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PRO

I have produced this simple excel spread sheet so that you can make sense of what you need to charge yourself out per hour.

Download the sheet to your own computer and edit it to suit yourself. Make sure that you only edit the variable amounts (if in doubt, look for a calculation formula before making changes)

It would pay to have a little excel experience for this exercise.

You may also be interested in applying this simple hourly rate test - you may be in for a shock!

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Replies

    • Using your calculator uses the same formula, and shows that anyone that is an employer has to know the amount of utilised hours and not just presume that the need to use an 8 hour day calculation.

      For example (using your calculator) if you pay someone £10.0 an hour and they are only productive for 50% of the time employed ( 20 hours a week) because the other 20 hours is taken up by drive time etc, then you are in fact having to pay your labour two hours money to do one hours work. 

      So in this example the basic labour charge out price works out to be twice the paid hourly rate. £20 per hour, and that is before you even start to add all the other expenses, (say) another £10 per hour, making £30 an hour, now you have still to add your gross profit margin pay the overheads and make a contribution to the net profit.

      Again, for this example, a charge out price of £40 per man hour looks reasonable.

      But the most important figure to know is the Direct Labour Utilisation figure, without it you could be throwing buckets of money down the drain.

      • PRO
        Are you an employer ?

        What's your direct labour utilisation and number of staff, Adrian ?

        Why do you never answer any questions about 'your' business ?
        • Because that is PRIVATE and fun.

          However, to find our what you Direct Labour Utilisation figure is this is what you need to do is:-

          Go all through your records for the past 12 months and record the amount of man hours that have been spent on each and every job. By that I mean that if you have a customer Mrs Jones, you should record how many man hours your crew spent at Mrs Jones property during the year, and the same for every other customer or contract. So in the end up with a list :-

          Mrs Jones      6.6     man hrs

          Mr Jack         2.9     man hrs

          Lloyds Bank 13.05 man hrs 

          and so on.

          When you have a complete list, then add them altogether,  so you have an answer 2900 man hours for a crew of three, which = 966 man hours per single crew member.

          Now divide 2080 (the amount of hours in a working year) by 966, which comes to 2.15.

          This shows that you are paying your labour 2.15 times their hourly wage rate to obtain one hours production (paid for by the customer).

          So (for example) if a customer is paying you £60 to do work for an hours work for a crew of three, the labour cost to you is:-  the crews total hourly wage x 2.15. So in this case if pay your staff £10 an hour x3 crew = £30 x 2.15 = £64.50, which shows that you have made a loss of £4.50 in labour alone + all other direct costs.

          Simples !

          • PRO
            Given your business situation, is it appropriate for you to post business advice on LJN ?

            LJN is about transparency and clarity - neither of which you display.

            I find that deceitful for LJN and its members.
            • Gary, come on.

              We all know Adrian doesn't speak about putting anything he talks about into practice. Let's not let him spoil a good useful thread.
              • Thanks James.

                I try to inform people by giving them some good business tips, as I have a wealth of experience in many types of business. 

                It just sounds as if Gary is a bit sour about something he doesn't understand.

                • PRO
                  No not sour Adrian, just believe in transparency.....
            • Can't you do figures then Gary?

              • PRO

                Yes, I know you've had many dissolved/struck off businesses.

                How about we get the real business owner of 1st Garden Maintenance Ltd on here and discuss real facts?

                • You are getting to personal. Stick to facts and figures and you might do yourself some good.

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