Calculating hourly cost
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- Опубликовано: 20 июн 2024
- Calculating hourly cost.
As business owners detailers are passionate technicians, but often lack business skills to take their income to the level of their skills. Detailers work on high end cars, yet for the most part can’t afford those same cars. When I ask detailers in my classes who are the owners of these $100,000 cars, most of them are business owners.
A detailer often charges much less than a mechanic per hour, why? We pay the same amount per square foot for our space, we spend as much on education, taxes, marketing, insurance, utilities, plus the mechanic makes 30% profits or more on the parts they sell. As an industry we need to evaluate what we do, how we charge for it, and why we do it.
Let’s do a little calculation to start, let’s figure out what every hour costs you to operate your business. For mobile detailers I will add a little modifier at the end, but most of it is the same.
First we need to know ALL of our costs. So for the last year list the numbers for the following.
Rent/Mortgage:
Property Taxes:
Business Taxes:
Business Income Tax:
Utilities:
Communication:
Marketing:
Insurance:
Employee wages( all inclusive):
Supplies:
Maintenance:
Vehicle costs:
Tools:
Education:
Sub total
Next add to that the following :
Your wage, not actual, but as a successful business owner, what you should be earning (minimum $100,000):
Retirement savings, 10% of your wage or more:
Subtotal:
Add the above 2 subtotals together , and multiply by 1.3( profits). This will give you your total cost per year to run your business:
Now take the final number and divide it by the number of people you have on staff detailing. Managers, sales, clerical do not count. This will give you your per technician yearly cost(PTYC)
Once you have your PTYC, divide it by 240( number of working days per year @ 5 days a week, 2 weeks paid vacation, and 10 days statutory holidays/ sick days) this give you your cost per day. Divide this number by 8, to get your true cost per hour: ________ This number is what you need to obtain from every technician, every hour to break even.
Anything below that true cost per hour you are loosing money.
For mobile detailers, you will need to replace Mortgage/Rent with the real cost of your mobile unit. Even if you have an old van you paid cash for, go out and find out the cost to lease a new one, and use that number. Replace utilities with your fuel costs. The biggest expense for mobile detailers isn’t an expense, but actually a loss. That loss is calculated in time lost in transit, rain days, set-up/year-down times. Shop based detailers have 1920 hours a year available to them, you need to reduce that number by the number of hours you spend driving in a year, the number of hours you spend setting up and tearing down, and the time lost to weather. Then take your PTYC and divide it by your total number of workable hours.
Once you have your true cost per hour , only then can you really evaluate what a job actually costs you, and what you need to charge for it to make financial sense . Even though my calculations include a profit margin, I consider this a break even number, anything below that is a loss. True profits only come when you get over that number.
Once you know your real cost per hour you can evaluate what your packages should be selling for. Also by closely tracking your time you will be able to determine the validity of your services.
#business
#detailing
#wealth
Yvan, you are a true G. Can't thank you enough for these videos. Slowly watching a few every day!
Thank you, if you have any questions, I’m happy to help.
I just woke up literally and watched this and woke up metaphorically after watching this. Thanks.
If you are not making that much.. Why? Thanks.
Thank you for watching!
I finally sat down and crunched some numbers and realize how I have it both good and bad working in house at a shop! Thank you for continuing to educate us, it’s appreciated.
Thank you for your comment.
most don't realize you gave them a $1MM raise in 9 minutes... it's about mindset, skill, tactics and gear, however too many (in every industry) get the sequence backwards. cornerstone video Yvan!
Thank you.
This is why I don’t worry about the dozens of detailers that I see advertising full details for $40. I know they won’t be in business next year.
Exactly. Charge what you need to charge to be a good profitable business. Thanks for watching!
Thanks for always challenging us to think Yvan!
Thank you for watching and accepting the challenge.
Yes sir, thank you!
You are welcome!
Hey Yvan !! You are now in my top 3 of youtube channel !! SOOO great informations you give to us. Like I aleeady wrote in another video, this spring I will start my weekend/occasionnely detailing business at home and again this video is just in time to make decision on my prices. Thanks again Yvan for that one and going to watch another one !!
Thank you.
I always loved the business aspect you brought to all the videos I've seen you in! Always great information to take in.
Thank you
🚗 Wonderful explanation, loving this info. 🚗
Thank you.
Great information, and I am so grateful that you shared this formula with me earlier this year when I was starting up. My wife and I did all of the math and we came up with $65-75 per hour, and thus I based my package pricing off of it.
Thanks, hope you’re doing well.
Great points Yvan. Owning a body shop for 30 years, I've done exactly that on a regular basis. But it's amazing how many detailers don't have the business owners mindset. Like you said, it can be quite eye opening. Instead of dangling a carrot in front of the horse, to reach a given goal, I look at those numbers as a lion trying to eat me. That tends to be more of a motivator for me. By the way, I'm really enjoying this series.
Thank you, agreed that this is an exercise that needs to be done and updated regularly. Putting everything on a spreadsheet and updating as numbers change can make it easier.
Thank you for your help with calculations. I guess my one question is, is mid 40's too late to start? I've loved detailing since I was a kid. Just now, I want to be my own boss.
Not at all.
Learned this years ago in a previous job managing multi million dollar budgets. Great advice!
A budget is a budget, big or small.
Great content boy was I surprised
Thanks, how were you surprised?
@@Detailers-Business-Academy just using your formula I was way off on cost about 1000 a month never had someone break it down and totally forgot education and insurance so I must bumb my charges up to get a new vehicle was charging average 80 a car now up to 110
I look forward to every one of videos. 😁
Thank you for joining me in this adventure
@@Detailers-Business-Academy you're welcome and thank you for your education. There is always more to learn and sometimes I get stuck with what I know and forget that I always need a teacher. You have been that for me since your early days at Optimum.
Thank you it’s an honour to be able to help.
Thank you it’s an honour to be able to help.
Great insight for the true costs of business. My mother taught me business overhead when she presented her last years water bill and this year's water bill when I was washing autos in our driveway. I was expected to pay the difference and I did if I want continued free room and board. Teenage businesses are real. More people need to learn their expenses and such approaches are well defined by Michael Gerber in his E-Myth series of books.
Agreed, and thank your mother for teaching you a valuable lesson.
Good One Yvan~! know your bottom line, know your worth~! ;-)
Unfortunately not many actually know.
Nice Thank you I have homework to do
It’s profitable homework
This is great , thank you so much for this info. I just did the formula and like you said, was pretty shocked at what I SHOULD be getting. Pretty much came up with $112 an hour that I need to make. Just one question, is this formula good to go with income taxes coming out or is that something I need to factor in as well?
That’s an additional expense you need to add to your calculation.
I have been trying to go by this method religiously with my pricing but have came up with one stump in the road on calculating my hourly costs. I have been doing as you said by incorporating 10k a year for retirement purposes, but I also pay in to social security each year, as well as have it incorporated into my pricing. Am I double dipping this type of expense twice into my pricing when I should only do one, or is both great? Thank you for all your help and that you do!
Both is much better
Thank you always great ideas I went from a 1992 GMC Safari now I’m leasing a 2019 Honda ridgeline which the business is paying for that and I am also mobile I figure out between an hourly range between me and my other employee we are both making about $20.00 an hour each After paying everything I have to pay
How much are you saving, how much are you putting away for retirement? At 20 per hour that’s only 40k a year.,
@@Detailers-Business-Academy nothing been spending to much
Knowing your hourly cost allows you not to give your time, skill or profit away. 🇬🇧
In reality we are not selling details, we are selling our time.
"Right now, fuel is low..." Ooh man, that stings right now!
Times change.
@@Detailers-Business-Academy For sure. Certainly not holding that against you -- it was true at the time. At least we seem to be on a "feather down" trend now.
A very slow feather…
Hi Yvan! I had a quick question on understanding the 1.3 (profits) you multiply by the sum all the yearly costs added up.... what exactly is this 1.3 if im already adding my yearly wage when adding all yearly costs? Hopefully this question makes sense lol, love this formula but that is the only thing I don't really understand.
The 1.3 is the profit margin. Yes it’s above what you pay yourself.
@@Detailers-Business-Academy thank you!
Great Video! Question about the profits: how did you come up with 1.3? What does that number mean?
30 percent is a good profit level that banks will be looking for if you want to get a loan in the future.
@@Detailers-Business-Academy I see what you mean with the banks, but what is the 1.3?
It’s a multiplier, by taking your costs and multiplying by 1.3 you build in 30% profits
@@Detailers-Business-Academy Thank you! That makes more sense!
Hi Yvan! When you say $100 000 per year, do you mean net profit of that much per year? As in that is the amount that you personally withdraw into your pocket?
Personal salary.
@@Detailers-Business-Academy Appreciate the reply Yvan!
Should I be factoring in the costs of what it would be to replace equipment in case it breaks as well? Such as polishers, extractors, generator, steamers, vacuum, etc.
Yes
I think that's what he was implying with "repair coat"
@@Detailers-Business-Academy Thank you, appreciate the content you’ve been pushing a ton. Has helped a lot with getting into the business mindset for sure
The part where im struggling is calculating business/income tax since it will vary by job. Also supply, maintenance, tools and education since they're not set costs? or are they?
Your accountant will be able to provide you average tax figures for a given yearly sales figure. Example if your projecting an annual sales figure of $400,000, with a net profit of $150,000 the income taxes( not sales taxes) would be $XX,000
For supplies calculate an average of $10 per car. Education calculate a budget of 5% of gross sales.
Do people who own an actual shop not know these numbers? Business plans, people, please ensure you have one for your LEGAL detailing business! Good info as always, Yvan.
Unfortunately many do not. Thanks for watching and contributing.
Your thoughts on the "5 for 5"
Please explain what 5 for 5 is?
5year coating for $500 - detail and coating
Which has been a lengthy banter on facebook detail groups
@@pinoypop02 sounds like a good idea, but in reality it has negative long term effects. In the short term it’s ok income, as long as it meets or exceeds your needs in terms of income. If you can wash, decontaminate, polish, prep and coat a car in 3 hours, then yes. If it takes you more than 4 hours, then you will be probably loosing money on the job.
Long term it devalues you, your service, and the industry. After charging $500 for a service that normally sells for $1500 or more, your customers will not want to pay what it’s worth in the future. It’s a very slippery slope and you’re the one falling down it.
2 for 5 is better
For someone starting out and trying to figure out pricing this is all projection. I have no idea what my true costs would be. I’m just guessing
It’s easy to estimate
Mr Lacroix how can I know how much I spend on equipment utilities and such on a year bases when you haven't started the business yet? Want to have it set to start
Find out what rent and utilities are in your area for similar businesses.
@@Detailers-Business-Academy and yearly quemicals?
@@Detailers-Business-Academy btw first time seeing you was last week on a rinseless wash on a black subaru... got me hooked man you know your stuff
@@oennekko375 thank you
Calculate 10$ per car
Where would taxes fit in to this equation
Sales taxes or income taxes?
@@Detailers-Business-Academy business income tax
You need to add that to your costs.
Excellent video, thank you. I still have 3 minutes left to watch, but it occurs to me that health and dental plans might be another expense you want your business to pay for.
Thank you for watching. Yes, I’m in Quebec, so those are not a big concern, but generally it should fall under insurance.
This doesn't make any sense to me. so your saying if I do an interior detail takes me 2 hours based on your calculations that 2 hour detail is $300 at 150 an hour? no one is going to pay that for an interior detail.
people will and do pay those dollar amounts. It depends on your area and clientele. The only way to get it, is to ask for it and produce a level of work that justifies it. Sure, there are detailers out there taking on jobs for bottom dollar, but they do not last. I see folks opening leased brick and mortar shops charging less than I do out of my home based shop, and sure enough, they fold in under a year.
Nicolas, if you’re costs to run your operations are $150 per hour, then you will be paying the customer to detail their car if you don’t charge that much. If you don’t believe that your work is worth that, then neither will your customers. Once you realize the service your providing has value, then so will your customers.
If it takes you 2 hours to do an interior, and you charge $300, is the customer paying for 2 hours of labour, or a clean interior?
For the average consumer to do an interior to the level a good detail shop does would take 4-5 hours. Now let’s say that person is a lawyer making $400 per hour, to them those 5 hours are worth $2000.
@@Detailers-Business-Academy I've called multiple shops around me and they do a interior detail with shampooing on a sedan is $140 how am I going to charge $300 lol? And they have been in business for 20+ years
@@nicholasbarker2956 do you produce better results? Are your costs really $150/hr?
@@nicholasbarker2956 same here ( UK ) my HC is £140, so to do high level interior service, or any high level services as I would like to do, we all know it's taken around 2H to 4H even longer, I do value my time and I know it's worth it, but if customer can pay £50 for full valet in&out ( with takes 1:30H ) ( maybe they are noty customers, but is more thous customer then rich ones ) then I think I'm gonna be the business who will last not too long, Yvan what are your thoughts ? Maybe you could do video :
" I know my numbers & what next if shop next to my charging "£5" per hour and I'm charging £140 "
Any thoughts ?
$100 an hour is my minimum acceptable wage.
That’s perfect.