# Calculating Overhead Percentage?



## Oconomowoc (Oct 13, 2011)

jb4211 said:


> What math is that? 52 weeks x 5 days a week = 260 days :laughing:
> (maybe it was a leap year or something)


Sorry, I was doing it quickly in my head.


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## Oconomowoc (Oct 13, 2011)

BamBamm5144 said:


> Now to me, that is a problem and one of the BIGGEST problems in the whole industry. This is why prices vary so much and why a lot of guys don't make it. I don't know if I will "make it" either but I know that I get paid weekly.
> 
> How do you plan on expanding if you can't charge real rates? Do you plan on being your own employee until you can no longer work? What are you going to do about retirement? Do you plan to retire?
> 
> ...


That is most certainly NOT the problem. I know what you are getting at though. :laughing:

The true problem is discipline. I don't need to pay myself anything because I have discipline not to spend it. Discipline is a serious problem, without it you can pay yourself weekly, monthly or annually and you will still be broke.

I learned that when i was 6 and couldn't afford shoes.


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## SSC (Feb 8, 2011)

@Mike - is coffee a write off if you list it as overhead expense?


Back to the salary part-

I agree that there has to be compensation for running the business. Estimates , payroll, paperwork etc. as well as compensation for the actual project related labor.

Is it a normal business practice for a one man show to collect 2 checks at the end of the week? 1 check for salary amount an 1 check for the hours worked on projects.

Do you guys have a list for fixed overhead and variable overhead or just keep one list and average it out.


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## DavidC (Feb 16, 2008)

BamBamm5144 said:


> *Paying yourself should not go into overhead if you are physically working.* It should go into labor as you pay yourself per hour as if you were a regular employee.
> 
> For me, I usually get around 200 working days a year. If my overhead is 100k a year, I need to make 500 a day.
> 
> As I have said, I don't think you can go wrong starting off with the 30-30-25-15 rule and tweaking it for yourself.


I have to agree with the highlighted statement. I'm not usually on the job physically in the day to day. More of a guest appearance now and then.

A flat percentage for your materials may work out on average but I would caution that if you sell a job that is light on materials, heavy on labor you may not be covering your OH for that job.

Good Luck
Dave


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## Oconomowoc (Oct 13, 2011)

SSC said:


> @Mike - is coffee a write off if you list it as overhead expense?
> 
> Back to the salary part-
> 
> ...


Absolutely. As long as I'm funding prostitutes for our congressman I'm writing off Starbucks.


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## Oconomowoc (Oct 13, 2011)

SSC said:


> Is it a normal business practice for a one man show to collect 2 checks at the end of the week? 1 check for salary amount an 1 check for the hours worked on projects.


Just remember that you have to pay tax on income. The cardinal rule of wealth is to 1.) Not show income 2.) Pay little taxes 3.) Grow assets.

Two paychecks is a big no-no. You should talk to a good tax accountant about that.


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## BrandConst (May 9, 2011)

Oconomowoc said:


> Just remember that you have to pay tax on income. The cardinal rule of wealth is to 1.) Not show income 2.) Pay little taxes 3.) Grow assets.
> 
> Two paychecks is a big no-no. You should talk to a good tax accountant about that.


Could not have said it better myself!


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## BamBamm5144 (Jul 12, 2008)

Oconomowoc said:


> Just remember that you have to pay tax on income. The cardinal rule of wealth is to 1.) Not show income 2.) Pay little taxes 3.) Grow assets.
> 
> Two paychecks is a big no-no. You should talk to a good tax accountant about that.


It depends how you are set up. I only get taxed on company profit. If I have a loss of let's say 50k one year and a profit of 50k the next year, I don't get taxed anything because of the carry over.

You can only not show income for so long until the IRS comes knocking to figure it out.

Main problem is most people don't know what they can actually write off or not.


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## Oconomowoc (Oct 13, 2011)

BamBamm5144 said:


> It depends how you are set up. I only get taxed on company profit. If I have a loss of let's say 50k one year and a profit of 50k the next year, I don't get taxed anything because of the carry over.
> 
> You can only not show income for so long until the IRS comes knocking to figure it out.
> 
> Main problem is most people don't know what they can actually write off or not.


That's not what he said, different subject.


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## SSC (Feb 8, 2011)

Oconomowoc said:


> Just remember that you have to pay tax on income. The cardinal rule of wealth is to 1.) Not show income 2.) Pay little taxes 3.) Grow assets.
> 
> Two paychecks is a big no-no. You should talk to a good tax accountant about that.


Not in that position (yet) bu i think what your trying to say is use the money through the business or investments?

for example: dont pay my self a check and from that money go buy health insurance. instead buy health insurance through the company right


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## jb4211 (Jul 13, 2010)

BamBamm5144 said:


> Main problem is most people don't know what they can actually write off or not.


Like me, which is why I have an accountant. A man can only stay on top of so many things simultaneously: the various codes governing the building trades, tax laws, wife's moods, children's needs, etc. Truly, there's only so much time in a day, a week, a month and a year. And another thing, I have four watches and three clocks, when the f#@k is Miller Time, because it's not listed on any of my time pieces I can tell you that? :no:


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## jb4211 (Jul 13, 2010)

SSC said:


> Not in that position (yet) bu i think what your trying to say is use the money through the business or investments?
> 
> for example: dont pay my self a check and from that money go buy health insurance. instead buy health insurance through the company right


Erik, there are company owners who rifle everything through the company, even down to groceries. Everything is a company expense. Is it legal? No. Do you know what the penalty is? They have to pay it back. But in the interim between the date they filed and the date they got caught, they collected a boat load of interest. This is mainly geared to those who either wear suits to work, or don't actually go to work in the literal sense and have boat loads of money to begin with.

Your best bet is to consult with a really good accountant that understands your issues.


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## SSC (Feb 8, 2011)

jb4211 said:


> Erik, there are company owners who rifle everything through the company, even down to groceries. Everything is a company expense. Is it legal? No. Do you know what the penalty is? They have to pay it back. But in the interim between the date they filed and the date they got caught, they collected a boat load of interest. This is mainly geared to those who either wear suits to work, or don't actually go to work in the literal sense and have boat loads of money to begin with.
> 
> Your best bet is to consult with a really good accountant that understands your issues.


of course and i do have one, just trying to understand better myself:thumbsup:


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## Oconomowoc (Oct 13, 2011)

@ BamBamm

I'm not picking on you so I hope you don't take the following in a bad way but.....

One day when you have added some years to your life you will wake up to a different reality. After meeting enough people and experiencing enough things you will begin to understand that our tax system in America is designed by business men for business men. Companies are actually started with the sole purpose of not paying taxes, haven't you ever read anything about the debate on taxes in our social system? Most millionaires (real millionaires) I know don't pay a dime in taxes and its not that hard. Again, our tax system is set up for it. 

Even in the news haven't you continually heard or read stories about that? Its been going on for decades and its legal. 

My wife is an accountant, have you ever looked at the emence size of our tax rules when printed out on paper? 

That's not an accident. A person can go an entire life time without paying taxes and retire a millionaire....and do it legally.


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## BamBamm5144 (Jul 12, 2008)

jb4211 said:


> Like me, which is why I have an accountant. A man can only stay on top of so many things simultaneously: the various codes governing the building trades, tax laws, wife's moods, children's needs, etc. Truly, there's only so much time in a day, a week, a month and a year. And another thing, I have four watches and three clocks, when the f#@k is Miller Time, because it's not listed on any of my time pieces I can tell you that? :no:


No I don't even know a third of it. I focus on what I know. That's why I hire an accountant, internet guys, lawyers, etc.

All I know is that a lot of guys pay their whole mortgages every month, truck payments although they don't have a personal vehicle, all their gas, entertainment, utilities and groceries all through the business.

I am trying to show profits so I can buy land and build within the next few years.


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## jb4211 (Jul 13, 2010)

SSC said:


> of course and i do have one, just trying to understand better myself:thumbsup:


I gave up trying to understand the plethora of tax law. With everything you and I and every other working man has going on it's impossible to stay on top of a moving target. So many changes, so often.


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## BamBamm5144 (Jul 12, 2008)

Oconomowoc said:


> @ BamBamm
> 
> I'm not picking on you so I hope you don't take the following in a bad way but.....
> 
> ...


No, I am not taking it badly. 

I know of guys who have tried to play the game. One went to a federal prison. The other is an employee of my mothers and he will be having $200 taken out of his check for the next 20 years.

I know taxes don't need to be paid. I understand why we all shouldn't want to. Problem is that you said legally. Majority of guys don't do it legally because they don't know all the rules. I have seen a list printed out by my accountant and it was unbelievable. I was even doing a few things that I thought were fine.

Until a few months ago I learned that if I replace rotten wood on someones house, I have to charge a tax on that. I don't have to do it to replace the roof but if I tore off someones fascia board and put on a new one, I need to charge and pay sales tax.


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## jb4211 (Jul 13, 2010)

BamBamm5144 said:


> Until a few months ago I learned that if I replace rotten wood on someones house, I have to charge a tax on that. I don't have to do it to replace the roof but if I tore off someones fascia board and put on a new one, I need to charge and pay sales tax.


But you already paid sales tax when you purchased the new fascia board. Unless you are tax free, which I'm assuming you're not. I know some companies are.


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## Oconomowoc (Oct 13, 2011)

Your assuming most do it illegally I don't have those facts so I won't assume.

My wife is an accountant for a nonprofit organization. Its very simple to do and do it legally. No need to break the law. Morons break the law. If you know people who went to federal prison your hanging with the wrong group. JK

Most accountants don't have a clue about taxes. Good accountants are rare.


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## BamBamm5144 (Jul 12, 2008)

jb4211 said:


> But you already paid sales tax when you purchased the new fascia board. Unless you are tax free, which I'm assuming you're not. I know some companies are.


I mean that I have to charge the sales tax then pay the government.


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