How do you calculate your equipment overhead?

[Tim Wilson]

[Blake Davis] “Do you have any recommendations for how to calculate the equipment overhead (maintenance, etc.) so that I can better estimate my needed pay rate for the contract negotiation?”

Have you calculated your own depreciation schedule for these for tax purposes? If yes, start there. If no, start there. 🙂

That’s the thing, though, either way. Even if you’re not itemizing depreciation, you’ll eventually need to replace everything you’ve got. Nothing tricky about that. Take the amount of money you’ve got into it, divide by the number of months before you need to replace it, and you’ve got at least a ballpark number.

Now go the other way: how much are you gonna need to be making OVER AND ABOVE what it takes you to do your job, pay your bills, and make a profit? Add that to your cost.

Some of these other fellers who are much smarter than I am may well have more thorough and more modern answers. Maybe my business model was ruled by a combination of addition, subtraction, and long division because that’s about the extent of my mathematical abilities.

(Turns out my primary use of multiplication tables is for purposes of division, rather than multiplication per se. Who knew?)

But in any case, the numbers are going to bear some relationship between how much you’ve put into your gear, how much it’ll cost you to replace, and the extent to which you can get away with your clients subsidizing it directly as an expense, rather than having to take it out of your end of the profits. That last part involves finesse, and your understanding of your client’s price sensitivity…but otherwise, the numbers are the numbers. 🙂

[Grinner Hester]

1: take your day rate and multiply it by 40.

2: well, that’s all, really.

You are giving them 12 weeks in trade for a year’s booking.