Tom and Dan address your questions about including your overhead in your gross profit, how you handle estimations with the differences in price between materials, if Facebook advertising is a good idea, and surrounding yourself and networking with other like-minded individuals.
In this episode, we talk about…
Question1: I included my overhead in my hourly rate. Do I still need to include it in the gross profit?
- Find out what your hourly rate should be because you have to charge for the field labor, recover overhead, and then make a profit.
- Many people charge double their hourly rate. But if you are charging twice for overhead and profit, you are making your prices way higher than they need to be.
- Use the job costing sheet instead of the charge sheet.
Question2: How do you deal with estimates with the way materials are all over the place price-wise?
- If you get a deposit and have a shop, you can buy the materials at that day's price.
- Material is not your problem; it's the customers' problem.
- Material pricing is a sales process and marketing issue. This is content that should be on your website.
- Some people have no confidence indirectly addressing costs on the front end — start with that.
Question3: Do you think Facebook advertising is a good idea?
- You are thinking of tactics — Facebook ads, Google ads, and direct mails are tactics.
- Think strategically — how do you want to build your brand, or how do you want to position yourself?
Question4: What should a first-year look like for a new business when funding is limited to using the profits to reinvest? I have no access to any loans or outside help.
- The first year in business should be a high gross profit business.
- Start right, get some help, educate yourself, invest in yourself, make sure you're charging enough, do not get into debt, and market yourself.
- You don't need outside money if you do your work right.
- Do not be in a hurry to hire — if you're on the tools, stay on the tools and make sure all the money goes into your pocket.
Question5: Say something about the importance of surrounding yourself and networking with like-minded people and how that affects profitability and growth.
- Read chapter 45, "Show me your friends," in Tom's book.
- You become who you hang out with.
Question6: Can you put the job costing link in there?
Resources:
Submit your questions to help@thecontractorfight.com with the subject "Podcast" and Tom and Dan will try and answer them on an upcoming show.
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