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    How to figure profit?

    For those of you that do odds and ends jobs, build stuff on the side or any side hustle. How do you factor in your profit? Is it a percentage of the materials on top of the materials cost or is it an hourly rate on top of what materials cost? Is wear and tear factored in on tools on every job? Or is every job going to be different ?

    Don’t have any plans yet for a side hustle but when I find one I want to try charge correctly.

    #2
    For most things I use multiples, some things require a time estimate.
    If your estimating time don’t forget to plan for all the crap that could go wrong.
    I’ve noticed my guys are half as fast as they think they will be sometimes lol


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      #3
      I have a little woodworking hustle on the side.

      Just starting out so I charge material plus 10%(covers glue, pads, screws, sandpaper, etc) plus $40/hr. Eventually, I would like to get up to $80/hr.

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        #4
        It depends on what the job is and the skill set required.
        Mostly it is costs plus time involved. Daily rate, hourly rate etc.
        Some jobs I have set rates that only change as material/parts costs change.
        For example I charge a days labor cost to replace a lift plate and motor. I've done a couple in as little as 3 hours. Most take 4 to 6. Eats up a day. Plus the time to order, show up for orders received and do estimates and invoices. Consideration for time to go get materials, fuel, maintenance to vehicles, tool depreciation/ replacement and administrative time have to be included in those hours and costs.
        I have under bid a couple of jobs this year and although in the end I didn't loose money per say, I didn't profit off of them.
        Remember that most people in business have to think about that day after they close the doors. It's not just having a few bucks left at the end of the month.

        Gary

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          #5
          It depends on the job but need to factor in wear and tear and create sinking funds to either pay the equipment off or have funds to replace when time. Always remember to factor in the incidentals as they add up over time and it’s not just the main items you buy for the job, but all the small stuff that you buy here and there. Profit is hard for a one man show as you set what your worth and charge that. When you add people, then you need multipliers to make sure taxes/ins are covered if you have those.


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            #6
            At least your asking the right questions, most folks pull a number out of somewhere and think that's good enough. Every expense has to be factored in plus the amount you need per hour/week/month. I calculate in gas, how much per day it will take to replace my vehicle in 5 years, same for my equipment but on a 1 year replacement, insurance, etc.. Your expenses will vary according to whatever your doing just remember for every dollar that goes out that dollar plus 30% and your rate comes back.

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              #7
              I get the opportunity to look inside of a lot of different businesses as a consultant.

              Most people aren't charging nearly enough, and lots of them aren't really making much at all.



              The first rule is to calculate your true overhead.
              My business is extremely lean, so I keep it under 20%.
              Most that I see are in the upper 20's.

              Then profit is the next big hill to climb.

              My rule of thumb, is that you need to be making enough to make your business worth buying to someone else.

              That means you need to be paying yourself a salary AND still making a profit on top of that.

              No one wants to buy a business if it just means buying yourself a job.
              Last edited by Atfulldraw; 05-26-2020, 10:22 PM.

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                #8
                Your biggest hurtle will be figuring out your time. That has been a struggle. I know all fixed cost, plus % of other items, then your time. That has always been tough.

                There is an excellent book that I wish I had when I started my business. It is called Profit First! If you follow what that guy has advised you will or should have money in your account. Highly recommend it.


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                  #9
                  As an ac guy not practicing currently but here go's. For a system replacement I figure cost. Cost of equipment, extra parts and supplies, some for misc, labor for my installer (subs). Then i figure how much i would like to make over cost. In the misc costs i have a figure that covers insurance (truck and business) and taxes.

                  For smaller repairs i mark up my parts and supplies and charge whatever labor i am currently charging. I dont make as much money there as the flat rate shops do, what they get $500 for i seem to do about $320. But i have no trouble sleeping at night.

                  Most ac (ok, lots) of outfits now are about selling systems. That is where the money is at, so i like it too. But lots (ok some) of companies push equipment sales past a point of being honest. Some technicians are sales guys, not repair guys. If they don't sell equipment, they wont keep a job. If they do sell equipment, they make lots of money.
                  Its all about the sale and financing.

                  Sorry for the rant, but i am not happy with the industry that i have spent a lifetime in.

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                    #10
                    Revenue - expenses

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                      #11
                      Originally posted by Atfulldraw View Post
                      I get the opportunity to look inside of a lot of different businesses as a consultant.

                      Most people aren't charging nearly enough, and lots of them aren't really making much at all.



                      The first rule is to calculate your true overhead.
                      My business is extremely lean, so I keep it under 20%.
                      Most that I see are in the upper 20's.

                      Then profit is the next big hill to climb.

                      My rule of thumb, is that you need to be making enough to make your business worth buying to someone else.

                      That means you need to be paying yourself a salary AND still making a profit on top of that.

                      No one wants to buy a business if it just means buying yourself a job.
                      Well said.

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                        #12
                        Years ago when I had two kids in college I started a millwright side business setting new industrial equipment on a major plant expansion. When it was just my son, tool buddy and my self things were great, although the huge company was consistently very late paying invoices. Well when the work just kept growing and I had to hire employees having to make regular pay days, unemployment taxes and workers comp insurance, it eventually turned out unbearable for a small business. I ended up rolling over to being an employee myself for one of the general contractors. Oh well, live and learn. On the upside, two kids thru college and zero loans for them or myself. Life is good, but in small business, there sure are a lot of what ifs.......cC

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                          #13
                          Thanks TBH. Pretty good info here.

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                            #14
                            Any other tips ?

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                              #15
                              When I was welding on the side I would just total up expected materials to be used and my consumables. I always did lump sum with a minimum charge. Probably would have made more money charging hourly but I stayed busy enough.


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