Home
Blog Archive

Thursday::Aug 22, 2024

Accountability

A

ccounting is a pretty interesting subject. When I first started my business, I was doing basically no accounting -- I just guessed how much time and materials a job would take me, invented some high-sounding pay rate, multiplied them together and charged that. All my payments, and all my costs, just went into the same bank account, and I just hoped that the amount in there would be the same or higher at the start of a new month as at the start of the one before it. I didn't really understand my own pricing, and it was very hard to tell if I was making money or not.

Turns out, what you really have to do is depersonalize all your numbers. Set up basic system that would keep track of things as if you had employees doing them -- then, if you do those things, pay yourself like an employee. For example, the business owner gets 8% of revenue, the job supervisor gets 4%, and the sales department gets 3%. I do all of those things currently, so I pay myself 15% of revenue. 10% is profit, which is not take-home pay, but money to be re-invested in the company. And, labor costs are factored into the job costs; if I'm the one on site, I get paid hourly, exactly as if I were an employee.

Seeing this all laid out really clarified things for me. I have a much better sense of how to determine my pricing, and very clear reasoning to be able to defend it. I know exactly how much money I'm making, and I know how well my business is doing from month to month. And the best part is, this template is fully convertible to things like using subcontractors or eventually employees; the structure is already there.