Author Topic: Work costing  (Read 4665 times)

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Offline scalci

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Work costing
« on: March 26, 2017, 01:59 AM »
Hi Everyone

I am new the Festool family, and need advise.

I have been doing woodwork/ cabinetmaking the last couple of years but never as business earning an income.

Does anyone have a basic way, Excel sheet. can use as a framework to do costing calculations and what,to charge customers?

Any help is,appreciated...

Rgs
Scalci

Offline Peter Parfitt

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Re: Work costing
« Reply #1 on: March 26, 2017, 03:42 AM »
Hi Scalci

Most of my commercial work has been done in IT or Sy but there have been a few woodworking jobs. I realise that you are looking for an IT solution, maybe an estimating tool or something similar. No matter what method you use you do have to understand the basics of costing...

You need to have a method of estimating the following:

Time: Only you will know your rate of working and you need to establish a rate that you will use for each hour that you spend on a job. Remember it is not just time on site but workshop prep time, selecting/buying materials and travelling time. You also need to factor in the time that you will have spent associated with a particular job ahead of being hired - preparing estimates or samples for example.

Materials: Not as easy as it sounds as it might not just be a few pieces of wood but is likely to include fixings, adhesives, finishes and so on. If you are using salmon leather for drawer linings and the glue fails then...

Tool Hire and Depreciation: You may have spent a lot of money on the van, the tools that you take with you, the tools in your workshop, the maintenance contracts and so on. I write down the cost of power tools over 3 years, hand tools maybe 5 years and machinery may vary between 5 and 15 years. It may depend on your friendly tax man as well.

Travel Costs: This covers every day spent going to and from the job site, trips to suppliers, meetings with planning or coding professionals etc.

Annual overheads: These will include, the cost of keeping your van on the road, workshop heating, telephone and various types of insurance including 3rd party and cover on site (you need insurance). If you estimate that you will be able to get, say, 40 booked hours a week over 48 weeks a year then in theory you can add on 1/180th of most annual overheads to every hour charged. Remember to update this rate every time something changes.

Taxes: Make sure that you do not miss any of these and ensure that they are factored into any estimate or quote that you produce. Keep the tax money in a separate account and do not be tempted to "borrow" from it.

Discount Rates: If you want to offer a discount in order to get a job and beat the competition then you can only reduce your rate not your overheads. This is where many small businesses go wrong. At the end of the year you have to have paid all of the costs to you but it is the rate that you pay yourself for your time which will be the source of any discount.

I am sure that there is a lot that I have missed and I am sure others will not only fill in the gaps but give some real life examples for you.

Good luck.

Peter
« Last Edit: March 26, 2017, 03:54 AM by Peter Parfitt »

Offline antss

  • Posts: 1374
Re: Work costing
« Reply #2 on: March 26, 2017, 10:22 AM »
This is an age old question that gets asked over and over.

The short answer is no, there's not an app for that.

Peter has written a great tutorial for arriving at pricing but has left out one important item: profit. Has to be in there if you're running a business.

Lots of guys start out pricing on the back of a napkin using only a few of the items on the list.   Do a take of of materials from the plans, guess the number of hours you'll spend constructing and installing, and then add in some $$$ for incidentals.

That's the price, easy peasy.

If you can, try to hire out on a cost plus basis.  You'd bill actual materials plus the hours spent at an agreed upon rate per, and the "plus" if you can get it .  You'd limit your exposure until you collect historical data for construction times and figure out what your actual overhead is all the while adding this knowledge into YOUR pricing tool.