As the independent Contractor, what are the numbers you need make money? At what point is it not worth the effort? Are you just spinning your wheels? Below I will contrast the same scenario. Doing the same amount of stores in the same amount of time. Just at a different price point. I have included bare bones needed costs to be legally an independent contractor. Vehicle payment of $300.00. Fuel $700.00. Commercial auto insurance $115.00 (Monthly auto costs). General Liability $300.00 (first year cost). Rounded up to $38.00 daily overhead.
What’s missing?
Advertising (Ads, Website, SEO, Fliers, Postcards, etc.)
Bank fees & service charges
Software and subscription services (CRM, Quickbooks)
Equipment and supplies
Legal and accounting fees
Meals
Office expenses
Answering service
Merchant account fees
Office supplies
Shipping & postage
Uniforms
For this illustration, just the bare bones.
Tax Professionals will tell you to put away between 30% and 40% of your profits to cover your taxes. I have included the tax costs, at the different tax scenarios, for this comparative analysis. Both models assume 12 hours worked, completion of 10 stores, and a charge of $75.00 per store. Each scenario involves a single Contractor doing the work and a cost of $40.00 paid to him per store.
As you consider this, Keep this in mind.
As an independent contractor, you are responsible for paying your own taxes and social security contributions. You are not eligible for benefits such as health insurance, retirement plans, or paid time off that employees receive. No such thing as overtime or time and a half. If you get hurt while working as an independent contractor, you are responsible for your own medical expenses and insurance coverage. Your boss is not liable for any injury or damage caused by your work.
Overview
I. Examination of adjusted financial figures at a lower price point for independent contractors and their employers under two tax scenarios: 30% and 40%.
II. Net Labor Costs
- Net Cost Per Store: $40.00
- Net Pay to Contractor: $400.00
- Hourly Average Pay: $33.33
- Net Cost of Work Done: $400.00
III. Contractor’s Numbers
- Vehicle Costs (Daily Average): $55.00
- Gross Income: $400.00
- Gross Overhead: $40.00
- Taxes: $108.00 (30%), $144.00 (40%)
- Profit: $360.00
- Net Hourly Income: $21.00 (30%), $18.00 (40%)
- Left After Taxes: $183.40 (30%), $157.20 (40%)
IV. The Real Numbers (Employer’s Perspective)
- Employer’s Direct Cost: $138.00
- Gross Income: $750.00
- Employer’s Gross Cost: $538.00
- Gross Costs Per Store: $53.80
- Gross Hourly Costs: $44.83
- Taxes: $63.60 (30%), $84.80 (40%)
- Profit: $212.00
- Net Hourly Income: $12.37 (30%), $10.60 (40%)
- Left After Taxes: $148.40 (30%), $127.20 (40%)
