What is Your Real Hourly Charge Out Rate?
We've had a few questions about filling in the Hourly Rate Calculator correctly so we thought we'd best answer them for everyone to see... And just in case you wan't to run your figures through the Calculator again, we've added the button in below (we suggest reading the notes first):
Here's some KEY NOTES which might also help in filling in the details.:
The biggest 2 mistakes we see people make when filling in this calculator are 1. not calculating costs for a 12 month period and then dividing by 12, and 2. leaving out wages or income for themselves.
They make no allowance for a wage for themselves and/or they don't add in Sub-Contractor costs. The idea behind this calculator is to put in all the costs that would relate to you running a professional business. These may NOT be the same costs that you're running at now. ie if you don't pay your partner a wage for doing the books, or you're not paying your mate for storing your equipment and materials in his spare garage....and you don't make an allowance for this, then you're not filling it in properly. You want you to see what the calculations would be by allowing for all of these things. Because one day, you may need to pay a real bookkeeper or rent for storage etc - and you want to know that your charge out rates covers these costs.
Trucks (This figure should be the total of all the vehicles in your business, not just for one vehicle):
- PETROL - just petrol alone can now be up to $600/mth depending on how far you travel for work or jobs.
- LEASE REPAYMENTS - (We recommend making an allowance for a truck lease even if you don't have one now, as you'll more than likely have one in the future.)
- MAINTENANCE and servicing etc. You'd be surprised how expensive it is to run a work vehicle.
Even if it's only you (or your partner) doing the 'books' please allow for a cost for someone to do this work. Good bookkeepers are generally anywhere from $50 - $90/hr and are worth their weight in gold. There should be at least $1000 to $1500 a month allowance made here to cover these costs. Of course, if you're using cloud accounting software, such as XERO, then these costs can be considerably less.
Public Liability Insurance (which you must have), Key Person Insurance (if needed - generally only if you're not covered by a workers compensation policy), Workers Compensation Insurance etc. Basically add up all the insurances that you'll need for your business and put them here.
What about legal expenses? This is where you'd put Filing Fees (only applies if you have a Company, ie PTY LTD).
Any stationery costs, office equipment leases, ipads, iphones, computer costs, kitchen supplies (if any).
Phone & Internet:
What plan is your mobile on? Do you have an office phone or an internet account? Do you pay for any of your plumbers mobile plans? Etc
Do you rent space for either your office or storage of equipment? ie a Container on a property, kennards storage unit etc.
Do you need to hire skip bins or get rid of your rubbish like hot water heaters etc? What does it cost you a month?
Do you have uniforms? Or even just your normal work clothes? Work out what they cost you a month if you've paid for them in one lump sum - break it down. What about training if you have staff - are there any costs here that you need to allow for?
Do you have to pay parking for any of your jobs? What about Road Tolls? This is where you'd also allow for any speeding fines (hopefully there are none.....). Work out on average what you'd spend per month and put this figure here. (ie add up all expenses for the year and then divide by 12)
Do you pay yourself a wage? Have you made an allowance for one? What about any plumbers working for you or office staff? Add up the wages for a month (Gross, ie including any Tax) and enter the figure here. Remember to allow for the current rate of Super at 9.5% on top of Gross Wages. (Note: if it's only you as a Sole Trader then you don't need to add superannuation on top). Make sure you include all wages here, ie for your whole team. If you pay your team at Subbie rates, then put the average per month in here as well.
Do you have an advertising budget? What do you spend on flyers, newspaper ads, truck signwriting, social media etc. Add this up here and break it down monthly.
All other expenses should be included in this box. That would be things like Bank Charges, Master Plumbers Membership Fees, Repairs and Maintenance to tools and equipment, and anything else you spend money on.
Can I just use the expenses on my last months Bank Statement?
No. You need to use the whole year's expenses and then divide them by 12.
Can I use last years Financial's from the Accountant?
Yes. These would be great to use if you have them.
What if I have 2 work trucks but only 1 is on the road going to jobs?
You still need to include the running costs for both vehicles, as your business still has to pay for the one not out on the road. However, in the spot where it says "How Many Income Producing Vehicles Do You Have?" you would only put 1 in here.
My Cost per hr/Service Vehicle came out at $14.30/hr. Is that correct?
NO. If you're getting results like that then something's gone wrong somewhere. You'd be best to go back over your figures and make sure you've entered the data in the right format, ie hrs or days or per month. Eg. we had someone accidentally enter they're chargeable hours for the week instead of for each day - this in turn blew all the figures out.
Remember, if you need any help with this, please feel free to send us an email.