In this episode of The Building Freedom podcast, Randy talks about the labor burden rate and how most contractors and trades out there are calculating their true costs wrong because they don’t account for all the actions that they are taking but not getting paid for. To be able to charge the right amount of money for your services you first need to understand what your overheads are then divide that by the number of guys we have out in the field then add that number to their hourly rate and that gives you the labor burden rate.
OVERHEAD \ EMPLOYEES + HOURLY COST PER EMPLOYEE = LABOR BURDEN COST
Almost without fail every time a contractor or tread isn’t making money in their business it’s because they have miscalculated this formula and are not charging based on their true cost. Once you understand what you need to charge for the business to be profitable you then need to strengthen your client acquisition machine so that you have an abundance of opportunities in the pipeline, so that way if you lose a few deals it’s not the end of the world. Randy ends the podcast by tying everything back to knowing who your ideal client is. Your ideal client would be more than willing to pay a rate that allows your company to be profitable because they see the value you bring.
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