You've got to know your labor burden and overhead expenses to sucessfully compete with the big dogs. The more you know the more you can tweak your rates on jobs to get competitive.

For example, I recently was in your shoes. I got with the wife (an accountant and mine on the side) who figured my labor burden was at 28%. That is to say that each dollar I pay anyone for labor, you can add 28c per dollar to your cost to do business. This is for social security, wc, and unemployment and liability insurance + she added in health insurance for mine.

Then you got your overhead. Trucks, fuel, maintenance, utilities, rent/mortgage etc which don't vary much month to month.

Lets say you have $5000 per month overhead. You have 4 guys working in three trucks, your entire crew. If they work 40 hrs week, you take 5000 and divide that by the total expected hours. That is, 40 x 4men x 4.33 weeks (average # of weeks per month)and you get 692 hours worked/month. $5000/692= 7.22/hour overhead per man per hour. You got a man making $15/hr, x 1.28 (My burden) + 7.22= your cost/hour per $15/hr man. That is 26.42/hr you must make to break even.

Now figure adding a fifth man to your crew. No additional expense unless you give him a phone/radio. If he works 40hrs/week you can now divide your $5000 by 866 hours/month. That dramatically reduces your hourly overhead from $7.22 to 5.77/hr. A sixth man and it is now 4.81/hr. Now you can charge less per hour if you need to and still make money.

A 3 or 4 man operation cannot compete with larger outfits who employ say 15 guys. Sure they have a larger gas bill etc. but the rent, utilities etc will remain the same.

That is what I've been trying to do. Working my A## off and making a decent living but if you figure all the hours I've worked my top guys probably made more than I did per hour. You've got to grow a bit to get your hourly costs down.

After doing some figuring I adjusted my rate down only a couple dollars in my estimating software. Now I've become very competitive and getting jobs. I had to plan to hire a couple of guys to get the same profit.

As I said, you must KNOW YOUR labor burden and overhead in order to get competitive and still make money. If you don't know and you lower your rates you may seal the deal to closing your contracting business.

Good Luck!

Last edited by teester; 07/22/07 05:44 PM.