how to work out hourly rate properly

the_pen_turner

is there a good article or book on the topic.
all I can find online is uk and usa specific

im a carpenter , unfortunately there is only so much I can charge so the number isn't really worth anything.
I would like to work it out properly just for my own sake and to hopefully learn a bit about the finer parts of running a business.


its easy work out the basic labour and basic over heads . im unsure about the more complex parts like depreciation and offsetting investment in tools etc

I plan to make up a spread sheet to work it out

I am hoping to have most of it worked out before getting my accountant to tweak it if needed


thanks

pedroeibar1

That question is a little like one in the Consultant thread below on how much to charge.

The answer depends on your experience, the quality of the work you do, be it carpentry or consulting, and the complexity of the project. For some jobs the model has to be tweaked to cover extra labour/travel but the basic formula is simple,

(Overheads + Labour costs +Profit) divided by days worked = daily rate

Calculate each separately –

Overheads - your recurring expenses such as workshop rent, employees, phone/power bills, transport costs, equipment, insurance, advertising. Write off your equipment over three - five years. Total the items – the sum depends on your own figures, let’s assume you’re a small sole trader and it amounts to €20k.

Labour costs - Say you want €100,000 in a year (salary + social welfare costs) .
Profit – you need some profit to prepare for contingencies/new equipment/whatever. Call that 20% of the total Labour+Oheads. (€120k x 20% = €24k)

So you have 20k + 100k + 24k = 144k

However, you will not have work for every day so assume you have no jobs for two and a half days a month, so take 30 days off the annual total of available days so the work days amount to (365 days, minus Sundays, Saturdays, public holidays, “no work” days and two weeks’ vacation). That brings you to days working - 230 days per year

So the sum is €144,000 divided by 230 = €626 per day or in round figures €80 an hour.

You need to play around with the figures - your workshop might be a garage attached to your house, your equipment might be a few basic planers/mitre saws, your income demand or available work could be different, so only you can fill in the blanks.

the_pen_turner

thanks for that pedro but it is the finer details im really after

power101

There are a few online calculators out there which may be helpful for you and steer you in the right direction .

http://motivapp.com/freelance-hourly-rate-calculator

This one is based on UK taxes and allowances...

http://www.microbusinesshub.co.uk/freelance-rates-calculator/

An Irish tradesman viewpoint on it

http://blog.tradesmen.ie/2014/06/hourly-rates-tradesmen-construction-workers/