What Should You Be Charging? – A Quick Calc
I recently received a question from one of our CLIP users regarding how to calculate what you should be charging per hour so I thought I’d share some quick steps to figuring this out.
The following calculation will provide you with a good foundation for understanding how much you need to charge.
Figure Out Your Charge per Hour
1. You will need the following information about your company:
a. Total Yearly Expenses (excluding material costs) – Example: $300,000
This you can quickly find by looking at your Profit & Loss Sheet from last year.
b. Desired Profit- Example: 15% or $45,000
c. Total Production Man Hours in a Season – To calculate use the following formula:
# OF PRODUCTION EMPLOYEES x HRS/WEEK x WEEKS PER SEASON
Example: 5 production employees x 40 hrs wk x 30 wks/year = 6000
2. Next, use the following formula to calculate your hourly rate:
(Total Expenses + Desired Profit) / Production Man Hours per Season
Using the example numbers above, our formula would be:
$345,000 / 6000 = $57.50 per hour.
This is the method taught in our Revenue Tracking/30% Profit presentation which is available online here.
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