- Thu Feb 01, 2024 4:36 pm
#17029
Your "shop rate" has to be higher than your labor rate to cover your business overhead. Materials are easy enough to add up for any job with stock supplies like thread, needles, foam, fabric add a reasonable mark up. Overhead is all the costs of running your business but not your labor rate for the job, but will include your labor for actually running the business like accounting/billing, tax preparation, marketing, estimating jobs that you don't get, cleaning the shop, maintaining the equipment, buying the equipment, paying shop rent, utilities, internet, liability insurance, etc, etc, etc. Your shop rate should be 2~3 times your take home pay or you will go out of business at some point. If you have employees you should be billing them out at 2~3x what you pay them, including benefits, workers comp, etc because you are providing them with a place to work, equipment and regular pay regardless of what your job flow is. Many "hobby" businesses cannot charge enough to cover the overhead and the owner will have to take less pay as a result. It it's supplemental income this may work for you, but if this business is your only way to make a living you have to earn a profit, beyond what you pay yourself. If you are in an area with intense competition making a profit is tough as there will always be someone undercutting you, but this is hard to prove as prospects (customers) often lie about money and will tell you anything to get a cheaper price. They don't care if you go out of business right after you deliver their job, so be careful when a prospect tells you they can "get it cheaper" somewhere else. That may be true, but often it's not. All businesses in a small geographic area will have similar costs so anyone charging 1/2 is loosing money, do you want that person to be you? I'm OK with loosing some bids for jobs as that's just part of the system we all work in. There are no guarantees of a profit when you own your own business, but it is a guarantee if you do not make a profit you will go out of business at some point.