posted
Trying to use Jeff Cahills worksheet (www.signcraft.com) to calculate a shop rate. I'm not understanding how you figure in pay for employees. There's no space for it on the worksheet. In his article he mentions something about treating employees as if they have their own business under your roof. I understand this philosophically, but how do figure it in with the shop rate or pricing?
Any help greatly appreciated.
-------------------- Glenn S. Harris
....back in the sign trade full time. Posts: 293 | From: Baton Rouge, LA, USA | Registered: Jul 2001
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posted
I had the same problem with that worksheet. I even emailed the author about it and I got a response (which has since been lost in a system crash), but it didn't make any sense either.
Everybody here gets paid whether we're busy or not, so I consider it a quasi-salary situation and include all wages in the worksheet calculation. That way, the hourly rate covers all costs except for material.
If you do the worksheet exactly as it is laid out, you'll be covering all your overhead costs and your material costs, but NONE of your labour costs.
If someone else has an explanation for where the labour went, I'd be happy to hear it.
posted
I've been thinking about it all day. Perhaps, since this worksheet is supposedly for shops with 1 to 10 people, you use it to calculate a base shop rate & then calculate a production time figure into each price based on how much time each individual will spend on the project. I'm not sure that would work well here though. I am the sole employee, and do 90% of the production work. My boss is mostly a salesman. He does some design sketches, a little productiom & helps on the installs. Seems like it would benifit him to just include my salary in the shop rate. Since we've been getting into more vinyl & other different things, we're trying to nail down a better pricing procedure.
Any comments greatly appreciated.
-------------------- Glenn S. Harris
....back in the sign trade full time. Posts: 293 | From: Baton Rouge, LA, USA | Registered: Jul 2001
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You have to pay these costs day in and day out whether you produce work or not. Therefore, you are paying an hourly rate simply to exist and be in business.
This amount of money must be recovered, plus profit, in the hourly rate you charge your customers.
Employees you pay on a per-job basis, or subcontractors, should have their pay figured in to the cost of the job - almost as if they were a "material."
HTH -
-------------------- Best Regards, Mark Smith EstiMate Sign Pricing Software It's Not Luck. It's EstiMate.™ http://www.EstiMateSoftware.com 1-888-304-3300 Posts: 724 | From: Asheville, NC, USA | Registered: Nov 1998
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posted
If you go to Mark's website, they did have a free downloadable program to calculate your overhead. I think it's called ProfitWatch. I tried it out before I bought EstiMate and it seemed to cover about everything.
-------------------- Chris Welker Wildfire Signs Indiana, Pa Posts: 4254 | From: Indiana, PA | Registered: Mar 2001
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posted
Mark, You have just described the premis used by enterprise softwares, such as SAP and other use. The labor has a fixed cost per hour, and is basically charged as a fixed cost of production just like a material. In the case of an employee his cost per year are divided by the number of hours per year he will work or produce. It becomes a item similar to rent. Paid for by the year calculated to the cost of 1 hour.
I have an overhead/labor rate worksheet on my website you can download, it's an Excel file so it's easy to add lines for expenses if needed.
The way I have mine setup is you enter every bit of overhead you have, including business expenses AND personal expenses (hey, your own bills are paid from money the biz makes anyway). Then you can enter empolyees, including their pay rate and the amount of hours. I also include the shop owner in the employee area, plus a shop owner's pay rate, and desired hours.
Then there's another line that asks "How much do you want to take home every month?" This figure is chosen keeping in mind your personal bills are already figured into the overhead, AND you've already decided to pay yourself as an employee.. now you have another chance to take home a little more money every month.
The worksheet calculates your labor costs (by the way the labor cost is calc'd based on 50% Productivity), you specify a profit margin you'd like to maintain on labor, and the sheet spits out a suggested shop rate.
The only challenge then is maintaining the workload.
posted
Mark's ProfitWatch worksheet is the one we use to establish our hourly rate.
I see the other responses here agree that payroll should be viewed as an overhead expense same as rent. I'm still interested in how the Jeff Cahill worksheet can possibly work.
""Good judgment comes from experience; and a lot of that comes from bad judgment" - Will Rogers Posts: 3486 | From: Beautiful Newaygo, Michigan | Registered: Mar 2003
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