This video will guide you through the process of adding your crews to the labor catalog. This screen will help you calculate the true cost and correct price for each one of your crew types.
In this video, we will cover:
- How to setup your crews using the labor catalog
- How to calculate average crew wage
- How to calculate your overtime factor for crews
- How to calculate your unbillable time factor for crews
- The true hourly cost of your crews
- Adding overhead to your labor costs
- Calculating the right hourly rate for your crews, covering all costs and overhead
- Setting a custom profit margin for your hourly rates
- Setting a custom price for your hourly rates
Setting Up the Labor Catalog
The purpose of this article is just to give you a quick overview of the Labor Catalog within your Item Catalog.
Labor Catalog Information
- The labor catalog is used to calculate your hourly rate(s) for your labor on estimates. This calculation will include all costs as well as your overhead recovery markup and profit margin from your budget.
- Your Default Budget, Overhead Recovery % and Profit Margin will be featured at the top of the page.
- We typically suggest setting up your labor in Crews, since you will not necessarily know exactly which of your staff are going onsite during the estimating phase.
- For work that is done individually (ie. Snow), we suggest setting these labor items up individually by Staff Type - not by individual staff member (ie. Snow Plow Operator and Snow Laborer).
- To add a new labor item, click +New.
- You will be taken to the Edit Labor Item page shown below. From here, add in the fields as recommended below.
- Name: Start by setting up your labor item's Name. You don't need to setup each crew in your company, but you'll likely want to setup each type of crew, as different crew types tend to get paid different wages.
- Units: This will defaulted to Hours.
- Description: We suggest adding a description here to advise how many of each type of employee are included in your crew (ie. 1 Foreman, 3 Laborers).
- Internal Notes: Optional, any text added here will be displayed in the description part of job planners.
- Sales Tax: This will be pre-populated from your Default Tax selections. If you have not already setup your Default Taxes, we highly recommend you do this before proceeding with Estimating. Please click HERE for more information.
Cost + Breakeven Calculator
- Average Wage: This is the average wage per man, per hour for this crew (not including labor burden). Click the calculator button beside the average wage field to pull up a list of employees from your budget. Then fill out the count column (e.g. 1 Foreman, 3 Laborers) to let LMN auto-calculate the average wage for this crew.
- Overtime Factor: Will automatically be calculated for your crew after you add your staff in (as shown above). This calculation is based on the Overtime Hours indicated in the Field Labor tab of your budget.
- After you've selected your crew, click OK.
Cost + Breakeven Calculator
- Unbillable Factor (%): Unbillable factor is to cover the costs of payroll hours that aren't estimated to customers. Unbillable % typically range from 10% (for companies who include all their setup/driving hours in their estimates) to as high as 35%. For more information on calculating your Unbillable %, click HERE.
- Labor Burden: This is read from your budget. It's the default % to add to employees' wages to cover payroll taxes, worker's compensation, unemployment insurance and another payroll expenses over and above their raw wage. For more information on Labor Burden, click HERE!
- Overhead Markup: This number comes direct from the budget you are using and will change as you switch your default budgets. This number is how LMN needs to markup your labor costs to recover labor's share of your company's overhead. For more information on Overhead Recovery, click HERE!
- Breakeven: This rate covers the costs of labor, plus overhead.
The price calculator has three different settings you can use to calculate the billable rate you need to charge for labor.
- Use Profit Margin from Budget: This is the default setting. LMN will use the budget you've selected and pull the desired net profit margin from the budget. This is the hourly rate that's designed to help you hit the sales goal you set in your budget.
- Set a Custom Profit Margin: Select this option if you want to force LMN to ignore your budget and use a custom profit margin. Please note: if you are unhappy with the Profit Margin indicated in your budget, it would be easier to adjust it in the budget then to set a Custom Profit Margin for each item in your catalog. For more information on increasing your Profit Margin, click HERE.
- Set a Custom Price: Select this option if you want to force LMN to use a specific billable rate per hour. Once you customize your billing rate, LMN will automatically calculate, and show you, what your net profit margin is a that rate.
Labor Catalog Important Note
Labor items are priced per man hour (ie. per man, per hour). It is essential you estimate in man hours as well.
Example 1: Mowing takes a 3 man crew 2 hours. Estimated hours = 6 man hours (3 people x 2 hours).
Example 2: Building a patio will take a 4 man crew 3 days at 10hrs per day. Estimated hours = 120 man hours (4 people x 10 hours x 3 days).