The first step to making your business a success is to arrive
at the correct hourly rate to meet your profit goals. You may
have to ask your accountant for some information about your business
as well as have a good estimation of other facts and figures.
The following formula should give you a rough estimate of how
much to charge for your labor to make a decent profit:
Yow! Don't worry if you don't understand this yet. Simply fill
in the blanks in the Labor Calculator. If you want a more detailed
explanation Click Here and follow
the steps in the worksheet to arrive at the correct answer.
First we need to figure the ratio of hours worked by a technician
to the hours sold for a given time period. You should have a pretty
good idea how many hours you can bill out per eight hour day.
Based on the performance at my old plumbing shop I'll suggest
some numbers that I found realistic.
Average Hours Worked per day (try 8)
Average Hours Billed to Customers per day
Hourly rate paid to employee (try $20)
Labor Burden on an hour of labor (try $5)
Benefits (try $2)
Overhead % (try 20%)
Profit% you want to make (try 15%)
Sell Price of Labor
You may be surprised at how high this ends up. This is the rate
you need to charge to make a profit and to stay in business.