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## VinylHanger (Jul 14, 2011)

Zkmconstruction said:


> Yes. Walls, base, ceilings. 1 coat. We did have 1 job last month where we charged $200 for same job, But the walls were dark maroon and she wanted white. And it took 3 coats. We figured no reason to charge alot more, because they were already there doing other work.


That's insane. 200 dollars is not enough to pull off of a profitable part of the job to do a non profitable part. Though, honestly, it doesn't sound like many parts are profitable yet.

You can't charge people what you think is fair, or makes them happy. The cost is the cost. Believe me, this is the hardest thing to realize. But when you are broke and wonder why your husband is working so many long hours and not getting ahead, you will understand.

It is easy to give breaks and discounts, it gets easier to not. 

Try a few jobs at a fair, but higher rate and see what happens. Work less, make more. That is the point.

Sent from my SM-G930V using Tapatalk


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## 480sparky (Feb 1, 2009)

Folks: It's obvious we're conversing with someone who is either fantastically wealthy and making a profit to live on is not an issue, or just does not care to hear the truth and refuses to accept facts.

If it is the former, then let's congratulate them for either being lucky enough to have the financial means to live out their lives in relative ease on $50k a year. Working for less-than-minimum wages means they can already afford the steak and lobster. It's just the jobs they're doing means the difference between a cheap bottle of domestic wine and a bottle of the good stuff.

If it's the latter, we are wasting our time here. I say we move on.


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## TxElectrician (May 21, 2008)

Zkmconstruction said:


> Wow! I told my husband that and he almost crapped his pants! We charge $150 for painting a room (12x12 standard room sizes in this area), Stomping a ceiling is $100 And we charge $85 per sheet of drywall. Includes hanging, mudding and sanding. That's no materials included.
> 
> 
> Depending on HOW comfortably you cushion yourself, we feel like 50K a year is perfect. We do not live above our means.


First off, you are to be commended for trying to educate yourself on business matters, as well as staying part of this thread where it could seem as if everyone is jumping on you. You are receiving some solid advice.

If you want to be a business, you must calculate all the costs associated with being a business, which means you have to know those costs. 

Start with your husband's and his partners yearly desired salary, add all overhead expenses (which 480 provided a good list) and your profit margin. Remember profit is not extra money, it's a necessity. Divide that number by the hours that will be billable. Dont forget to figure in holidays and vacation time. For me, I deduct 6 holidays and 2 weeks vacation, plus in an 8 hour day, only 5.5 hours are actually "billable". 

Best of luck to yall. 

As far as your husband nearly crapping his pants, I do not like to waste money, but I would sooner pay someone what I did than hire someone that had quoted me your price. I had a good feel for the amout of time they would spend on site, and a knowledge of the costs and time off site. A happy and profitable company is more likely to perform to my standards than someone who was worried they weren't making any money.


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## TxElectrician (May 21, 2008)

480sparky said:


> Folks: It's obvious we're conversing with someone who is either fantastically wealthy and making a profit to live on is not an issue, or just does not care to hear the truth and refuses to accept facts.
> 
> If it is the former, then let's congratulate them for either being lucky enough to have the financial means to live out their lives in relative ease on $50k a year. Working for less-than-minimum wages means they can already afford the steak and lobster. It's just the jobs they're doing means the difference between a cheap bottle of domestic wine and a bottle of the good stuff.
> 
> If it's the latter, we are wasting our time here. I say we move on.


I may be wrong but I think she may actually be trying to figure things out. It's difficult to quit looking at things from an employee perspective and realize the cost associated with operating a business.


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## 480sparky (Feb 1, 2009)

TxElectrician said:


> I may be wrong but I think she may actually be trying to figure things out. It's difficult to quit looking at things from an employee perspective and realize the cost associated with operating a business.


I get that. But every time someone suggests the 'proper' way to calculate a price, the OP comes back with 'we just want to be cheaper' and 'we are comfortable living on 50k a year' and 'we don't want to charge more than we would pay for the job'.

None are so blind as those who refuse to see.


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## Leo G (May 12, 2005)

Plus you need to be making $80K/yr to bring in $50K


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## SectorSecurity (Nov 26, 2013)

I think there are a number of us here who starting thinking I can't possibly charge that much!

Then we came to the realization that yes we can. When I started never did I think I could bill out at $100/hour but now I do

Sent from my XP7700 using Tapatalk


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## TxElectrician (May 21, 2008)

sectorsecurity said:


> i think there are a number of us here who starting thinking i can't possibly charge that much!
> 
> Then we came to the realization that yes we have to. When i started never did i think i could bill out at $100/hour but now i do
> 
> sent from my xp7700 using tapatalk


fify


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## KAP (Feb 19, 2011)

Zkmconstruction said:


> Wow! I told my husband that and he almost crapped his pants! We charge $150 for painting a room (12x12 standard room sizes in this area), Stomping a ceiling is $100 And we charge $85 per sheet of drywall. Includes hanging, mudding and sanding. That's no materials included.
> 
> 
> Depending on HOW comfortably you cushion yourself, we feel like 50K a year is perfect. We do not live above our means.


Make you a deal that will demonstrate and most likely help you get beyond a retail mindset...

On your next three jobs, increase your prices 10% above what you normally would charge... here's the kicker... YOU personally get to keep the 10% for your efforts (a pittance in reality)...

Once you start to realize your time is worth money, transitioning to the mindset of an owner and being properly compensated for your efforts will hopefully start to grow and cultivate...


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## Zkmconstruction (Oct 27, 2017)

480sparky said:


> Folks: It's obvious we're conversing with someone who is either fantastically wealthy and making a profit to live on is not an issue, or just does not care to hear the truth and refuses to accept facts.
> 
> If it is the former, then let's congratulate them for either being lucky enough to have the financial means to live out their lives in relative ease on $50k a year. Working for less-than-minimum wages means they can already afford the steak and lobster. It's just the jobs they're doing means the difference between a cheap bottle of domestic wine and a bottle of the good stuff.
> 
> If it's the latter, we are wasting our time here. I say we move on.


Well, that's a little rude. I'm trying to figure it out. I am in no way wealthy. We are 29 and 33 with 2 children, an 80k home just trying to make something for ourselves. 

I have ran alot of the suggestion past my husband, and have a list of things to discuss with the partner. 

The partner wants to raise costs. But we have the mindset that we don't want to charge alot more, because being a new business, if we do 3 bids a week and they are all too high and the customers pass, then we have zero Income. And now there is zero to pay expenses for the business, or our personal bills. We would rather get $500 in our pocket to support ourselves with cheap prices vs 0 because we charged "too much".


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## hdavis (Feb 14, 2012)

Zkmconstruction said:


> Well, that's a little rude.


Actually, I think everyone is being pretty nice for 3 reasons - you're just starting out you're stuck trying to figure this out, and you're female. That all gets you the more detailed explanations and more gentle responses.

Keep in mind, a 6% bump in your price may only be a 4% bump in overall project cost. You're surviving on the marginals, but the customer isn't. They don't starve or go bankrupt just because of a few percent you charge.


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## rselectric1 (Sep 20, 2009)

Zkmconstruction said:


> I am going to assume by your user name, you are in fact an electrican. If you don't mind me asking, how much would you charge to upgrade a 100amp seruvice to 200? We have done a few and charged $1250. Labor and materials. On our first one, I thought it was too cheap, and actually called other local companies for a price and 4 out of 6 I called, charged under $1000, labor and materials.




Were there permits and inspections involved in these?

EDIT, and did the POCO really ensure that the feeders whether above or below ground had the ampacity to handle the new service load?


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## Zkmconstruction (Oct 27, 2017)

rselectric1 said:


> Zkmconstruction said:
> 
> 
> > I am going to assume by your user name, you are in fact an electrican. If you don't mind me asking, how much would you charge to upgrade a 100amp seruvice to 200? We have done a few and charged $1250. Labor and materials. On our first one, I thought it was too cheap, and actually called other local companies for a price and 4 out of 6 I called, charged under $1000, labor and materials.
> ...


Yes. Everything was permitted and inspected. A permit for residential electrical work in our city (and county, I checked with them also) is only $75. Inspector came out before job, and after.


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## rselectric1 (Sep 20, 2009)

Zkmconstruction said:


> Yes. Everything was permitted and inspected. A permit for residential electrical work in our city (and county, I checked with them also) is only $75. Inspector came out before job, and after.


Just goes to show even further why pricing questions are not allowed on this forum. In Chicagoland the pricing is much much higher.

Just the materials would eat that up quickly just in AFCI breakers, not to mention permit fees and we don't even get rich quick on these by any means.


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## hdavis (Feb 14, 2012)

We go back and forth on AFCIs in some jurisdictions here. IIRC, last time a new panel was put in, the panel was around $100 and the breakers ran about $500.


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## EthanB (Sep 28, 2011)

I'm getting a little nervous here. How are you doing painting, water heater installs and electrical service installs, all with only two guys? Is one a licensed plumber and the other a licensed electrician? If so, why on earth would you be doing painting or charging only $30 an hour?

I will agree with the others, you need to get out of your own head when setting pricing. Don't think "how would I feel" first. Calculate the costs and then do a gut check. If you need to charge $500 but you think the market will only bear $300 then you either need to figure out how to cut costs or stop offering the service.

I remember that I thought, when I started, that charging $25 an hour meant I got to pay myself $25 an hour. A couple years ago I figured that I needed to charge $50 an hour to pay $25 an hour, THEN add a markup for profit. It's all relative.


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## Mordekyle (May 20, 2014)

A customer called me this morning about an estimate I gave him to replace 7 courses of siding at 8' wide, 3 trim boards around a window, and presumably a strip of rotten OSB behind it. 

He thought $800 was high. I told him that was the cost. 

The customer doesn't determine the price. He asks for an estimate and then says yes or no. 


If a homeowner doesn't maintain his property, he shouldn't complain when it rots out from under him nor when the costs of repairs seem steep. 


Sent from my iPhone using Tapatalk


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## Zkmconstruction (Oct 27, 2017)

rselectric1 said:


> Zkmconstruction said:
> 
> 
> > Yes. Everything was permitted and inspected. A permit for residential electrical work in our city (and county, I checked with them also) is only $75. Inspector came out before job, and after.
> ...


Oh! I'm sorry! I wasn't aware pricing questions were not allowed here. I was doing research about how to calculate profit and this page popped up on Google. ???


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## Mr Latone (Jan 8, 2011)

Money can be discussed. It's just not to be confused with pricing questions or comparisons. Like, "How much should I charge?" isn't appropriate. Everyone's circumstance is different


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## B.Johnson (Sep 17, 2016)

I just want to say that I admire that you are still posting and trying to learn from the responses that you have been given. A lot of people would have been gone by now. :thumbsup:


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## KAP (Feb 19, 2011)

Zkmconstruction said:


> On our first one, I thought it was too cheap, *and actually called other local companies for a price *and 4 out of 6 I called, charged under $1000, labor and materials.


This is where you are going off the rails and demonstrates you need to get to know your numbers intimately so you aren't "guesstimating"... basing your pricing on what every one else charges could only possibly work if the companies were the same (i.e - number of employees, same pay goals, profit goals, setup, insurance cost the same, operating costs, etc.)... in EVERY market there will always be someone cheaper AND more expensive than you and that is based on many factors that vary from company to company...

Consider... you already identified that you are having trouble in this pricing area... what if another company was basing their pricing off of your company and then lowering their pricing to "compete"?

Do you see how that is not a proper way to approach pricing? Charge what YOU need to charge to be in business and focus on getting customer that can support it... over time, while the lake is full of fish, you'll find that similar fish congregate amongst one another (i.e. - referrals)...

What others charge is irrelevant to what YOU need to charge (hopefully, you're now calculating you getting paid in the mix going forward)...


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## RangoWA (Jun 25, 2014)

I can't stand companies that call me to see what I would charge for a job so they could figure out their own. I threatened to sue one bastard, just by the questions I knew he was shopping me.

I alwyas figured out how much money I wanted after all expenses. If one cannot make that determination then business is not for them, find a job and let the employer handle the math.


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## Inner10 (Mar 12, 2009)

RangoWA said:


> I can't stand companies that call me to see what I would charge for a job so they could figure out their own. I threatened to sue one bastard, just by the questions I knew he was shopping me.
> 
> I alwyas figured out how much money I wanted after all expenses. If one cannot make that determination then business is not for them, find a job and let the employer handle the math.


Just give a crazy low price.


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## RangoWA (Jun 25, 2014)

Inner10 said:


> Just give a crazy low price.


I have done that. But sometimes it isn't immediately obvious so don't appreciate some company ripping off my time. Seems to be the hallmark of bottom feeders though.


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## SectorSecurity (Nov 26, 2013)

I also hate customers who call up and want line item numbers with suppliers and everything.

I'm not building you a ****ing shopping list so you can try it yourself.

Sent from my XP7700 using Tapatalk


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## overanalyze (Dec 28, 2010)

I think knowing my numbers has made estimating easier. I still find the most difficult part is estimating the man hours it takes for more complex projects. It takes time to build up past projects to refer back to.

Glad to see the op still around...it does show she has some good intentions of getting things better for her and her husband.


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## Zkmconstruction (Oct 27, 2017)

I realize calling and asking other places was a no-no. I have not done it since. And I did not do it to use at competition price, the guys said $1250 and it stayed at that price, even knowing the competitions price. 

Thank you to the people who have posted and given me a "simple formula"on how to figure out what we need to make vs. want to make. My husband and I do have a plan set in place for certain things, like taxes we have to pay. And are quickly learning of other things we had not thought of before. 

This is hard to get started, and we do not know of anyone personally who has started a business and been able to keep it going, but we are committed to trying, and that's why I am still posting. 

Also, out of the people who are on here that have been in business for more than 10years, have you tried to research start-ups!? The range of what to do/not to do on the internet is crazy! So many things contradict each other! I have even spoken to 3 different CPAs that all told me different things about small company taxes. 

I will look at all my expenses and recalculate, but be prepared to see me posting another thread. I'm not going anywhere.


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## Zkmconstruction (Oct 27, 2017)

EthanB said:


> I'm getting a little nervous here. How are you doing painting, water heater installs and electrical service installs, all with only two guys? Is one a licensed plumber and the other a licensed electrician? If so, why on earth would you be doing painting or charging only $30 an hour?
> 
> I will agree with the others, you need to get out of your own head when setting pricing. Don't think "how would I feel" first. Calculate the costs and then do a gut check. If you need to charge $500 but you think the market will only bear $300 then you either need to figure out how to cut costs or stop offering the service.
> 
> I remember that I thought, when I started, that charging $25 an hour meant I got to pay myself $25 an hour. A couple years ago I figured that I needed to charge $50 an hour to pay $25 an hour, THEN add a markup for profit. It's all relative.


My husband is a licenced electrician, and neither one are licenced in plumbing, but in Ohio, you do not have to be licenced to do residential work. I have checked with county and state, and also BBB on those. To help us out, we do have a "handyman" licence and in the process of getting a general contractors licence (can not do things like room additions without it).


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## Seven-Delta-FortyOne (Mar 5, 2011)

I thought you were in Virginia, no? 

I really think that book I mentioned would help you a great deal. It's one of the go-to books for new contractors.


Delta


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## hdavis (Feb 14, 2012)

She said Ohio earlier.


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## EthanB (Sep 28, 2011)

If your husband is a licensed electrician then I would definitely focus all my efforts on the service electrician model. It's less common than the service plumber model but they can do quite well. 

You should do a search for posts here on CT by a guy named Oconomowoc. He isn't active anymore but his posts were gold. He had the service plumber system dialed in to a crazy level. I look at it this way, it's FAR better to do 1000 hours of specialty work at $80 an hour a year than 2000 hours of $40 work a year. I don't really work in hourly rates but idea is that your overhead and exposure is much less in the first situation, so you can actually make more in the first situation AND have 1000 hours of your life back.


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