Operating costs for a one man operation. Note, these are "real" costs:
1. A good family medical program - $700 per month minimum.
2. Vehicle, gas, ins., payments, depreciation, tires, tune up, repairs, etc. - $670
3. Office supplies including stamps - $30
4. Acct and attorney, if and when needed - $50
5. Magzines and books $40
6. Business taxes - $100
7. Telephone - $50
8. Cellular phone - $100
9. Travel & entertainment - $50
10. Seminars and Trade Shows - $125
11. Uniforms - even just jeans and shirts - $45
12. Small tools - $15
13. Software and upgrades - $30
14. Marketing & Advertising - $200
15. Office Equipment depreciation - $75
16. Liability Insurance - $300
17. Workers Comp OR Disability insurance - $125
18. Bad Debt - $100
19. Guarantee work $100
20. Future Capital Expenditures - $100
21. Owners draw ($1000 weekly) - $4333.00
22. Bookkeeping - ($150 per week) $650
With no provisions for retirement, no vacation pay, no sick time, no other perks and benefits a real job gets you, it comes to about $7950 per month. Anything less and you're kidding yourself. Divide that by about an average of 32 "production" hours per week at 46 weeks for a total of 1472 man hours per year, or about 122 man hours per month. Divide that $7950 by the 122 hours and you get $65 per hour - COST of doing business. Add the profit you want.
The overhead cost items listed above are far from being excessive, but are realistic as to the true cost of operating, it you wnat to treat yourself as a legimate business owner. I do't see how anyone can operate without charging anything less than a minimum of $70 per hour. Notice, I've not included the many hours spent on sales calls, estimating, typing contracts, etc. Nor do I include a reward just for being in this very difficult business and the inherent many and varied liabilities assumed.
It doesn't matter if the profit is taxed directly to you as a sole prop. You're also taxed at twice the rate of everyone with just a job. As a minimum, you are writing a quarterly check to the IRS for 1/3 of your income
Being a nice guy, it feels better to do your customers a favor on price. But the result is always poor quality work,hurrying to get done to get to the next job to get the next check, substituting the best materials for less expensive ones, and nothing left over in the bank to honor warranty work if you get a call back. The customer suffers. Charging prices that let you do the job right and be in business the next time they need you is good for you and the customer.
Quality is remembered (or lack of it) long after price is forgotten. If you want referral businesses, provide the absolute best qualiy in product AND SERVICE. And charge accordingly.
