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Hourly Rate Calculation Help
We’re currently reviewing our prices, especially labour intensive tasks, as we’re getting busier and busier, and feel that increasing costs would help ease some of the pressure. (ie filter out the rubbish)
Does the logic below make sense?
Take our monthly overheads
Rent, Rates, Electricity, Machinery Leases, Fuel, Insurance, Water, Wages
Calculate the number of hours that are billable to customers
Design, Production, InstallationsDividing the overheads by the billable hours, should give us a cost per hour, add our desired markup and have our hourly rate, or have I missed something?
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15 Replies
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Is your hourly rate for production or installation ?
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Everything really…
Design, Production, Installation for labour.
Could also do with working out an hourly rate for our machines to put into clarity.
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Don’t forget to include any advertising costs and website – in fact anything that is an outgoing but not a variable cost (i.e materials), and I think you should probably also include depreciation.
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I put my fuel, vehicle tax, vehicle insurance into what i charge per mile so that would not come into my hourly rate for general work. However also in my per mile rate i add £10 for every 50 miles as a driver payment.
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Our rates are –
Studio – £45-60 per hour
Production – £20-30 per hour
Installation £35-50 per hourMileage – £0.50 per mile
We also charge for all sundry items – cleaning fluid, paper towel, etc
Do your sums and see if it come out similar
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Cheers for the replies…
Looking at my excel spreadsheet, if I could bill for the full 8 hours everyday, our hourly costs are £15 p/h, that includes most overheads, including the lease on one machine, I will add website to the list too.
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You will never achieve an 8 hour productive day every day unless you and your staff are prepared to work 12 hours a day – but why should you? A more realistic productive day figure is probably 5 hours allowing for all the various downtime that is inevitable no matter how efficient you try to be. Remember to take into account holidays, and the fact that you will not spend all of your time actually producing and installing signs. You will also need to allow time for visiting clients, producing quotations, and dealing with all the other aspects of running the business
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Just amended the figures, added depreciation of the new printer, and working on 5 billable hours, it currently costs us £28.50 p/h to run the business.
As there’s two of us working there (wages accounted for in the £28.50) Am I correct in assuming between us we need to be charging more than 1/2 of that per hour? IE: If we’re both doing production at £20p/h, between us we’re making £12.50 profit per hour?
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Just a quick update.
Ran all the figures I had in excel past our accountant, whilst having the majority there he suggested increased the ‘wages’ aspect to reflect what an employee would expect to be paid for the same job, not what we actually take home as a salary.
Our hourly costs are surprisingly high for a small business and a real eye opener! :yikes:
New pricing being rolled out from Tuesday…
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When you included your wages did you also remember about tax & national insurance that you as an employer have to pay, if you have included vehicle cost have you also remembered to add any maintenance costs, servicing, mot etc etc. It’s actually very difficult to remember all your fixed costs, you think you have included them all but there are always a few things that you remember latter, make sure you have included everything before you set your new rates. Very difficult to justify a second price increase shortly after you have introduced the first one :lol1: :lol1: :lol1:
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I really need to re-evaluate my costs too, I last did it about 6months into having my last shop, my costs have largely gone down in this unit (except I’ve increased my insurances just this week) so I haven’t bothered to re-evaluate, I really should though!
Customers often look at me in amazement when they see my standard hourly labour rate, the reality is that maybe only half of the working week is financially productive, thus I’m probably earning less that 1/3rd of my hourly labour rate when averaged out over the course of a 45hr week!
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It was a real eye opener for us, having bought the new Seiko in April, and upgraded our Xerox machine in December, it was long overdue.
We’ve been exceptionally busy through what is normally a quiet holiday period, we’re hoping a price increase will help weed out some of the less desirable work.
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Customers often look at me in amazement when they see my standard hourly labour rate
Had that myself :lol1: :lol1: But if you stop & think about it your a trades person. What is the normal hourly rate for a mechanic, plumber, electrician etc. Ok maybe should have left electrician out of that as they have to be 17th edition qualified so will always have some official training but anyone can set up as a mechanic or plumber in much the same way they can as a signmaker.
I know painter & decorators that charge more an hour than I do & with less overheads so really it comes down to setting a rate that you are comfortable charging (as long as it covers your expenses).If you are any good at what you do & your prices are fair then there will be people that will pay it. You will lose the undesirable Customers as you call them David but those customers you do retail will be those that appreciate how you can help them & what you can do for them, the kind of customer you really want.
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I’m so lame and need to get onto this. I still struggle to get organised more than anything. A lot has to do with my situation with many hospital visits for my son yet ironically I know if I knuckle down and get organised and work out how to value my work more I know it would actually make things easier by being more organised and in tune with my business. I am looking at employing someone to help because currently I’m almost running my business like a hobby and ver hap hazard as and when because I get tired with everything. Currently I run and maintain my CNC machine , Embroidery machine, Sublimation printer, DTG flat bed chinese crap :), Roland print and Cut a laser engraver cutter as well as sales man, fitter, designer etc
I know many of us do this but there is only so much time in the day to design, print, engrave cut, advertise, network etc
I want to ask are there any tips that help a very small company like me getting organised and pricing. Cant afford clarity at the minute 🙂 -
Mike, if you are struggling to work out prices on your own circumstances then this Price it Guide can be very useful.
i still often use it for a quick estimate and when I spend the time to work out things in more detail it seems to always come out pretty close to the guide so if short of time and experience then you can’t go far wrong with it
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