[TomCrowther]

A few years back, someone {possibly Spruce} posted an interesting subject about expenses.  They worked out how much it cost to arrive at a job.
Total expenses, including van depreciation, running costs, resin, uniforms, accountant, water, pole replacements, nipple cream, light/heating contribution etc etc etc divided by the number of jobs per year.
Does anyone remember this and what do you think your cost to turn up is?
It helps to know this figure as you are less likely to underprice.

[AuRavelling79]

I've never quite got this "cost to" turn up. Let's say it costs £10,000 (excluding profit/wages) to run our business as a sole trader for a year. Let's say I clean 2500 jobs in a year - that equals £4 per job in expenses.

But if I do an extra job in a day it doesn't really cost me another £4 to turn up does it? It depends how far away it is from my last job and how long it takes to get there. Same with giving a price, whether it results in a job or not.

But I like the idea of saying to myself (and the customer) whatever I would have charged, I'll add £4 to it.

[Spruce]

A few years back, someone {possibly Spruce} posted an interesting subject about expenses.  They worked out how much it cost to arrive at a job.
Total expenses, including van depreciation, running costs, resin, uniforms, accountant, water, pole replacements, nipple cream, light/heating contribution etc etc etc divided by the number of jobs per year.
Does anyone remember this and what do you think your cost to turn up is?
It helps to know this figure as you are less likely to underprice.

It was me.

I did this to show myself what each job I did cost me to turn up before paying myself a wage.
I must say its not the bee all and end all but it gives me an idea.

When I did the exercise and made the findings 'public' my cost per job that year was £3.97.  But it does leave a few questions to be answered. We do a couple of commercial jobs a year which we invoice out at a total of £1800. Do I exclude these couple of higher cost jobs? What doesn't make sense is that under this cost exercise those jobs cost us £20.

When I worked for Bosch in South Africa our Germany HQ would put expenses as a percentage of sales turnover which is more realistic.

Using the percentage rule of expenses against turnover we can get a better spread. If my expenses excluding wages ran to 40% of turnover for example, my couple of commerical jobs would show a more realistic amount of £720.

Of course this again isn't fixed as it can vary from year to year. Last year I spend hardly anything on replacement equipment but the year before my expenses were off the 'scale' as I bought a new van and wrote it off under AIA.

But if I assume my running costs are 40% of turnover on average over the years then I already know that a £10 job is going to cost me £4 to turn up and I'm going to earn £6. If the job is going to take me half and hour then I'm wasting my time doing it for £10. And this is where the conundrum comes in. If I did 2 jobs for £10 each I'm just earning the minimum national wage. If I increase the price to £20 per job then I'm over pricing for the area I live in.
My only other solution is to increase the number of houses I do an hour. If I push this up to 3 houses an hour then my £10 a house starts to look a little more acceptable.
 

[Dry Clean]

40% who are you, Dazmond.

[Spruce]

I've never quite got this "cost to" turn up. Let's say it costs £10,000 (excluding profit/wages) to run our business as a sole trader for a year. Let's say I clean 2500 jobs in a year - that equals £4 per job in expenses.

But if I do an extra job in a day it doesn't really cost me another £4 to turn up does it?  It depends how far away it is from my last job and how long it takes to get there. Same with giving a price, whether it results in a job or not.

But I like the idea of saying to myself (and the customer) whatever I would have charged, I'll add £4 to it.

Your doing an extra job a day will slightly dilute the £4 cost over the year. Doing an extra job a day will add a little to your expenses bill of £10,000. (Extra water etc.) I agree it would be better to factor time into this but the exercise just becomes too complicated.
Its basically just to give me an idea.

I asked a young couple window cleaning how much it cost them to run their business. All they could tell me is that the earn enough to pay the rent and look after themselves.

[Smudger]

you will send yourself insane with figures if your not careful!

you can make them tell any story you wish....


Darran

[dazmond]

average expenses for me is around £6000 a year so its around 13% of my turnover(which is around £45k at present).if i clean 300 jobs a month for 11 months a year then it costs me £1-81 to clean every job before i make any money(but this is also before tax/NI).....

too many variables.....and head scratching......spruce you think TOO MUCH!

[Spruce]

you will send yourself insane with figures if your not careful!

you can make them tell any story you wish....


Darran

I'm sure as an employee with a few vans on the road you will keep a sharp lookout for rising costs and 'sales'. If the costs go up then you will need increased 'sales' to justify that increase.

There was a report of a Tearoom in York a few years ago. The owner of that Tearoom knew how much each table needed to earn him a day to cover his running costs - rent, heating, wages etc, etc. He did say what the figure was an hour but I can't remember what it was tbh. Someone gave his Tearoom a bad review on Trip advisor because the owner levied a charge for a glass (not a bottle) of water.
The response from the owner was that this person expected to occupy a table for 2 hours, use the 'free internet' and only order a glass of water that he/she expected for nothing. They did this on several occassions over a short period of time.

[Spruce]

average expenses for me is around £6000 a year so its around 13% of my turnover(which is around £45k at present).if i clean 300 jobs a month for 11 months a year then it costs me £1-81 to clean every job before i make any money(but this is also before tax/NI).....

too many variables.....and head scratching......spruce you think TOO MUCH!

For you Daz as a single operator you will know if a job is viable doing or not without this calculation. You have been doing it long enough to run it on experience. You don't need this.

But Darran needs to keep a close eye on his business as he can't afford to carry 'dead wood.' He has to identify quickly one of the team who isn't carrying his weight.

But this is just my opinion. Some might think it could help them to do this, others might see it as a total waste of time. Thanks OK.

[Pete Thompson]

There are fixed costs, variable costs and semi-variable costs.

Fixed costs don’t change with scale. For example, insurance is a fixed cost. If you do 30 houses or 90 houses, the insurance cost is the same. Other fixed costs could be software,  etc.

Then there are variable costs. Things like water, mileage etc. These will usually rise in direct proportion to your turnover.

Then there are semi-variable costs. These could be things that don’t change in direct proportion to turnover, but are related to it.
Things like rent (if you have a unit). The rent won’t change as your turnover grows, but eventually you’ll need more vehicles and water storage, so you’ll move to bigger (and more expensive) premises.

There is an argument that says eventually all costs are variable.

[Kev Martin]

I don’t think it matters what business you are in.  I have always calculated all running expenses regardless of what they are as follows:  Count all Annual expenses worst case scenario,  regardless of what they are.   Divide by the amount of working days per annum and then divide that by working hours per day.  This gives me a cost per hour / day to run the whole business.  This gives me a formula of what to charge per day / hour for work.  If it gets crucial I have the option to split the hourly cost depending on personnel involved.  But the fact remains I am covering cost per hour.  I simply then calculate the gross income per week / month,  then divide by the amount of days / hours worked.  You are either profitable and making money or not.  My accountant can never work out how I do it  because I have never told him but regardless of any flaws others can see in my madness it works for me and has done for the last 30+ Years

[Smudger]

it is something I wrestle with regularly --- its an unpleasant business

I have a baseline of known costs - ( rent, insurance etc.. ) and then wages this is used on costs per hour against what the guys turn over per hour - but then we have extra costs such as equipment hire for certain jobs - I then have to factor this into that particular job and see if the turnover per hour is still good to the baseline costs

Darran

[Spruce]

There are fixed costs, variable costs and semi-variable costs.

Fixed costs don’t change with scale. For example, insurance is a fixed cost. If you do 30 houses or 90 houses, the insurance cost is the same. Other fixed costs could be software,  etc.

Then there are variable costs. Things like water, mileage etc. These will usually rise in direct proportion to your turnover.

Then there are semi-variable costs. These could be things that don’t change in direct proportion to turnover, but are related to it.
Things like rent (if you have a unit). The rent won’t change as your turnover grows, but eventually you’ll need more vehicles and water storage, so you’ll move to bigger (and more expensive) premises.

There is an argument that says eventually all costs are variable.

This is true, but if you aportion a cost of insurance to each house, then the cost of insurance per house will be lower with 90 houses than 30 houses.
 

[PHILIP HARDY]

average expenses for me is around £6000 a year so its around 13% of my turnover(which is around £45k at present).if i clean 300 jobs a month for 11 months a year then it costs me £1-81 to clean every job before i make any money(but this is also before tax/NI).....

too many variables.....and head scratching......spruce you think TOO MUCH!

I think its best you let Spruce stick to the maths Dazmond, you keep telling us about your new "leased " van, and your 4K Hot water system, they alone, with depreciation and running cost will come to well over 6K annually unless you think vans and systems appreciate over the years, (maybe the diesal fairy will fill your tank!!).

[jonboywalton75]

Makes me feel some price rises are imminent 😱😱😱

[Shrek]

average expenses for me is around £6000 a year so its around 13% of my turnover(which is around £45k at present).if i clean 300 jobs a month for 11 months a year then it costs me £1-81 to clean every job before i make any money(but this is also before tax/NI).....

too many variables.....and head scratching......spruce you think TOO MUCH!

What is tax on 39k a year? Don’t think I’ve earned that little for a good few years now

[dazmond]

average expenses for me is around £6000 a year so its around 13% of my turnover(which is around £45k at present).if i clean 300 jobs a month for 11 months a year then it costs me £1-81 to clean every job before i make any money(but this is also before tax/NI).....

too many variables.....and head scratching......spruce you think TOO MUCH!

I think its best you let Spruce stick to the maths Dazmond, you keep telling us about your new "leased " van, and your 4K Hot water system, they alone, with depreciation and running cost will come to well over 6K annually unless you think vans and systems appreciate over the years, (maybe the diesal fairy will fill your tank!!).

when i calculate expenses i calculate it over a period of 5 years(an average if you like).....rather than one year.

if i calculate it over a 10 year period(including van,hot water system,etc)then £6k a year is a very realistic amount to be spending on all expenses,of course this is only a ball park figure as expenses change from year to year.....

[dazmond]

average expenses for me is around £6000 a year so its around 13% of my turnover(which is around £45k at present).if i clean 300 jobs a month for 11 months a year then it costs me £1-81 to clean every job before i make any money(but this is also before tax/NI).....

too many variables.....and head scratching......spruce you think TOO MUCH!

What is tax on 39k a year? Don’t think I’ve earned that little for a good few years now

i dont get taxed on £39k a year mate.....

[Kev Martin]

average expenses for me is around £6000 a year so its around 13% of my turnover(which is around £45k at present).if i clean 300 jobs a month for 11 months a year then it costs me £1-81 to clean every job before i make any money(but this is also before tax/NI).....

too many variables.....and head scratching......spruce you think TOO MUCH!

I am not quite sure how you get away with a sum as low as £6K unless I am missing something?  The expense of running a van alone for a year is £10000 in our calculations and thats before you put a driver in it and pay them!!!!

[Shrek]

average expenses for me is around £6000 a year so its around 13% of my turnover(which is around £45k at present).if i clean 300 jobs a month for 11 months a year then it costs me £1-81 to clean every job before i make any money(but this is also before tax/NI).....

too many variables.....and head scratching......spruce you think TOO MUCH!

What is tax on 39k a year? Don’t think I’ve earned that little for a good few years now

i dont get taxed on £39k a year mate.....

Oh ay - it’s closer to 10k