Question on profit

[john1]

i think your idea of "profit" may be a little skewed if i am even following you on this

$1000 job = $1000 cash
$200 in materials = $600 with markup
$75 an hour shop rate with 12 hours labor = $900
$900 + $600 = $1500 to produce job
$1500 cost - $1000 job = $-500 out of pocket = no profit lost money WTF?

the estimating system that you so highly push, should be setup so you do not even need to ask all the questions about pricing, i have used it, if you setup all your expenses into it, and material costs, labor estimates to produce etc, you would not be constantly asking pricing questions

Yeah it's a labor estimate, Isn't it good to go back and make sure the estimates are correct after a job? I thought this was good business practices but maybe i am wrong.

I am just noticing that if someone comes to me and wants a run of lets say 250 cut vinyl decals, I will make less profit than other jobs because more complex designs take more time to cut and weed out than others. No?

I know you bigger guys laugh at this type of work but the bills need to be paid so i'm not too good to say "no" to a job that is making me $60 a hour after materials just because it's not my normal $75.

 

[tsgstl]

its an average
are you going to give back money when you do a job in half the time? It is only going to come with experience.

 

[genericname]

• Overhead figured in
• Utilities
• Insurance
  [*]Taxes
  [*]Any incidentals you might happen upon.
  [*]Down time
  [*]And most of all…….. mistakes
  

Gino's on to what you need here.

First thing's first, hourly rate.

List all your expenses. ALL of them. How much does it cost for you to live and operate for one year? Car, mortgage, heating, electrical, food, you name it. Are you comfortable making only that? I'm going to say no. Bump up the number to something that would make you comfortable.

Take that number, divide by how many weeks a year you want to work. Divide that by how many days a week you want to work. Divide THAT by how many hours a day you want to work. That's your hourly rate.

When quoting a job, you use that hourly rate as your base, and multiply by the amount of hours the job will take you (charge absolutely a minimum of 1, or the job's not worth it). Add to that your material expenses, plus their markup. Add any outsourced talent, plus markup. Add delivery, plus markup. Add, add, add. There's your figure.

This way, no matter what, you never wonder if you covered your hourly rate, because it was your starting point. Materials cost should never bleed into your hourly rate.

 

[Fred Weiss]

Gino's on to what you need here.

First thing's first, hourly rate.

List all your expenses. ALL of them. How much does it cost for you to live and operate for one year? Car, mortgage, heating, electrical, food, you name it. Are you comfortable making only that? I'm going to say no. Bump up the number to something that would make you comfortable.

Take that number, divide by how many weeks a year you want to work. Divide that by how many days a week you want to work. Divide THAT by how many hours a day you want to work. That's your hourly rate.

When quoting a job, you use that hourly rate as your base, and multiply by the amount of hours the job will take you (charge absolutely a minimum of 1, or the job's not worth it). Add to that your material expenses, plus their markup. Add any outsourced talent, plus markup. Add delivery, plus markup. Add, add, add. There's your figure.

This way, no matter what, you never wonder if you covered your hourly rate, because it was your starting point. Materials cost should never bleed into your hourly rate.

The one thing you are leaving out is an estimate of your billable hours per day. Just because you want to work 8 hours a day doesn't mean you will ever be able to bill for all of them. Start with 4 billable hours a day and check back in a month or two to reevaluate.

So, for example, after you calculate your overhead and add in both the income and profit you'd like to earn, you come up with $300 a day, 5 days a week, 50 weeks a year. If you would like to work 8 hours a day, then your shop rate would be $37.50 an hour. But you realize that you only bill an average of 4 hours a day even though you work 8, therefore your shop rate must be $75 an hour to meet your goals.

 

[genericname]

Oh absolutely. I meant it only as an ideal situation, where you see yourself actually working and billing for all of those estimated hours. Fortunately, the markups should take care of the variable billable hours at first, but as you said, you should always re-evaluate.

Don't know how, but I completely missed your post further up. I basically just posted the dumbed down version of it. My apologies!

 

[CES020]

The one thing you are leaving out is an estimate of your billable hours per day. Just because you want to work 8 hours a day doesn't mean you will ever be able to bill for all of them. Start with 4 billable hours a day and check back in a month or two to reevaluate.

So, for example, after you calculate your overhead and add in both the income and profit you'd like to earn, you come up with $300 a day, 5 days a week, 50 weeks a year. If you would like to work 8 hours a day, then your shop rate would be $37.50 an hour. But you realize that you only bill an average of 4 hours a day even though you work 8, therefore your shop rate must be $75 an hour to meet your goals.

+1

I think that's a very common problem. You can figure 40 hours a week all you want, but if you only get 10 hours of billable time a week, then you're going to go out of business eventually. You need to work very hard to make sure you have a lot of billable hours each week. Without those, you're in trouble.

 

[Fred Weiss]

Don't know how, but I completely missed your post further up. I basically just posted the dumbed down version of it. My apologies!

Not a problem. Good information is good information.

 

[Gino]

Here's a question for you guesstimating geniuses.......

Let's say you are a one man shop and all you do is print vinyl all day long in and out. Let's say 8 hours a day, five days a week.

So, while the vinyl is printing or going back and cutting it's contour shape.... then sheet cutting automatically.......... [NO LAMINATE INVOLVED to make calculations easier]... you're answering the phone, playing on your ipad, listening to Pandora or just walking the dog, how do you figure an hourly wage, if machinery is all that's really creating your work ??

If the machine needs a tune up or more ink, do you wait til you run out of money and gripe about what a liter of ink costs or do you have each and every item down to a blue stabilo pencil figured in ??

So, if you're just a monkey, what's your worth.

 

[Border]

A single thread like this one alone is well worth the price of a premium subscription to Signs101, even though this one is not in the premium section.

Invaluable info being shared by successful people...put it to good use!

 

[genericname]

...or do you have each and every item down to a blue stabilo pencil figured in ??

Ideally, yeah, you do. You want your hourly rate to, as closely as possible, encompass every single expense you have, if it's an operating expense, and not just one that gets passed on to your customer and marked up.

No surprises that way. Well, there will always be surprises, but at least this way you can minimize them. And as Fred said, re-evaluate often to make sure you are covering your expenses.

 

[Fred Weiss]

Here's a question for you guesstimating geniuses.......

Let's say you are a one man shop and all you do is print vinyl all day long in and out. Let's say 8 hours a day, five days a week.

So, while the vinyl is printing or going back and cutting it's contour shape.... then sheet cutting automatically.......... [NO LAMINATE INVOLVED to make calculations easier]... you're answering the phone, playing on your ipad, listening to Pandora or just walking the dog, how do you figure an hourly wage, if machinery is all that's really creating your work ??

If the machine needs a tune up or more ink, do you wait til you run out of money and gripe about what a liter of ink costs or do you have each and every item down to a blue stabilo pencil figured in ??

So, if you're just a monkey, what's your worth.

My worth is however much I can get paid for what I do. If I can only keep one machine going, I don't make as much as if i can keep three machines going. As a business owner I am free to take advantage of income multipliers such as employees, machines and outsources etc. I charge for each job as if it were the only work being done. If they happen to occur in the same time frame, then my return on time gets multiplied. My model is a local friend in the business who averages $500K gross a year, has two part time employees, outsources whenever possible and puts $300K a year in his pocket.

 

[genericname]

Invaluable info being shared by successful people...put it to good use!

Shows what you know. I'm far from successful! :Big Laugh

 

[J Hill Designs]

Shows what you know. I'm far from successful! :Big Laugh

you need to make more than a genericname of yourself!

snap!

 

[Border]

Shows what you know. I'm far from successful! :Big Laugh

Well, at least your brain seems to be firing on most cylinders~

 

[genericname]

you need to make more than a genericname of yourself!

snap!

In due time! The name's actually part of not wanting to seem like an official voice for the business. Definitely needed a community like this for my job, but I wasn't asked to participate in an official capacity, so I'm not overstepping my bounds.

Well, at least your brain seems to be firing on most cylinders~

I'd like to think so! Not unsuccessful, just haven't had the time to properly dedicate to my side business. Hopefully when I do, I have enough know-how to not bankrupt myself.