Calculating hourly cost

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