calculating rates and business plan

[Octopus]

I like the $3,000 for telephones - I spent a paltry £236.00 last year!

 

[bobzzz]

No because your ideas are based on your thoughts, I wouldn't consider pricing in your way at all. I would work out how long the job takes and multiply the hours on the Job by my rate. I would then add 15% onto the top of the materials supplied, easy, simple and it works.

I fully agree with you. I also would not use a method to work out an hourly rate and use that to price jobs. That would be foolish. Your method is sound. The example above shows how to calculate your minimum hourly rate without profit added.

 

[bobzzz]

You appear to have have added in the non productive hours twice. in the on cost 38% at the beginning and at the end.
If this is not the case then the38% on cost is for what? justified how? its a random figure based on nothing much, and a dangerous figure to use if judging by the currency used is based on US business. It is giving nearly 18,000 of further overheads.

While i would agree the base currency is not relevant, a book which is giving business advice written for the US market has little value in the UK due to the completely different tax, employment, H&S, etc. etc. laws. While some comparisons can be drawn it is not a reference I would use.

You have arbitrary figures for stated overheads which do not reflect real world, certainly at this time in business.

Also i do not know anyone who is self employed who only works for 44.2 weeks per year. 8 WEEKS HOLIDAY!!!!!!

Oh yeah right!

You appear to have have added in the non productive hours twice. in the on cost 38% at the beginning and at the end.
If this is not the case then the38% on cost is for what? justified how? its a random figure based on nothing much, and a dangerous figure to use if judging by the currency used is based on US business. It is giving nearly 18,000 of further overheads.

While i would agree the base currency is not relevant, a book which is giving business advice written for the US market has little value in the UK due to the completely different tax, employment, H&S, etc. etc. laws. While some comparisons can be drawn it is not a reference I would use.

You have arbitrary figures for stated overheads which do not reflect real world, certainly at this time in business.

Also i do not know anyone who is self employed who only works for 44.2 weeks per year. 8 WEEKS HOLIDAY!!!!!!

Oh yeah right!

The 38% comes from other costs associated with employment: PPE, Training, pension, annual leave pay, sick pay, redundancy pay, public holiday pay and other you might add to that depending on your situation.

The figures used I believe the author used them for illustration purposes. At school when we learned a new formula for physics I did not go and use all the values the teacher used in the example. I used the values that was asked in the question. Likewise you use the values in your situation not values some guy on the internet writes.

Yes in the book there are certain things only applicable to that market, but 90% of it can be used in any country. Most business owners would know their tax etc or their accountant could give them the numbers they need.

The 8 weeks is not 8 weeks leave. It was broken down as this:

Annual holidays .......... = 4.0 weeks
Paid public holidays – 9 days ……… = 1.8 weeks
Paid sick/family leave – say, 10 days … = 2.0 weeks
Total non income earning weeks ………. = 7.8 weeks

 

[Cbigfoot]

The 38% comes from other costs associated with employment: PPE, Training, pension, annual leave pay, sick pay, redundancy pay, public holiday pay and other you might add to that depending on your situation.

The figures used I believe the author used them for illustration purposes. At school when we learned a new formula for physics I did not go and use all the values the teacher used in the example. I used the values that was asked in the question. Likewise you use the values in your situation not values some guy on the internet writes.

Yes in the book there are certain things only applicable to that market, but 90% of it can be used in any country. Most business owners would know their tax etc or their accountant could give them the numbers they need.

The 8 weeks is not 8 weeks leave. It was broken down as this:

Annual holidays .......... = 4.0 weeks
Paid public holidays – 9 days ……… = 1.8 weeks
Paid sick/family leave – say, 10 days … = 2.0 weeks
Total non income earning weeks ………. = 7.8 weeks

So you ARE using the same figure twice.
The 38% is for annual leave pay, sick pay, redundancy pay, public holiday pay, and then you add in holiday pay again!


When i was at school the teachers did not give us formulas which were incorrect, lacking detail, or worked out with figures which were not relevant or realistic.

This is the first time you have mentioned any detail of the content of the 38%

It is dangerous to put formulae on here for people who may use them as a business model, without a complete explanation and breakdown.

In addition if someone fully understands the tax requirements and company legislation of this country then working out an hourly rate is the easy part!

 

[bobzzz]

So you ARE using the same figure twice.
The 38% is for annual leave pay, sick pay, redundancy pay, public holiday pay, and then you add in holiday pay again!


When i was at school the teachers did not give us formulas which were incorrect, lacking detail, or worked out with figures which were not relevant or realistic.

This is the first time you have mentioned any detail of the content of the 38%

It is dangerous to put formulae on here for people who may use them as a business model, without a complete explanation and breakdown.

In addition if someone fully understands the tax requirements and company legislation of this country then working out an hourly rate is the easy part!

I am sorry but I think there is perhaps some misunderstanding here.

The 38% was mentioned in the example as ON COST. Most business people will know that relates to the costs mentioned. I still fail to see how the number is used twice that you mention.

The 8 weeks is subtracted from the 52 week year. That is time lost that cannot be charged for so you have to calculate your earnings with the remaining time in the year that you will actually work.

To put it in other terms I would say that It is time you cannot charge for and at the same time you have to pay your employee/yourself for that time "lost".

I cannot see how those 2 things can be seen as the same thing.

I also did not put this formula here as the be all and end all. I put 1 part out of a whole book that I thought most people running a business would be able to relate to.I did that to see if anyone might be interested, so I could send them the entire book. In previous sections it shows you how to calculate On Cost etc and and in later sections it shows you other calculations etc.

You say that working out the hourly rate is easy, perhaps you could add that value to other people here by showing us an example.

 

[Octopus]

I think you are over complicating matters. Work your figures based on working 4 days per week, 8 hours per day, 44 weeks per year and you won't be far out. Anything extra is a bonus.

 

[Cbigfoot]

the 38% includes for annual leave pay, sick pay, public holiday pay among others.

At the end you then add in Annual holidays .......... = 4.0 weeks
Paid public holidays – 9 days ……… = 1.8 weeks
Paid sick/family leave – say, 10 days … = 2.0 weeks

And you feel they are they not accounted for twice?

I agree with Murdoch, this is far too complicated.

I would remove the 38% and work out all your costs over the year...

I am not here to teach business practices, I am not qualified to do so. However i have seen a flaw in the one you present, and thought it should be pointed out.

 

[Southern22]

Hahaha I bet bobzzz wishes he never bothered offering now!