A reader writes: “I struggle with how to determine what my true costs are in bidding a job. Any assistance would be appreciated.”

This is one of those simple, yet complex challenges that we all face when we are getting started. The question you want to answer is “what is my TOTAL cost for a worker to perform a task?” To keep it simple, lets use the concept of washing 50 windows inside and out. First of all, we need to establish our Burdened Labor Rate. The BLR is going to vary based on different factors that you (or your accountant) chooses to include in this number. First is the basic wage which for this example is $10.00 per hour. Note that your number will vary for many reasons. Add to the basic wage the overhead costs including FICA, FUTA, SS, Workers Comp and anything else related to this worker and the task they are performing. Note that your Workers Comp rate may vary since some states will automatically make you pay a higher rate if you clean glass or windows. Of course, if you are going up ladders or on scaffolding, your rates will be substantially higher due to the inherent risks related to being off the ground. For our purposes, we are going to say that all of the overhead costs are $3.00 which again is simply being used for easy math in this example.

Do you pay other benefits such as vacation time, sick leave days, absent for death in the family and other benefits? If so, these need to be captured as well and for this example we are going to claim $2.00 per hour per worker. As you note, the total BLR is $10.00 + $3.00 + $2.00 = $15.00 for you to employ this person.

We have time studied the 50 windows and based on past experience estimate that it will take approximately 15 minutes per window which includes set up, take down, etc. We multiply 50 x 15 = 750/60 = 12.5 DLH (direct labor hours). We multiply the 12.5 x $15.00 = $187.50 for the total costs before we factor in chemicals, tools, supervision, transportation and any other related costs. Note that we will only allocate a portion of these items for the job since most of these are purchased in quantity and used over and over again.

Finally, add in a dollar amount or percentage for profit/retained earnings. You will get better at this process over time. I realize this example will probably give your accountant consternation, so simply take it as a very simple example of the process involved in calculating your costs. You can duplicate this as many times as necessary to build your costs for a job. Your comments and feedback are always appreciated.

Your comments and questions are important. I hope to hear from you soon. Until then, keep it clean...

Mickey Crowe has been involved in the industry for over 35 years. He is a trainer, speaker and consultant. You can reach Mickey at 678-314-2171 or CTCG50@comcast.net.