Break even analysis

[atm84]

What I charge per hour, where I am based is irrelevant and none of your business. I understand how to calculate break even when basis it purely on labour. I understand how to do it based on selling a single product. Electrical contracting is different as you can sell many products as well as charging for labour. This makes calculating break even quite difficult.

 

[7029 dave]

£200 lol

 

[Octopus]

What you charge per hour needs to be derived from your target income before tax, PLUS all your budgeted overheads.

so let's keep this simple,

target income before tax £36k, overheads £6k. Equals £42k per year gross profit.

BUT you don't work 38 hours for 52 weeks so I use, for example 220 days, a year is about 260 week days before bank holidays and days off, so you need to have a target profit based on this.

not sure I can offer more help unless you put more of your cards on the table

 

[newtothis]

My location is irrelevant when asking how to calculate break even

Agreed, have you calculated your costs and categorised them into fixed and variable ?

 

[newtothis]

The op needs to provide Fixed and variable costs these can be ficticious.
the only people who need to know the actual figures are managers/ owners, someone thinking of buying your business or giving you a loan.

 

[atm84]

It's the variable costs that I'm struggling with. How do you ascertain variable costs as so many different materials are fitted. I wouldn't use staff wages as variable either. I would say that was a fixed. If I used sub contractors then that would be a variable cost. What's confusing me is trying to include the revenue and cost of materials.

 

[uksparks]

What do you want the loan for and how much are you looking at borrowing? Just wondering

 

[SJD]

Just make some assumptions eg £2k materials costs per month average, 25% mark up, invoiced at £2.5k per month. Or whatever you think realistic, so long as you can justify the values used. Then include in the calculations along with labour etc

 

[Octopus]

What do you mean be variable costs? For me variable cost is diesel, as if I don't work it could be zero, but if I worked 25 miles away for a month it could be £200 per month.

you have to make a guesstimate based on previous years. I am SE and my overheads come to about £6k per year, and this has been fairly constant for the last 5 years.

 

[newtothis]

break it down, eg staff who are paid regardless of output are fixed others are variable.

Edit: too basic sorry.

 

[atm84]

Just make some assumptions eg £2k materials costs per month average, 25% mark up, invoiced at £2.5k per month. Or whatever you think realistic, so long as you can justify the values used. Then include in the calculations along with labour etc

Thank you. I'll have a go with that.

 

[Octopus]

Thank you. I'll have a go with that.

Materials for resale are not costs or overheads!

 

[atm84]

They are variable costs

 

[uksparks]

I know it's not important at the moment, but I want to know how much he wants to borrow and to spend on what?

 

[Octopus]

They are variable costs

Parts you sell to clients are not business costs. Fuel , insurance , tools , etc are costs or overheads depending on your terminology.

My business plan assumes I buy about £1 k of materials for resale with an average gross margin of about 18 percent so I will make about £2400 per year on this

 

[Hellmooth]

Admin close thread. I'm wasting my time

You've handled this thread well.......

 

[Englishman]

I'm surprised he's had any serious answers whatsoever considering how narky he's been.

 

[HandySparks]

Thank you. I'll have a go with that.

'Materials' are going to be hugely dependent on the sort of business you're running. If you're going to be installing lots of high value equipment, you might make a significant part of your profit on materials. On the other hand, if you're mostly doing EICRs and fault finding, you may make nearly nothing on materials.

 

[Englishman]

I think knowing what you're charging and taking time over quotes is hugely important as well.

 

[atm84]

Parts you sell to clients are not business costs. Fuel , insurance , tools , etc are costs or overheads depending on your terminology.

My business plan assumes I buy about £1 k of materials for resale with an average gross margin of about 18 percent so I will make about £2400 per year on this

Of course they are costs. They are variable. The more business you do, they vary. I've got the info I need so cheers