How Contractors Can Calculate Their Billable Hour

Contractors often ask us, "How do we set our billable hour?"
Well, we've got the answer for you! In this video, Matt Koop, Vice President of The New Flat Rate, breaks down how contractors can calculate their billable hour in order to succeed and maximize company efficiency.
Want to learn more about The New Flat Rate? Visit our website: thenewflatrate.com
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[@DonnTarris]

You're describing this as if it were a one employee company. The 80 percent that you're not paying to the employees, when you have more than one responsible for bringing in billable revenue, builds as an aggregate total the company brings in as revenue. It would be good to get feedback from an accountant on how to calculate an hourly rate to support the business.

[@NewFlatRate]

Hi Don, Thanks for your feedback. We always say asking a professional, whether an attorney or accountant, for input when making company changes, is a good idea. However, in this case, I consider myself a financial strategist more than an accountant. As far as the one-truck view, that is not correct. If our goal as an industry is to keep field labor below 20%, then it's important to know you can only turn 30% into 20% by adding volume because expenses keep rising with growth. As your company grows to multi trucks, the overhead climbs at a very rapid rate. Because you have new levels where you have to add additional levels of office staff and management, you have to force overhead to increase. This is also a big reason why so many companies out there, from one truck to multi-truck, struggle even to turn a 10% profit by year's end. These numbers come from us working with 1000s of companies over the past 12+ years and seeing what seems to work and what doesn't. But by all means, every company is in charge of how they want to price jobs, etc. It's just critical that everyone understands that if you are not profitable with one truck pricing the way you are, you'll never be profitable with 20 trucks pricing the same way. Thanks again for your time, and if you would like to discuss any of this further, I'm happy to chat or call. Good luck 🍀

[@DTSupstateNY]

The more field employees you’re able to charge less.. I believe your looking at this all backwards bud. Here’s simple math. Think 1 guy with 50k over head, compared to 100guys with 1M over head. ( BTW.. field workers are not overhead). Let’s call it 2,000 HRs a year each man can work. So now let’s think there’s you with 2,000hrs to make 50k (I’ll remind you again just using simple numbers okay. It should be more like 150k paying your self 100k) and you have 100 men with 2,000hrs needing to make you 1M. I think you get the point now 🤷‍♂️ 😂