Calculating Hourly Rates for a Contractor or Small Business

[rickyramirez]

You have no idea how valuable his vid has been for me!
Thanks, brother! I sub to ur channel! Keep them coming

[kathyl]

Guys! Quit complaining about the numbers he's using and use the math on the numbers that apply to you. Good Grief!

[natasharobichaud]

Great basic information to get people thinking numbers and $$. Caution for new to construction business owners - direct cost! Begin with (cost +). Until you can accurately estimate, I highly recommend not basing your rate to include direct cost. Also not mentioned in this video is utilization. Rather than saying: "I want to make $20 per hour!", ask: "how much per week do I want to make?" Now if you want to make $800 per week as indicated in this video, rarely do you work 40 production hours per week, its closer to 30 or 75%. That works out to $26.67 per hour! Customers tend to know how much time you spend onsite. If you try billing out 40 hours but only there 30, good chance you are only getting paid $600 not the $800 expected. You will spend an additional 30-40 yours per week on paperwork, quotes, supply runs, material you forgot or short, tools etc. If you haven't contracted before, STOP thinking like an EMPLOYEE. Adding a couple bucks to your employee wage and running out doing quotes is recipe for failure. This video shows how quickly additional expenses add up. Best of luck to anyone venturing out for the first time, construction is brutally rewarding!

[debblouin]

THANK YOU FOR DIVIDING rather than using the markup method.

[JAWAH]

Seriously with the comments. The numbers don’t matter, he’s just using numbers that are easy for you to calculate. You guys are to caught up on the $ sign associated with the numbers, they are examples... Great Vid. I’m upset that needed to be said...sheesh

[rubbersole]

Work comp insur. runs about 17% on top of hourly wage paid. So 40 hours x$20.00 = $800.00 x 17% = $936.00

[graigsnovak]

We have a floor covering company in an industry where labor expenses and material expenses are measured in square footage and yardage. My question is, can we incorporate this same method by using yardage/footage? Also, do you account inventory stock as an indirect expense until sold to the consumer? Great video by the way.

[charliegodinez]

$900 for 2 full days of work and that’s including the cost of running a business, wow. Who ever follows this wants to live in someone’s garage for the rest of their lives.

[prabalsarkar]

while calculating indirect expense/hr you have assumed 40 hrs of work/week ...suppose he does not get 40 hrs work in week ...and it varies week to week how do you calculate then?

[godbluffvdgg]

As a building/remodeling contractor, I've never; in 30 years in business, EVER gave an hourly rate...if they ask, I tell them my multiplier builds that in...Of course; it's like playing poker—you throw out a bet, and see if they call or fold. ..We walk a fine line with pricing. because NO TWO JOBS ARE ALIKE. Also; you screw yourself if you get a "daily rate" because; the one day you leave early; the customer will say; "hey, that wasn't a full day" ... Plus; if you spend more time on the project than THEY think you should; you'll be accused of milking the clock...Know your numbers and make a price. You'll make some mistakes and you'll make some scores...C'est la vie!

[heavy-gauge]

This is also a good way for the client to see if the fee being charged by the contractor is reasonable. My rule of thumb is to estimate the direct hourly wage rate a particular tradesman gets for doing the job (e.g. $20/hr.) and multiply that by a factor of 3 which would take into account indirect expenses, overhead and profit. Add material costs and you are in the ballpark. $20/hr x 3 = $60 x16 hours = $960 + 285 = $1, 245. This would account for any downtime that would not be chargeable included travel time, vacation, sick, marketing time, etc.

[thecloneguyz]

Defensive estimating
Contractors guide to markup and profit
Those two books are Bibles in construction

[randycamplin]

Have no idea why people beat up contractors, nobody breaks down lawyers, stores, restuarant, doctors etc,

[webuyhoustonhousesasap]

WHY IS THIS NOT BEING TAUGHT IN ELEMENTARY, MIDDLE AND HIGH SCHOOL. AMAZING. IF KIDS NEW THIS BEFORE THEY GRADUATE THERE WOULD BE BILLIONAIRE ENTREPENEURS AT ASTOUNDING NUMBERS. MY HAT OFF TO YOU SIR!!!

[peterthebull]

I use a super simple formula:

A. Labor = Hourly wage x 2 (I.E. $25/hr = $50/hr)
B. Materials = Hard cost of materials x "X %" markup (I.E. 15 - 50%)
Sub-Total = A + B


20 years of successful contracting - K.I.S.S.

[gibs]

I dont understand why materials are being incorporated into an hourly rate?
Is this for quoting when meeting the client for the first time? I guess this example only works for painters?
Isn't it simpler just to show labor, materials, indirect expenses, and or overhead as a separate breakdown on the quote?

[Intoxacajun]

This is what I love about youtube! So much good info, Thanks for taking the time to post!

[j.pepper]

I disagree with method. saying that it will take you a number of hours to do a job can be a mistake, because things are always done faster in your mind than in real life. if it takes 22 hours, not 16. you then are not making $20/ hr you make $14.55/ hr. and that changes everything. using a square foot cost method is quicker and more accurate.

[moretimethanmoney]

Indirect expenses vary by location (insurance, licensing, bonding), nature of work (new, renovation, repair), and who you work for (gov't, general contractor, owner builder, or private party). You can keep it simple, not knowing exactly what you've earned until years end. Or hire a professional accountant who can keep you on track. The best thing is to educate yourself so you are less easy to take advantage of. Find a good lawyer also.

[debblouin]

You need to include labor burden in your labor calculation: payroll taxes, benefits, worker’s comp-don’t put those into indirect expense.