# Figuring overhead



## Grumpy (Oct 8, 2003)

Overhead is really actually very easy if you know your numbers. You have to know what you did last year, know what you are projecting to do this year, and watch your numbers from time to time to make sure you are on target.

Your first year in business it's a little harder sicne you have no historic data to fall back on. However you can make some very educated guesses with your accountant as to your overhead and do a profit loss report at the end of the first, then second,t hen third job and adjust accordingly. Every time you want to make a big purchase ask your accountant how that will effect your overhead and thusly your pricing.

With me, it's simple. I know how much it costs me to run my business including my salary. I know about how many working days and how many jobs we are going to do this year. I know what the "going rate" is and I won't charge less than that. 

SO if it costs me $365,000 a year just to have a company sitting weather we do business or not you may think that's an easy $1,000.00 per day. Right? Wrong! There are only 200 working days in the year around here so that's actually $1,825 per day... almost double!

That means I need $1,825 gross profit per day to pay my salary and break even as a company. Anything more is gross profit. How do I apply this to a job? You know to know how long the job will take and how many jobs you will have run con-current, how many crews working per day. If I did 365 jobs last year that means I did 1.825 jobs per day. I could take the $1,825/1.825 and know I need to make $1,000 per crew per day just to break even.

I hope that makes sense. After you've read all our replies, ask your accountant what he thinks.


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## Kenny K (Feb 9, 2008)

correct method. accountants are a good rescource if confused


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## john elliott (Oct 23, 2005)

A distinction needs to be made between 'overhead', and 'recovering overhead'.

'Overhead' exists anyway. Even if you do no work at all. You can't measure 'overhead' on a by-the-job basis.

'Recovering overhead' requires knowledge of the 'overhead' itself, and a method of ensuring that each job done contributes a suitable share towards it

John


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