In the last posts I shared in this series, I mentioned a little about what it costs to be an independent contractor. I use Excel to run my models and figure out the numbers using local tax rates (California). I am uploading them so you can play with them if you so choose. Plug in your numbers and it factors everything down to what REALLY MATTERS… your take home pay. This one is still a work in progress but It gets the point across. Meanwhile… Plug in your numbers. The areas that are Light grey are you inputs. The variables that are particular to you. It will breakdown where the money goes. compare what you are actually making with what you think you are making. Then look at how much you need to charge to get what you need to live. Disclaimer: Tax rates do not adjust for tax brackets. FED is set at 24% and State is set at 9.3% FiCA in the Contractor model is the Self Employed tax rate of 15.3%. Why do I share this? Starting out, I didn’t have a clue. I didn’t know what I didn’t know. If you are starting out, This is worth GOLD!!! If you have been an ‘independent Contractor’, you need to know what the numbers actually are to make informed decisions. May we all make informed decisions to help build a better future and for the good of the window cleaning industry!
Employee_Contractor comparison.xlsx (15.8 KB)
I like the way you think
it takes some time to find where things settle since there are a few areas that are “fuzzy” or radically different for different scenarios or circumstances of owners
revenue - cost of providing service (in a wc biz anything operations: labor, supplies, transportation etc)= contribution
contribution- minus expenses (everything else including taxes, distributions and personal pay)= profit (subtract profit first if using ‘profit first’ methods)
fuzziness gets involved categorizing expenses with owner in field and office, diff work comps every year, their trucks or yours, different production levels of people and esp corp structure (never be self employed as one grows, thats the highest tax liability possible)
you’ve gotten in your groove by sharing what you’ve learned, congrats, it takes some time to see where all the chips usually land to start being able to start forecasting more accurately and where you are “backing in” to what job price should be and what different job prices will produce for the employee annual income
that’s a very enlightening place to be for an owner, since more more more is usually the mantra, then the owner sees its not producing what he thought, digs in, then surprise finds out prices should be way differently higher to cover everything up to all laws and regs
the next frontier is then the marketing awareness to produce messages and reach the people that will pay the new found price points that the new understood reality dictates
business is never boring lol
I spoke to a friend in a different industry recently. On the outside he’s looking good, he has good reviews, website, 2 trucks with full time employees, etc. However, he got a 3rd truck so he can get back in the field. Why? He said he’ll be lucky to break even for last year and he’s getting the 3rd truck so he can get some profit going for him. He also pays them off the books and one guy 1099’s even though he or the “1099” don’t have work comp. He pays about 50% in labor per crew.
Yup, it’s important to keep track of profit.
