Years ago I attended a seminar about ways of reducing overhead. One attendee made a statement that broke up everyone. He said that the way he reduced overhead was to fire all of his relatives. Probably excellent advice today. Rowdy
Re: Overhead#21973 02/14/0308:40 AM02/14/0308:40 AM
Seriuosly, overhead costs will vary wildly between contractors. A couple of examples: Dale P. operates out of his home. His wife handles the telco and the books. He has one, and sometimes two, helpers. He does 99% local work and his longest commute is about 20 minutes. His truck is also his personal transportation. In November 2002 his OH was calculated at 9.8-9.9%. T.E.C., in a nearby town, on the other hand runs 8 trucks, an office staff of three and a roving super. T.E.C. has a large tool inventory as well as stock. Last Juns their OH was calced to be 19.7-21.1%. Some EC's budget a number of man-hours to establish OH. Fall under the budget and OH is not met, over budget and it's profit. There are so many variables in OH that each EC must arrive at his own indirect costs. Tools, rent (or taxes), vehicles, insurance of all types, office equipment and supplies, bank loan interest, depreciation, etc. There is no catch-all percent. Rowdy
Re: Overhead#21975 02/15/0311:13 AM02/15/0311:13 AM
I don't figure an overhead percent into the bids because as a percent it varies. Instead I know what my daily overhead as a dollar figure is. Take all of your fixed expsense and divide by 250. Then you know what you have to bring in every day before you make a dime. Do the same for labor. With a little buffer, I know a $15 an hour guy costs me $170 a day after I pay WC, match taxes and other related employee expenses. Don't forget to plan for the future. My overhead just went up $92 a day because we added another truck and moved the shop out of my house and garage.