On Fri, 2 Jul 2004 22:05:19 -0700, "William" wrote:

I got a prospective client who would like their maple lobby desk refinished.
I'm not really sure what to charge.
snip:
Any pricing guidelines I should follow? any help on what price range I
should charge?

_The_ most useful post I've seen on this ng on pricing work came from
_that_ guy. You know, the one that doesn't contribute anything 'roun'
heah and just has his hangers-on do his work for him...

If the specifics are a bit over the top for your circumstances, the
principles should still apply.

Original follows:
--------------------------------
From: Tom Watson
Newsgroups: rec.woodworking
Subject: how to charge for a job
Date: Tue, 11 Feb 2003 15:14:35 -0500
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On 10 Feb 2003 16:12:55 -0800, (Luis) wrote:

I would like to start a business on handy works, wood working etc. And
I would like to know what to charge the customer. What formula would
you use.
Thank You.


Formula is:

M+L+O+P (Materials plus Labor plus Overhead plus Profit)

MATERIALS COST = Cost plus Tax plus Acquisition Cost (going to get it)
plus carrying costs if financed. Make sure you do your take-offs
cleanly and add for waste.


LABOR COST is a bit more difficult. You need to break the job down
into individual operations and make sure that you charge for all of
them.

Once you have your number of hours figured you need to figure your
shop rate.

Maximum number of hours available for work = 2080 (52 weeks x 40 hours
= 2080 hours).
Minus vacation time = 2000 (2 weeks x 40 hours = 80 hours).
Minus holidays = 1944 (7 days x 8 hours = 56 hours).
Minus non-billable hours = 1555 (20% of 1944 hours = 388.8 hours)
(marketing, selling, bidding, bookkeeping, purchasing, emptying
spittoons, etc.)

So, you now have 1555 billable hours in which to earn your money for
the year.

How much do you want to make a year as your wage (not including
profit, that's a different animal)?

Let's use $50,000.00 a year just for fun.

Labor Cost per billable hour = 32.15 ($50,000 / 1555 billable hours =
$32.15 per hour).

OVERHEAD COST = All the costs of doing business. Some of what I put
here should go into a thing called Labor Burden but screw it, I'm
putting it here, which works if you're a one man shop.

Shop Cost = 3.86 (We'll include heat and electric, etc. in here,
$500.00 per month x 12 months / 1555 billable hours = $3.86 per
hour).
Machinery Cost = 1.29 (Acquisition, repair, maintenance,depreciation,
$2000.00 per year / 1555 billable hours = $1.29 per hour).
Truck Cost = 2.22 (34.5 cents per mile x 10,000 miles per year / 1555
billable hours = $2.22 per hour).
Office Cost = 1.16 (Space, furniture, computer, supplies, etc.$150.00
per month x 12 months / 1555 billable hours per year = $1.16 per
hour).
Insurance = .64 (Contractor's Liability, building, etc., $1000.00 per
year / 1555 billable hours = $.64 per hour).
Health Insurance = 1.93 ($250.00 per month x 12 months / 1555 billable
hours = $1.93 per hour).
Professional Services = .64 (Accountants and lawyers, $1000.00 per
year / 1555 billable hours = $.64 per hour).
Other = .5 (All sorts of consumables and other stuff that can't be
directly billed to a job, $.50 x 1555 per billable hour = $.50
per hour).


Total Overhead per billable hour = $12.24.

Labor Cost plus Overhead Cost = $44.39 (Labor @ $32.15 plus Overhead @
$12.24 = $44.39)

PROFIT is not how much you make as wages, it's how much the business
makes.

A rough split on the cost of jobs is 1/4 material and 3/4 labor (Labor
Cost plus Overhead Cost).

If your yearly billing for labor plus overhead is $69,026.00 ( $44.39
per billable hour x 1555 billable hours = $69,026.00). Then your
yearly materials cost should be about $23,009.00 ($69,026.00 / 3 =
$23,009.00).

Annual Sales = $92,035.00 (Does not include profit, yet, Labor @
$69,026.00 plus Materials @ $23,009 = $92,035.00 per year).

Profit = 8.88 (15% of gross annual sales, $92,035.00 x 15% =
$13805.00 / 1555 billable hours = $8.88 per hour).

SHOP RATE = 53.27 (Labor Cost plus Overhead Cost @ $44.39 plus Profit
@ $8.88 = $53.27 per hour).

ANNUAL SALES = $105,840.00 (Labor Cost plus Overhead Cost plus
Materials Cost plus Profit).

QUARTERLY SALES = $26,460.00.

MONTHLY SALES = $8820.00.

WEEKLY SALES = $2035.00

Every time I start thinking like this it makes me want to go back to
working for somebody else.

I'll probably catch hell for this because no accountant would ever
group things together the way I have. Also, they don't, as a rule,
make as much use of the WAG method as I have for cost estimating.
They like GAP, I like WAG (they be rich - I be poor). I guess my
point is: If I'd had someone present things to me in this way when I
started, I probably wouldn't have started at all but, at some point
you have to start thinking this way, preferably with the aid of a real
accountant, or you won't really be in business, you'll just have a
very expensive, very time consuming hobby. And, for you guys who
think that 15% is a gaudy figure, yeah, so do I.

Good Luck

Regards,

Tom.

Thomas J. Watson-Cabinetmaker
address snipped by mjb
www.tjwcabinetmaker.com

--------------------------------------
end original.

Hope this helps,
Michael