Reply by Jeff Heath

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Posted on Calculating Overhead & Shop Rate

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Jeff Heath

107 posts in 3948 days

#1 posted 05-06-2019 09:36 PM

I’ll be happy to try and help you, as I’ve been self employed for 30 years. I honestly can say I have no idea what you’re talking about, though.

It sounds like you are trying to come up with some phantom way of calculating an overhead expense of your business that doesn’t actually exist.

My advise to you is to try and not over complicate the accounting. As you said, you have fixed costs, and variable costs. The more you work in your shop, the more your costs will go up, but hopefully, so will your commissions.

Focus on what you can charge for whatever your product is (cabinets or furniture, or ?), and subtract your actual hard costs for your workshop, utilities, glue, screws, etc….and whatever is left is your labor. If you’re not making enough, and you can’t work faster, then you need to charge more to survive.

Don’t let the accounting get in the way of making your business work. Calculate your exact costs, and know what they are, and account for them. You will very quickly be able to adjust your fees if need be.

-- Jeff Heath

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