You should calculate YOUR costs, based on Budgeted Hourly Rates, and determine YOUR selling price based on that! If you do, you will start to MAKE money rather than LOSE money at varying rates.
A major problem in establishing Budgeted Hourly Rates of any operation is the fact that we all run our business differently. We all do different types of work. We have varied plant configurations. We have different markets. We have different priorities. It is difficult to provide a formula, or a magic program, which will give us all the proper management data we need. There is no universal answer that will work equally well for everyone. Therefore, you must establish your own Budgeted Hourly Rates.
Calculate your own Budgeted Hourly Rates. If you want to download a sample BHR spreadsheet, Click Here.
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Know your costs and use them in your estimating method. |
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Start to determine your own production standards. |
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Vary your markup to determine what the selling price should be. |
What is wrong with using published books and guides?
They are based on averages . . . average costs of reale state, average costs of labor, average costs of health benefits, average costs of everything. You do not want to use average costs. You want to use your own costs. You want to use your own production standards.
I have calculated Budgeted Hourly Rates for many plants. (I used to keep count of the number of plants I had done, but when I reached 100 plants, I quit counting.)
I find there are many ways of determining costs. Most common methods are the,
"Well,-I-heard-that-John-down-the-street-uses-$120-per-hour-for-his-press." method, and
"I-heard-(NAPL or GATF or PISC or PIA or PIQM)-uses-$97.50 per hour." method, and
"Last-year-we-used-$150-so-this-year-we-should-use-5%-more." method, and
and - true story - "$95.00-an-hour-seems-like-a-good-number." method. There are others of course, but you get the idea.
The spreadsheet that you may download is one that I have developed over the years. I first started calculating Budgeted Hourly Rates for plants in the mid-to late seventies. I did it by hand then. Later when spreadsheets came into being, I started using them. When I made a draft and discussed it with the owner(s) they would raise questions and make me defend my calculations. This made me constantly improve my approach.
Since then, I have helped businesses turn things around from losing money to making money. I have also (unfortunately) successfully predicted bankruptcy. Firms that do not have an accurate determination of costs are headed for unpleasant times.
If you want to take a look at what this spreadsheet looks like, click here and download a copy.