Awesome forum here. I know there are hundreds of threads about making money, getting jobs, why did you start, etc. A topic that I have yet to see is, what are your expenses for a solo operation at a monthly/yearly rate? I see guys talking about making less than $100 per hour and you will go out of business. Tell me why a guy making $65 per hour will go broke other than the general vague reasons. Post up what it costs to run your business.
Good “money” topic Shawn.
our expenses (not including taxes) were 15-20% last year
i made $60-70 an hour every time i measured it last year but when you take what i netted and divide it by the work hours in a year, some how it came out to $30 an hour that’s why we aim for $100 an hour
If I’m understanding, you average $60-70 per hour and your average cost of operating (including tax) are approximately 30% and your taking your net and dividing by yearly “available” work hours and your coming out averaging approximately $30 an hour (pmh)…Correct?
I don’t think you would go broke at $65 pmh, I think it would all depend on what sector of the industry your working in and what the demographics and weather in your location is. Are you focussing on residential or storefront or small commercial accounts or are you focusing on high rise work?
When you hear our goal is $100 pmh that’s an arbitrary number. So many factors and uncontrollable factor come into play here.
If you read a lot of posts by @Bruce he talks numbers often, maybe he will take the time to visit and respond to this thread and topic.
a guy earning 65$/hr will go broke if he is spending 66$/hr.
the hourly rate is irrelevant. what $50 will buy u in CA is different than what it will get u in MA. And a guy earning $50/hr might actually be making twice as much as the guy earning $75/hr.
One of the main reasons I see ppl go broke is because they dont understand enough about budgeting or profit and loss, to be able to narrow down thier expenses correctly, thus telling them what they actually need to earn to turn a profit.
Most don’t even know what thier expenses are. There is software out there that would do all the math, but for some, just the data entry is difficult. (what budget do gas charges come from? or labor? or advertising? etc)
Ppl say, “I aim for 100$/hr!” - ok, but why? what are your costs? why that amount? Truth is, (from my experience) most don’t know why, they just like that big number and think that if they make that, then they will have enough. Or, they might even be comparing it to when they made $20/hr at that old job where they were an employee and with that “little” amount, they got their bills paid, so surely $100/hr means they will have some left over.
Anywho… u asked about a monthly/yearly rate… i am not solo… but i know our daily rate for costs is $39/vehicle. ($663/month) … and that’s pretty low… (when I was solo, it was slightly less)… and that of course doesnt include growth or accruals (labor). So a quick example based on my numbers to illustrate why some go broke…
say u want to buy a new pole that cost $40. Not too expensive! Say u do only 1 job and earn 100$ and it took u 1 hour. You can surely afford that pole right? AND you should have some left over for your pocket right?! I mean come on! You just “made” $100!! … well let’s see…
100- 30%(taxes/growth) = 70 left
70 -38 (daily costs/expenses)= 32 left
So far you only have $32 left…
So if you did that “$100/hr” job by yourself, then u actually only made $32/hr (after all costs) so…
if you buy that pole, you are now negative dollars and broke, it gets worse if you paid someone $12/hr to that job (labor) then you are down to $20 and cannot even afford 1/2 the pole! Imagine if tiki needed 1 pole and a new squeegee and you bought both without knowing these numbers. You can see how it could spiral downwards.
Now the saving grace is most of us do more than $100 per day… but the results can still be disheartening…
say you worked 8 hours and made 500$. (i see lots of videos on that!) that is $63/hour (uh oh! thats already alot less than our first example).
But… we will leave the daily rate the same, just for kicks…
$500 - 30% for taxes/growth = $350
$350 - $38 daily rate = $312
$312 / 8 = $39/hr… you cannot afford to buy that pole until you have worked at least 2 hours.
now… if u paid someone $12/hr to do those jobs, then…$312 - $96 (labor)= $216
$216/8 = $27/hr… still takes 2 hours to buy that pole.
One more… lets meet in the middle… say u do $250 for the day and worked 8 hours… u already know how this is going to turn out don’t you?!
250$ - 30% (taxes/growth) = $175
$175- $38 (daily rate) = $137
$137/8= $17/hr … takes you 3 hours of work to be able to afford 1 $40 pole. And you only made a measly $17/hr net.
The all important lesson here is to know your “break-even” point. You cannot know that until you have accounted for all your expenses.
Gas, advertising, insurance, license, auto license, auto insurance, paper, pens, ink for printer, solution, squeegee blades, pads, phone bill, CRM, payroll, poles, razors, containers, shelfs, rubber bands, taxes, payroll taxes, auto repairs, tools, auto mainteance, uniforms, water bill, auto decals, wfp, attachments and so on. You should know these so intimately that if someone asked you what ur biggest expense was, you would know that without looking.
Your post reminds me about this insightful thread.
i have read that book, and the truths contained in it is what managers and leaders have been using for centuries really. it is taught in business classes as well… it doesn’t change because its math , u know what i mean. It isnt easy to grasp at first, and from my experience most new WC business owners actually work the business model bsckwards. thst is detrimental.
You WILL NOT go broke making $65.00 hour. That is the short answer. Do a written budget ( Spending plan ) for the year. You will need to estimate the first year. Modify at the beginning of each new year. Do not spend money not in your budget. Do not borrow money ( it’s very tempting ). At the end of every month transfer 5% ( of your gross sales ) to a separate saving account and label it - Emergency Fund For Business Only. This is your buffer against, well, emergency expenses ( Example: Service vehicle transmission replacement which does not fall under normal maint. budget ).
Have a separate Checking Acct. for your business and do no Co-mingle that with household checking account. Transfer Weekly or Biweekly a set amount to your personal account ( This is your Salary ). Keep back 25-30 % for your Qtly Estimated Taxes and DO NOT get behind on this. Read as many books as you can on personal finance and investing. Start with The Total Money Makeover by Dave Ramsey. Read - Read - Read !
Disclaimer: This is what I have done since I started 26 years ago and IT WORKS ( for me ). I am not saying it is the only way. It may work for others and then again it may not.
You will do fine !
right that was for 2016 I haven’t figured it out for 2017 yet
Taxes. it’s always gonna be taxes
i hate taxes… for non-solo guys it’s usually labor.
i suppose that’s true
When I started i was avg $25 an hour at days end and didn’t go broke And I live in New York City and its very easy to go broke.
Look take a number that will make you happy and go for that. Never compare what others are making or more what they say they are making we had that faux post not long ago . Because every area is different some guys getting only $1 a pane others are getting $5 $10 $12 a pane.Take that number you have and try to improve on it weekly. Don’t get into all that U-tube hype of $500 a day listen to the guys who tell you its a hustle @Luke @TheWindowCleanse Etc stay clear of the Bland type of posters stick with the truth preachers.
when solo ages ago 20-30% annually (annually is a most helpful number to work with when forecasting and budgeting or planning with since it includes the whole business cycle) direct business expense vs revenue, excluding taxes.
but there are fixed expenses and variable expenses, do you have a truck payment or not? a bad driving record or not? a v-10 dually truck or a Tacoma? are you writing off business use of your home or not? do you have a wide driving radius or not? all these things are going to have an impact on your personal numbers. Also your tax structure is going to make a HUGE difference whether you are sole prop or S-corp or LLC etc.
you may not go out of business if you are a sideliner, part timer, your wife is a doctor and this is for fun etc. but by having numbers that are tied into what other service businesses are charging around (like your local mechanic’s hourly rate) one is forced to create pricing, productivity, efficiency and profits that will sustain a business and employee wages, start off right to avoid re-invention later or having to churn all customers into a new customer base that will pay the inevitable rates needed, save the headache now unless you know you will always be solo then you can choose how long you want to work for whatever rate you are satisfied with, but why not get the most for your time instead? If lower price is the only thing bringing in work then that’s a symptom of a marketing and branding strategy that needs more thought. One can ignore it but it will end up being a race to the bottom in commodity land. better for the long game to solve it
I refer to this. I think @Garry posted the original link somewhere in another thread
It’s about calculating the hourly cost to run your business, taking into account not just your business expenses, but also what standard of living you set for yourself and how much money you need to take home to be happy with what you do.
It costs far less to run my business than what it says on paper, clearly due to the fact I will expense every last thing I can think of based on the advice of my accountant. Over the years I’ve learned what other business owners are expensing. When I get to then end of the year my business will show a slightly negative net profit. With the new tax code I may reconsider how many paychecks I issue vs. a shareholder draw.
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what are your expenses for a solo operation at a monthly/yearly rate?
As a solo guy you really dont have too many business expenses . Yes you can go crazy and buy every new toy out there , and Yes you write off everything possible . But other than insurance , soap, rubber , resin , your website/software and some office supplies. And some basic tools, once you have purchase the big ticket stuff ( wfp, ladders, truck). You can keep your real expenses down if you’re deciplin .
I personally don’t see cell phone , internet and gas as a business expenses( I do only resi and drive very little) . The way I see it is if I had a 9-5 I would still have theses expenses , so I don’t see them as business expeses.
Also advertising will depend on you , will you spend $1000 a month on google ads? or will you spend 1000 a year on door hangers? or you maybe chose to do free advertising like Craigslist Nextdoor and yelp ( non paid ) .
so i’m finalizing our taxes so here our our numbers, keep in mind that we are a partnership but it’s basically two solo guys working together.
Yearly Gross: $158,808
Yearly Expenses: $30,088.09 ->18.94% of Gross
Keep in mind 35.01% of our expenses are payments to the fellow who’s business we bought, so if we hadn’t had to do that then our numbers would be:
Yearly Expenses: $19,552.09 ->12.31% of Gross
The largest categories of expenses are:
Window cleaning supply houses: $4783.07 -> 24.46% of expenses
Subcontractors: $3041 -> 15.55% of expenses
Hardware stores: $2642.81 -> 13.51% of expenses
Insurance: $1870.77 -> 9.56% of expenses
Online ads (facebook, google): $379 -> 1.93% of expenses
Do you count fuel and vehicle expenses? Gas is the primary expense for me.