# payroll costs?



## Ghillie (Dec 20, 2008)

I am working up some spreadsheets to analyze business costs for next year and would like some input.

We have a chance to bid some big contracts and I want to use the spreadsheets to help figure out the advantages/disadvantages in full time employees.

At the present time we only have the general partners and two sub-contractors that work for us so payroll costs are an unknown variable for me.

I am estimating that for the first year in Ohio, our work comp rate will be close to 40% with it coming down to a lower rate of 20% after that year.

I am looking at having 2 part-time employees starting at ~$10-$15 per hour with 1 full-time employee at $15 an hour serving at times as a foreman.

I feel very much in the dark on this subject and hope to get some nudges in the right direction.

Fred


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## trimmmed (Dec 20, 2008)

Who are the customers in the big contracts, municipalities?


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## Major Wood (Dec 20, 2008)

40% Workmans Comp!!!???? you might as well file for bankruptcy now. Checkout the Ohio BWC web site to get an idea of your initial rating. Unless I'm mistaken I don't think there is any profession in Ohio that has that high of a rating.


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## BlueRidgeMark (Dec 20, 2008)

Fred, for about 2 1/2 years I did pricing and proposals for the engineering company I worked for. While the actual percentages would be different, the formulas are the same, and may NOT be what you think! For example, a markup is a different animal than a gross margin. You really need to understand both.

If you like, PM me with your email address and I'll send you a spreadsheet that you can adapt, along with some slides from a presentation I did for our sales force, to try to help them understand the issues.

You already know that the cost of employees is higher than what you pay them, due to taxes, medical benefits, vacation pay, etc. That difference is called "burdening". In our company, it ran around 30%. Your number will probably be different. You are going to need to nail that number down carefully - it will make you or break you.


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## pdqdl (Dec 20, 2008)

My "burdening" is about 25% for lawn workers. If I consider "tree wages", It goes up dramatically.

See if you can get away with entering your ground men in the Workers comp category of "Park NOC". It will save a bunch of money. If you just ask your insurance agent what category to put them in, he is not likely to allow that.

Regarding workers comp rates: several years ago, I was paying almost 100% of payroll on tree wages. I would be surprised if you ever got down to 20%.


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## Ghillie (Dec 20, 2008)

Major Wood said:


> 40% Workmans Comp!!!???? you might as well file for bankruptcy now. Checkout the Ohio BWC web site to get an idea of your initial rating. Unless I'm mistaken I don't think there is any profession in Ohio that has that high of a rating.



This post in "work comp you got questions, i got answers" thread. This is the info I was basing forty percent on. I didn't have 40% nailed down as it would be a variable in the spreadsheet to change figures in year to year projections.

In your experience, what are more reasonable numbers for say.... $200K in payroll?


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## Ghillie (Dec 20, 2008)

trimmmed said:


> Who are the customers in the big contracts, municipalities?




Electric & Gas Co-op.


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## Ghillie (Dec 20, 2008)

BlueRidgeMark said:


> Fred, for about 2 1/2 years I did pricing and proposals for the engineering company I worked for. While the actual percentages would be different, the formulas are the same, and may NOT be what you think! For example, a markup is a different animal than a gross margin. You really need to understand both.
> 
> If you like, PM me with your email address and I'll send you a spreadsheet that you can adapt, along with some slides from a presentation I did for our sales force, to try to help them understand the issues.
> 
> You already know that the cost of employees is higher than what you pay them, due to taxes, medical benefits, vacation pay, etc. That difference is called "burdening". In our company, it ran around 30%. Your number will probably be different. You are going to need to nail that number down carefully - it will make you or break you.



Thanks for the offer Mark, PM sent.


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## Ghillie (Dec 20, 2008)

BlueRidgeMark said:


> Fred, for about 2 1/2 years I did pricing and proposals for the engineering company I worked for. While the actual percentages would be different, the formulas are the same, and may NOT be what you think! For example, a markup is a different animal than a gross margin. You really need to understand both.
> 
> If you like, PM me with your email address and I'll send you a spreadsheet that you can adapt, along with some slides from a presentation I did for our sales force, to try to help them understand the issues.
> 
> You already know that the cost of employees is higher than what you pay them, due to taxes, medical benefits, vacation pay, etc. That difference is called "burdening". In our company, it ran around 30%. Your number will probably be different. You are going to need to nail that number down carefully - it will make you or break you.



I am also using spreadsheets to help me with estimating and job profitability analysis afterwards. I have some rough drafts but have not implemented them as of yet.

I am trying to get a figure nailed down for actual costs of every job. Then I'll have a figure to put in as an overhead cost. Then I would adjust markup to fit the individual market on top of overhead.

With these spreadsheets, I want to be able to go to a job and *KNOW* what it is going to cost me to do the job (including paying someone to finish the job if i get hurt). ie... a job is going to take a crane operator, an aerial operator and two groundmen 6 hours to do the job. If able, I will be either the aerial or crane operator, but I have that as a cost in the estimate in case I have to pay someone else to do it.


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## ozarktreeman (Dec 21, 2008)

BlueRidgeMark said:


> Fred, for about 2 1/2 years I did pricing and proposals for the engineering company I worked for. While the actual percentages would be different, the formulas are the same, and may NOT be what you think! For example, a markup is a different animal than a gross margin. You really need to understand both.
> 
> If you like, PM me with your email address and I'll send you a spreadsheet that you can adapt, along with some slides from a presentation I did for our sales force, to try to help them understand the issues.
> 
> You already know that the cost of employees is higher than what you pay them, due to taxes, medical benefits, vacation pay, etc. That difference is called "burdening". In our company, it ran around 30%. Your number will probably be different. You are going to need to nail that number down carefully - it will make you or break you.





blueridge been trying to work on my own spreadsheet,nothin good coming of it.
i,ll pm my add,send example to me if you dont mind.


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## pdqdl (Dec 22, 2008)

The problem with overhead calculations is that they are based on somewhat fixed expenses divided among completely speculative estimates of work to be done.

The more work you do, the cheaper the overhead, the cheaper the operation costs for any machine, and (presumably) the more efficient your crew will be. If you establish your operating costs based on what you ARE doing, then you're prices will be too high to be competitive (unless you have excellent salesmanship). 

If you set your prices around overhead expenses that are not supported by the abysmal sales you are closing, then you are probably setting yourself up to go broke in a hurry.

I would suggest getting some industry standards for each relevant expense that you are anticipating, then try bidding & budgeting off the "industry standards". If you keep good notes, you will be able to establsh your own company figures, and fine tune with some real numbers.

Complicated? Sure. That's why Harvard and all the other colleges sells so many MBA's. There is a need for those skills, and it ain't easy to learn.


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## trimmmed (Dec 22, 2008)

Ghillie said:


> Electric & Gas Co-op.



Ok, nevermind not sure they are the same. Around here, to bid municipal work, your company needs to be paying union scale.


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## Jacob J. (Dec 22, 2008)

Major Wood said:


> 40% Workmans Comp!!!???? you might as well file for bankruptcy now. Checkout the Ohio BWC web site to get an idea of your initial rating. Unless I'm mistaken I don't think there is any profession in Ohio that has that high of a rating.



Out here in Oregon it's a flat rate of 36% for timber falling contractors, 40% for the first year for guys just starting.


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## Ghillie (Dec 23, 2008)

pdqdl said:


> The problem with overhead calculations is that they are based on somewhat fixed expenses divided among completely speculative estimates of work to be done.
> 
> The more work you do, the cheaper the overhead, the cheaper the operation costs for any machine, and (presumably) the more efficient your crew will be. If you establish your operating costs based on what you ARE doing, then you're prices will be too high to be competitive (unless you have excellent salesmanship).
> 
> ...



I think that I am trying to do exactly what you are suggesting. One advantage to doing several spreadsheets (IMHO) is you can be constantly evaluating your profitability and (hopefully) correct little errors before they become big ones. Just changing a couple of numbers by a small percentage will change your outlook drastically.

I know that good, sound skill sets and a strong work ethic are not sure fire success stories. It takes planning and constant re-evaluation.

I appreciate all of the input and hope my questions get more focused (and intelligent) as I take more and more of the guesswork out of the equation.

Be safe,

Fred


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## treepro (Jan 5, 2009)

*How to Get Municipal Work?*



Ghillie said:


> Electric & Gas Co-op.



We have been looking into getting some municipal contracts, but haven't had much luck on finding information. How do you all find information on what is required and how to get these contracts? We are a legit corporation with licenses, insurance, 3 full time crews, etc. Any help would appreciated.

Thanks.


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## treepro (Jan 5, 2009)

*Lower Workers Comp Rates*

Not sure about where you all live, but here after the first year or two we were able to apply for a self insured fund. It cut our rates dramatically. We pay around 6%, but that is a little deflated because our landscape rates are lower than tree rates.

Find a good, knowledgeable insurance agent and ask them if this is an option for you.


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## Ghillie (Jan 15, 2009)

treepro said:


> We have been looking into getting some municipal contracts, but haven't had much luck on finding information. How do you all find information on what is required and how to get these contracts? We are a legit corporation with licenses, insurance, 3 full time crews, etc. Any help would appreciated.
> 
> Thanks.



This opportunity was "right place-right time" but I don't think it is going to pan out.

I look at it as a learning experience that will make me that much more prepared the next time an opportunity arises.


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## John Paul Sanborn (Jan 17, 2009)

FWIW the state pool W/C starting rate, for tree work, is just under 22% last I looked.


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## OLD CHIPMONK (Jan 17, 2009)

Tree work is around $68 per hundred payroll for W.C.. It's a tough road we travel down.


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