I had a client ask me yesterday what my overhead rate is (and multiplier too I think). I'll be the first to admit accounting is not my strong suit, I looked up how to calculate it and ran the numbers.. I'm at 2.21 as a multiplier. Anyone care to share what your overhead rate is? Anyone know what is typical for our industry?
I'm a sole operator with one employee.. really don't pay myself a regular salary but have a office space, 3 gps units, and a robot. Am I in the right ballpark?
Any help would be appreciated, thanks!
--Edit: I prorated the cost of a new instrument and gps over 5 years, same with a truck, to get a large part of my indirect expenses.. if that helps at all.
Also, anyone know what an acceptable profit % is? I'm calculating at 15% at the moment.
All cards are being shown at this point in hopes of getting an accurate response. 🙂
After you factor in what your salary and vacation should be your rate multiplier will be lower. I am totally solo, but from when I worked elsewhere 2.5-3.5 is the range from small to large firms.
Paul in PA
3.0 is what our billable rate was based on at 2 different medium size (multiple offices) firms I worked with in the past. As far as profit goes, I say whatever you can get. We had some cost plus fixed fee work with the state and our profit was fixed at 15%.
A multiplier is just an indicator of how well your business is operating.
I've calculated a few at the places I was working to see how I stood in the food chain.
In the 70's it was about 1.8.
In the 80's it was about 1.7.
At both places I recommended that we jump to around 2.5 and be able to have better pay and equipment.
Got shot down both times and eventually left for more pay somewhere else and that put both those companies in a bind. Was not my fault they faltered, it was due to their choice of remaining the same too long.
They both used old school their whole career and wished to remain old school. Times passed them both by and left them in the dust because they would not upgrade their thinking and realize their worth.
The lower you multiplier can mean that you are more efficient in business or it could mean that you don't make enough to replace your equipment.
The higher your multiplier could be from the fact that that you operate in an expensive area to do business or it could be that you are making more profit on your work than others.
On my own from the 90's thru today my multiplier has moved up and down because it is a number relating what profit is being made.
I keep it above 2.4
There is no standard.
3.0 is always a good goal.
> ... Anyone know what is typical for our industry?
2.5 to 2.7 is typical. the 3.0 figure people are throwing around is a billing rate goal. ie/ you bill at 3.0 in order to make up for unbillable time.
> Also, anyone know what an acceptable profit % is? I'm calculating at 15% at the moment.
10% is common in government work, where the NTE number is usually high enough to be Not Exceeded. 20-30% is realistic when you are bidding fixed fee, ie/ taking the risks of not making any profit.
> I had a client ask me yesterday what my overhead rate is (and multiplier too I think). I'll be the first to admit accounting is not my strong suit, I looked up how to calculate it and ran the numbers.. I'm at 2.21 as a multiplier. Anyone care to share what your overhead rate is? Anyone know what is typical for our industry?
>
> I'm a sole operator with one employee.. really don't pay myself a regular salary but have a office space, 3 gps units, and a robot. Am I in the right ballpark?
> Any help would be appreciated, thanks!
>
> --Edit: I prorated the cost of a new instrument and gps over 5 years, same with a truck, to get a large part of my indirect expenses.. if that helps at all.
>
> Also, anyone know what an acceptable profit % is? I'm calculating at 15% at the moment.
> All cards are being shown at this point in hopes of getting an accurate response. 🙂
At my last company, I was told we had to bill at least 2.3ish to break even. The corporate guys in New York wanted 3.0 and were apparently able to get it in New York. Not so much in Florida. I'm solo now and still getting used to the pricing as a solo operator. I'm starting at around 2.0 and see how that goes.
I am probably going to get answers all over the board, but solo operators, how much do you pay yourselves that you apply your multiplier to?
From the web site "http://www.laccd.edu/news/documents/Billing_Rates_Briefing.pdf"
What is a “reasonable” overhead rate for PM/CM services?
Long-term, low-margin government construction projects generally range from 1.9 to 2.1.
Companies cannot make money with consistently lower multipliers because the company
has to pay various taxes, insurance, overhead, workers compensation ,vacations, sick
leave and so on.
Higher-end “management consultants” can achieve multipliers of 4.0 or 5.0 or higher. Most
consultants are satisfied with multipliers in the 3.0 range. A variety of industry resources
report the median range to be in the 2.5 to 3.0 range.
Read on if you like at
http://www.laccd.edu/news/documents/Billing_Rates_Briefing.pdf
AzClif
"I had a client ask me yesterday what my overhead rate is ..."
I do not answer this question for my clients.
Multiplier goals for employee/techs are different than management/senior staff due to percent billable.
Your field crew employes should be greater than 90% billable at half (or less) the salary of senior level surveyors who might be only 70% billable.
With that, it is unavoidable to have an easily achievable 3.0x for field crew staff while a principle LS only archives a 2.0x.
> I had a client ask me yesterday what my overhead rate is (and multiplier too I think).
Did they ask for a breakdown of the direct labor costs, indirect costs, and profit?
It's required information for contractors and subcontractors to submit along with the proposal when working on government projects that have federal funding under an EPA assistance program - such as most major sewer rehabilitation projects.
