Solo/Small Business NLM

I don't have a multiplier because I don't keep track of my hours, I don't know what my wife pays me, and I don't care. Nor do I know what my owner's draw is. Note: We're both senior citizens, we are growing old together, and are the nicest old couple on the block. I mention that because not all wives (or husbands) can be trusted quite as much as we trust each other. Some of you may want to keep a closer eye on the money.

Back to the point, I estimate my lump sum contracts based upon $150 an hour for anything I do, bearing in mind everything is long paid for and we have no debts. I realized long ago that the way to make money was to charge just as much, if not more, than the big guys with heavy overhead, but give superior and faster service. That is how you maximize profit as a solo operator. Never mind the multiplier.

You made me go look.

A number of years ago I attempted to maintain a multiplier of 3 or better. For a number of reasons that became difficult to maintain. With 5 employees I consider myself a small company.

I just did some calculations (hours v. fees) for the last three years and came up with an average of 2.43. That actually allows a generous profit margin north of the 15% you mentioned.

Thanks for making me go look. I would have had no idea if it ever came up. :-S

My situation is similar to Bruce's, though not quite the same. I do have an employee, but he's part-time; his hours are getting more sporadic, though, as I rely more on 1-man tools (e.g., robotic total station, network RTK). However, it's been some years since I've attempted to calculate NLM -- I had to because it was required under a Federal contract -- and even then the assumptions were too broad to be meaningful. Like Bruce, I keep my rates in the same range as my competition (sometimes I'm higher, sometimes I'm lower), and get whatever's left when all the bills are paid. It's been working out pretty well for over 20 years now, but I never intended to expand the business in terms of personnel.

Math problem for all solo surveyors:

If your multiplier is 1.5 and you charge 3.0 then how many hours a week would you have to work?

As much as I envy the lack of headaches the solo surveyor enjoys (understanding there is a different/smaller set of headaches) I also believe the solo mentality is holding back our profession.

Pardon my ignorance and/or forgetfulness but what is NLM?

> If your multiplier is 1.5 and you charge 3.0 then how many hours a week would you have to work?

The problem is that the multiplier has to start with an hourly wage + benefits number. I don't have one, as I get whatever's left regardless of what happens.

I could say that I want an annual net profit of $X and adjust that up to account for health insurance, retirement, self-employment taxes, etc., and then guess at a number of billable hours to arrive at an hourly cost, but what's the point? I know that on some jobs I'll net more and some I'll net less, and some years I'll have more billable hours and some less, and some years my costs will be higher and some less, and in the end I net what I net.

In over 20 years now there have been a lot of good years, a few great years, and a few not-so-great years. (In the very beginning there were one or two that were very lean.) Why bother to fake in a NLM if I'm not obligated to for a particular contract?

(Note for Eric: net labor multiplier.)

NLM (net labor multiplier) = What you bill per hour "x" divided by your desired hourly pay "y".

X is a function of y+overhead+goal profit.

Very roughly: if I desire a salary of 100k/yr, and my cost of doing business arrives at an NLM of 2.0, I had better charge at least 100/hr.

Agreed as long as your rates are high enough.

This is from a local solo guy's website:

We do quality work for a good price. Being a small company, we have low overhead. Your work will be done by a licensed person-a licensed soil evaluator, a licensed sanitarian, and a licensed land surveyor. If you hire a large company much of the actual work may be done by unlicensed people (or people working toward licensures), and usually different people will handle different phase’s of a job. If your hire us you get the same person involved in all phases of the project.

Obviously a solo guy will provide the same person in all phases of the project. By the by, this guy is so busy right now he will not answer the phone. Raise your rates buddy, work smarter, not more. Volume is a corporation game, not a surveyors' game.

>By the by, this guy is so busy right now he will not answer the phone. Raise your rates buddy, work smarter, not more. Volume is a corporation game, not a surveyors' game.

I agree completely, and this is the problem I hope to have.

Reminds me of a small Ford dealership where I grew up. They charge a little more, but would rather make more to do less.

> NLM (net labor multiplier) = What you bill per hour "x" divided by your desired hourly pay "y".

Back when I started in this racket, it was around 2.5 of the wage. Having been solo for waaayyy to long, I learned waaayyy to long ago to try charge more. Tough sell these days without a specific niche.

When your bean counters, insurance, taxes, and anything else you can think up costs more than you make.... at the end of the day you still have to realize the lowballer around the corner will never go away. They do not come to this website.

There is a guy here, Larry P I think, who's opined on this many times and seems like a pretty sharp guy IMHO. At the end of the day the market will determine how much you can charge, so find that niche and there are still a few out there. Even if from nothing other than attrition.

I'll add a caveat on to Mr Small and Mr Frames astute points - do not attempt this alone. I did, been divorced & stayed single for my entire solo life. Talk about a roller coaster. Solo is only for those with an alternative income source. Just my $0.02

Good luck