Business Owners Guide to pricing

The business owners guide to determining what to charge

Factor in your cost of living: Use the 50/30/20 model to set this up. Consider the amount of money you need to cover your essential spending such as rent, food, utilities, Clothing, transportation, and Health insurance, daycare, etc. Your essential spending should be no more than 50% of your after-tax spending. The next 30% should be your expendable income. Here is the money you use for eating out, Netflix, entertainment, etc. Next you should save at least 20% of your income for annual vacation, Down payment on your next home purchase, Rainy day fund, or retirement.

Next: add up your business-related expenses for the last 2+ years. Divide the total by the number of years you included to get an idea of your overhead costs. These expenses include:

Advertising,
Laborer/employee costs
Bank fees & service charges
Software and subscription services
Wages and Payroll charges
Insurances
Equipment and supplies
Workman’s Compensation Insurance
Legal and accounting fees
Meals
Office expenses
Answering service
Merchant account fees
Office supplies
Shipping & postage

Add the total of these business-related charges to what you need to earn to cover your personal taxes and living expenses. Now divide the gross by the number of hours you work in the year. If you expect to work 8 hours a day, 5 days a week, 52 weeks a year, then you will divide your gross income by 2080 which is the number of hours you expect to work for the year.

Now you have the price you need to charge per hour for your services.

Nice I can eat out every night , and get the gold package from cable vision, I never even thought about day care I neee to raise my pricing . My entertainment these customers are lucky I’m married , or Fugggetabout it

Ya I’m glad I got all this stuff figured out I’d have to give this business second thoughts after reading this. Shit just got complicated :rofl:

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HI ZAGHI:
Love it all your right on track, we must consider all overhead when we give Priceing people look at me tell me i am to high then i look at them and try not to be a smartass I have my overhead to pay for instead of being a s…a… saying i have to eat and live to and to tell you i just printed this to remind me everyday.
thank you
HOWARD SILVERSTEIN
HOWIE’S WINDOW CLEANING SERVICES LLC

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Add:
Parking, tolls
Uniforms
Shoes
Vehicle maintenance

Non billable hours never show up in the customers eyes, but we feel it greatly. The ones who understand the cost of doing business don’t quibble, the ones who think this to be a side gig for hobby or beer money will never understand.

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anyone use this?

some thoughts:

sure, divide by the 2080, but nobody is going to work 100%. In all my tracking i’ve found anything over 93% gives you some real burnout and life (vacations, holidays, sick, personal, so cal weather) happens whether you want it to or not and things will end up realistically in the 80-90% range each year. so using 85% has been an awesome budget tool.

so use your 2080 hour result then divide by .85 and that will give you a more realisitc number after “life”

do you keep track of your “on the job hours”? I highly recommend it

another very useful number to use, since we are a seasonal business with all the ups and downs thru the year, is a last 12 month average. (you can divide it into whatever number means the most at the time, month, week, day, hour)

take your 12 month revenue and divide by your 12 month on the job hours and see what your annual average per man hour on the job is, that’s a powerful number to focus on increasing and always asking yourself what it would take to increase it. find satisfaction as you see it climb over the years

you can also gauge your work/life balance by seeing if you are making more in less hours

and yes, we can take our bills or the last 12 months of what we spent business and personal to arrive at a per hour charge as a starting point, but its good to get aspirational in forward thinking too, how much more can be charged? (thru marketing, value, target customer, distances etc) can the personal side of 20% (of the 50/30/20) for investing be 30%? 40%? what would it take to get it there? are the numbers that come out just shocking to you or once you get used to working with and seeing those numbers are they higher than market value? or just higher than the “half pricers” (those equating rates to wages, not to a sustainable business charge)

by building above and beyond revenue/bills=hourly charge you’re creating something that can take care of you better than just meeting your current bills, which of course is always the first level that needs to be met

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