3 steps to define your hourly rate
How to determine your hourly rate ? What are the elements to consider whendeveloping an hourly craftsman ? What are the different fees that will affect your rate and what margin will be available to establish an hourly rate that will ensure the viability of your business? The building craftsman gives you all the information and keys to know how to determine his hourly rate .
You just settled as a building craftsman. However, much remains to be done to start your business in the best conditions and put every chance on your side in this great adventure.
But one of the most important points is choosing the right hourly rate. You need to find the right balance so that it can cover your expenses and allow you to get a fair pay while remaining competitive in the face of competition. We’ll look at in detail how to determine your hourly rate when you are a craftsman .
Plan de l'article
- How to calculate your hourly rate?
- Estimate your salary
- Estimate the expenses of your business to calculate your hourly rate
- Setting a CA Objective
- Calculate an hourly rate
How to calculate your hourly rate?
To calculate an hourly rate , it is necessary to proceed in several stages:
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- Set a Salary Goal
- monthly Estimating the expenses of the company
- Estimation of tax and social charges related to the activity
- Take the average working time of one month (with sufficient margin to anticipate the off-peak periods that the activity may encounter)
With the first 3 points, a turnover goal is achieved to pay the wages and expenses of the company.
With this objective of CA and depending on the working hours you want to make available to the company. A tariff estimate is obtained schedule.
Of course, sufficient margins will have to be provided to deal with the hazards of activity. It will also be necessary to outsource public holidays and public holidays.
The most important thing is to set an hourly rate that allows you to enter your fees. Attention, according to Choosing your status and setting up your business, the fees can be very different from case to case.
Finally, do not neglect the tariffs applied by close competition in order to remain competitive.
Estimate your salary
When you start as a craftsman, it is difficult to correctly estimate your hourly rate. From him will depend on your salary.
So that we can work in the opposite way. Indeed, the establishment of a salary objective makes it possible to determine the hourly rate accordingly.
Be careful not to have the madness of sizes on one side, or to underestimate each other’s needs.
You should also know that at the beginning of your business it will be difficult to fill in your order book and days (unless you master the techniques to easily find sites).
The The easiest way to estimate a realistic monthly salary is to take into account the salary you pay an employer to perform your tasks. That’s the right question: how much would an employer pay for my job?
After asking yourself this question, you compare the amount obtained with the reality of the market. Your colleagues will be able to guide you on the basic salary they practiced at the beginning. This will allow you to get an idea and adjust the amount you originally considered.
In determining your rate, you will need to take into account the cost of your salary and expenses associated with operating your business. In these charges, it will be necessary to take into account both the costs associated with the company as well as social and tax charges (see according to the status of the craftsman).
Estimate the expenses of your business to calculate your hourly rate
Very important point to take into account when defining its hourly rate : expenses.
2 types of fees to consider:
- Social and tax costs related to your status and business configuration
- Your business management costs (materials and operating costs not charged to the customer)
You may have heard of ROI, VAT, CFE and other corporate taxes. So, you should not forget about them in calculating your monthly cash requirements.
It is the activity of your company that must cover all these social and tax charges. They are therefore an integral part of your calculation basis for determining your hourly rate.
For the VAT applied, everything will depend on your company. Determine a VAT free rate and add VAT accordingly to your business (see VAT rates per business in the building).
If you start on your own, it is likely that you have opted for business car status (at least for starting your business). The tax levy rates are then around 25% of turnover. Learn about pricing based on the status and configuration you have chosen.
If you have opted for employee status in a company, you will have to take into account the social security contributions of the salary. The sums can then be quickly high. Be careful to choose your status when you start your business.
Estimating the expenses of the company
When you define your business forecasts , you have planned all expenses which you will have to pay monthly to cover your business. These include rental of premises, damage insurance and ten-year insurance, heating of premises, maintenance of equipment and company car, bank charges. All these costs must be added to the previously obtained amount.
Among the expenses of the company, it will also be necessary to take into account the various costs associated with promoting your activity (website creation, advertising, network of craftsmen).
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Setting a CA Objective
Adding all previous ratings actually leads to forecasting your monthly (or annual revenue according to your calculation method).
Your CA must cover all costs, including your salary. You have to plan as much as possible by giving yourself a net salary target and setting a CA target accordingly.
Throughout the year, consider regularly revising targets to adjust certain parameters (including the proposed hourly rate) as needed in order to try to achieve your goal.
With years of experience, your hourly rate will be refined and you will find the right formula to offer a rate that will allow you to keep your business alive while remaining competitive.
It is also important to determine a minimum CA for cost amortization. This minimum NOC will represent the monthly cash receipts required to cover your expenses. This is called amortization of costs. When you reach this amount, you know that the extra money starts to be your salary.
Calculate an hourly rate
We now come to the heart of the topic: calculating your hourly rate .
As a result of this calculation, you will need to verify that it enters the prices usually charged by the profession to make sure it is consistent. Too low or too high hourly rates may not attract enough customers.
Do not forget to pay attention to your competition directly, that is, the rates charged by craftsmen in your area and even in your city.
Calculate the number of hours worked
Evaluate the number of hours you will work per month and withdraw the days you plan to take on paid leave.
If you are based on average working time in France, you will need to take into account a minimum of 35 hours per week, or 7 hours a day over 5 days.
But be careful, you’re in a configuration or you will only charge for the hours of intervention. The time spent next door, for the management of the business is not paid directly by the customer.
Thus, you will have to take into account in your calculation only the hours of intervention in the calculation. On average, an artisan who works well bills between 15 and 25 of real work per week, with more weeks busy than others.
Be careful not to overestimate your monthly hours and consider the needs of your family.
It will also be necessary to outsource the holidays and holidays you want to take during the year.
Example of calculating an hourly rate
Now, you just need to divide your forecast income from previous calculations by the number of hours monthly to get your hourly rate.
For a net salary of 3000€, you must proceed as follows:
- Taking into the account of tax and social contributions in self-enterprise: 3.000 X 1.25 = 3.750€
- Number of hours billed per month (average over the year taking into account holidays): between 80 and 100 hours
- Monthly fixed charges: between 500 and 1000€
- Minimum monthly total CA: almost 4250€
- Hourly rate: 4250/85 = 50€ excl. VAT
- Hourly rate including VAT (20%): 60€ Including tax
A well-calculated hourly rate is an undeniable business advantage. However, be careful not to lower prices too be competitive.
On the one hand, you endanger the economic health of your company if there is a problem that prevents you from working for several weeks, on the other hand, a tariff that does not correspond to the logic of the market will seem suspicious to the consumer.
Do not forget that it is important to make points throughout the year to find out where you are at your level of AcdObjectives .