Just a few pointers about calculating costs and making "profit"... a lot of these are learned the hard way by most people starting a business...
1. Employees are expensive. Employer taxes add on about 15% to the cost of employing someone, after all is said and done...so, that $42k per year personl actually will cost you almost $50k a year after taxes. Also, employees are demanding folks these days, often wanting all sorts of stupid stuff like health insurance and so forth. Typical rule of thumb for "actual" cost of employee for most small businesses (that tend to have pretty lousy benefit packages) is 1.25xbase or higher if they go beyond basic health and offer life, 401k, etc..., in which case it can push almost 1.35x or even a little more... 2. Employees take a LOT of time. Remember that most companies (of the vaguely IT type) often have a manager over groups of 4-8 people, which should give you an idea of how much time it takes to manage people. No, I don't just mean payroll and billing (although both takes more time than you realize--especially the former once you start dealing with customers that like getting service more than they like paying). I mean training, hand holding, ongoing support, problem resolution, retraining, retraining, retraining (ie going over stuff again and again until they have procedures doing pat) and general followup on tasks. This takes a lot of time, and is often an expense that gets forgotten. 3. When starting out, structure everything possible so that you can eventually hire people to take these roles over. So, calculate costs so that it is profitable with an employee doing all the work... 4. How are you selling your services? What is your time as a sales person worth? If, as eventually should happen, how much would it cost to hire a sales person. Are you "selling" for free? Or, does your time spent selling something have a value...it is a cost... 4. Most importantly, profit is NOT the same thing as owner's salary. $60k/year in revenue against $50k/ of employee costs + gas + whatever leaves $10,000 for you (although I think you're underestimating expenses). This is NOT profit.. This is your salary...Profit is above and beyond what the owner makes as a "salary" (however this is handled). It is important to differentiate between the owner as employee #1 and the owner as the owner/investor in the company. Let's take Bob's WISP for example. Bob runs a WISP, does it all himself, and, at the end of the month, after paying all of his suppliers, vendors, taxes, bribes (joking), and so forth, has $5,000 left over. What's his profit? His profit is $5,000 MINUS his salary, which means that if he paying himself $60,000, Bob's WISP is LOSING money (remember, Bob's WISP has to pay taxes on his salary). So, even though Bob is making $5,000 a month, Bob's WISPs is losing money. Now, all that said, are you screwing the customer at $80/hour? Perhaps...that really depends on how good of service you provide. I'd check to see what _good_ IT shops in your area charge for on-site work. Still, $80/hour tends to be on the low end of what well run IT shops tend to charge and, having been around this particular block a few times, is not unreasonable...even at that price, it takes fairly good management and fairly low labor costs to have any sort of a profit margins... -Clint Ricker Kentnis Technologies On 8/15/07, Mike Hammett <[EMAIL PROTECTED]> wrote: > > Currently it is only myself, so I pocket 100% of it. I'll expand upon my > thoughts not to defend my price, but to say where I'm coming from in an > attempt to figure out if my current system won't scale or if everyone else > > is just screwing their customers. > > That said, I don't see how all of those things really add up to that much > money. At $20/hour, that's just under $42k/year for a full time employee. > Make that just over $43k after you figure in unemployment, social > security, > and Medicare. I only pay income tax on what I profit, so that's not part > of > the equation. > > Office space and use is pretty cheap. $250 for the whole office, I have > options on other office spaces in the building. > > Most any problem can be quickly diagnosed and repaired, being able to > include travel time within the 1 hour minimum. Otherwise, the $15/hour I > make for beyond the included 3 hours surely pays for the $5 - $10 in > mileage > they would use (until I have my own vehicles). > > Everything is manual at the moment because there just isn't the volume, > but > I can't see the minute I spend entering into QuickBooks taking that much > time or money to bill them, pay the employee, etc. > > There haven't been many things that I've encountered that I haven't been > able to fix quickly. I know at least one other person that is about as > smart as myself and they'd be tickled pink with $10/hour. I greatly > prefer > people that have gained their knowledge outside of formal > education. After > going through college, I would have only hired 2 people in my class of 30 > (myself included) due to information absorption and retention rates. > College just trains you to expect more than what you're really worth. > > etc. > > If we're going on 100 billable hours of work a month, that's 33 customers, > > assuming they actually need my services that month. I've only been doing > this a couple months, but I really don't think I'll be needed > much. They're > paying for something they may not utilize, but have on reserve. 33 > customers would be almost $60k/year. That leaves me $15k/year to cover > all > of those other, misc expenses. If I can't do that, I have bigger problems > to deal with. > > Maybe I'll kick up my rates 25% or so, but $80 or $120/hour, IMNHO is just > > screwing the customer. > > > ----- > Mike Hammett > Intelligent Computing Solutions > http://www.ics-il.com > > > ----- Original Message ----- > From: "Clint Ricker" < [EMAIL PROTECTED]> > To: "WISPA General List" <wireless@wispa.org> > Sent: Wednesday, August 15, 2007 4:30 PM > Subject: Re: [WISPA] Managed IT Service > > > >I don't see any possible way that you're making any sort of actual profit > >on > > this (or even really breaking even) at this rate, unless you've got some > > redicuously cheap labor.... > > > > Consider this... > > If you're doing $40 an hour, and you had a full time person billing 100% > > of > > the time (ie 168 hours per month), then you'll max out for that employee > > at > > about $80,000 of revenue....you then have to pay taxes, mileage, > > insurance, > > etc... > > > > Now, take into account that a single full time employee doing this full > > time > > in reality will never do more than 100 billable hours a month... > > This is from experience and even assumes that you're fairly streamlined > in > > terms of paperwork, supplies, travel routes, etc... > > > > This means, at $40 per hour, you'll only pull in $48,000 per year in > > revenue > > for that full time employee....assuming you have a streamlined > operation. > > There's no room in there to pay them, pay taxes, pay mileage, pay for > > their > > portion of office space (and other expense), pay for billing, pay for > your > > time in management, and so forth. > > > > I'd double it as a starting point if you're in a rural market, triple if > > you're urban, and probably more for people who aren't regular customers. > > > Still, a lot does depend on your market and your business model. Are > your > > employees knowledgeable? Do they really know what they are doing on > this > > stuff, or are they just fumbling through... > > > > Keep in mind, as well, that small business consulting is not too > different > > from dealing with people in the home construction / repair > industry--there > > are a lot of people who just walked off the farm, so to speak, and claim > > > to > > be in the business (no insult intended, and some of them do well). They > > aren't always the best in terms of quality, and they aren't always the > > best > > in terms of professionalism. Most businesses that have some sense pay > > more > > to get better quality...in some sense, if you price yourself higher, you > > price yourself into the good customers. You also give yourself the > money > > to > > do it well... > > > > -Clint Ricker > > Kentnis Technologies > > > > > > > > > > On 8/15/07, Mike Hammett <[EMAIL PROTECTED]> wrote: > >> > >> Does this sound fair to all parties? > >> > >> My normal rate is $40/hour, with $80/hour for emergencies. > >> > >> I charge $150/month to manage a business's network. This includes 3 > >> hours > >> of support. I also will VPN into the network and ensure that operating > > >> systems, anti-virus, etc. are updated, which does not consume any > >> hours. Additional support is available at $35/$70 per hour. > >> > >> > >> ----- > >> Mike Hammett > >> Intelligent Computing Solutions > >> http://www.ics-il.com > >> > >> > >> > -------------------------------------------------------------------------------- > > >> WISPA Wants You! 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