I have read several threads on adding profit and overhead into a bid. I have been doing this but would like to hear different ways of doing this! What methods do you guys use to brake down your monthly, yearly or quarterly overhead cost into each bid?
Add all your overhead up for the year - This includes everything you will spend for the year to run your business. Also you should add some budgets to this for stuff that will come up unexpectedly such as repairs for equipment.
Lets say it's $20,000 for example. Now try to come up with the amount of hours you hope or plan to work. The default is 2000hrs - 5 days a week for 50 weeks at 8hrs a day.
Maybe you are new so lets say the hours you might work this year will be close to 1200.
Just divide $20,000.00 by 1200hrs and you will get $16.67 per hour. If you are a one man show then add that to your hourly rate. If you have two guys then divide it in half $8.33 per man.
As you move through the year you might get a better idea on the total hours being worked for the year and you can make adjustments as needed.
There are various ways to do it. I keep note on weekly, monthly, and yearly expenditures. I know how much I spend a year on fixed and variable spending. Take that total amount and divide it among your jobs. Depending on how many jobs you expect over the next year will give you your OH per job. If I expect a job to be a day, week, or month long I can tell you what my OH is. Now, if your work isn't steady then you need some profit to cover your expenses for that down period. OH is one of the differences between two professional contractors.
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