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Construction Business Owner, August 2008
Q:
We have been in business eleven years now. We manufacture all types of custom metal products. We are making a profit every year but always find we are on the high end of bids.
Overheads costs, shop hourly rates, etc., seem to keep me confused. To calculate my shop billing rate, I take all overhead costs including salaries, hourly wages for the men on the floor times 2,080 hours a year (normal forty hours weeks), fuel, vehicle payments, electricity, administration, CPA costs, building repairs and all other costs. Then, I take this total cost and divide it by the total hours that my men produce in a year.
For example, All costs = $897,779.00 divided by 10,400 production hours per year = $86 an hour. Then I multiply $86 x .25 percent markup and come up with about $107 per hour to charge for shop rates. But these are out of the ballpark here in our state. So I only charge what I can get at $75 an hour, and we still have a hard time getting work. But at year-end, we still seem to have some profit left over.
My main question: Is there a better way to figure our shop rates, overhead and markup? There has to be a set formula for figuring all this! Your quick response would greatly be appreciated, as I have a chance to land a big yearly account but at a lower overall price. Please help---I'm confused in my business....
Walt Rivers, President
MetalCon Inc.
Tags: accounting , costs , financial , George Hedley , management , risk |
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Construction Business Owner, August 2008
Editor's Note: Following is the seventh article in our ten-part series called, "Accounting Software Checkup: Ten Ailments That Can Hinder a Healthy Bottom Line," by Fred Ode. Each "ailment" will be discussed in detail to help you determine if your seemingly healthy business has an underlying problem. To read the previous article, click here. To read the next article in the series, click here.
Do what you do best, and hire the rest. That's great advice for all entrepreneurs and construction business owners in particular. In fact, one of the smartest decisions a small but growing contractor can make is to hire an outside CPA who specializes in construction accounting.
Tags: 2008 August Issue , accounting , construction software , Fred Ode |
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Construction Business Owner, August 2008
Most closely held businesses, especially multiowner corporations and partnerships, need to have a buy-sell agreement in place. However, individually owned businesses can also profit from the use of a buy-sell agreement. This is essential for smooth transition of ownership upon the occurrence of several events, namely the "Eight D's." We'll discuss each one individually in the corporate context, however, most would also apply to partnerships. In a single-owner business, the buyer could be a key employee(s), a competitor, a supplier or even a customer.
Tags: 2008 August Issue , financial , insurance , legal , risk , security |
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Construction Business Owner, July 2008
Editor's Note: Following is the sixth article in our ten-part series called, "Accounting Software Checkup: Ten Ailments That Can Hinder a Healthy Bottom Line," by Fred Ode. Each "ailment" will be discussed in detail to help you determine if your seemingly healthy business has an underlying problem. To read the previous article, click here. To read the next article in the series, click here.
The goal for many business owners, aside from making money, is to grow. Perhaps, but large increases are welcome only when they reflect a company's profits and not its overhead.
Tags: 2008 July Issue , accounting , construction software , Fred Ode |
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