Sole Trader Invoice Example for Security that Simplifies Your Billing Process

Sole trader invoice example for Security

the question that I get asked most by security guard companies especially the new ones is how do I go about pricing my services many times they'll ask is X dollars per hour too much and I always respond with the same answer which is it depends so here is how you figure out your billing rate for your security guard service as you know not properly pricing your services correctly is one of the quickest ways to find yourself out of business either because one your pricing your service is too far outside the normal pricing range the buyers are expecting and no one will sign a contract with you or two you're not charging enough and you're losing money on your contract and we all know where that leads if you don't want to find yourself in either one of those positions let's talk about the proper way of pricing your contract the method that most companies start out with is what I'll call a simple market pricing with simple market pricing what companies do is take how much they're paying their security officers and mark the number up you know X percent so if they're paying their security officers $15 an hour they might mark that number up 50 percent and have a billing rate of 20 to 50 the problem with that pricing methodology is that you're doing nothing but guessing about what your price should be and if that's the method you're using right now in this very moment you're probably fifty percent forty percent thirty one point two percent confident and how you price your contract or what your competitors pricing is if I'm right please raise your hand okay okay it's way too many of you to count so let's talk about the proper way to price a contract and that is using cost plus pricing cost plus pricing is a pricing method where a fixed percentage is added on top of the cost to produce one unit of a product the resulting number is the selling price of the product in your case the product is one hour of security guard service so what are the cost to produce one hour of security service to calculate your billing rate you have to take into account everything that goes into putting a security officer on site for an hour those things include officer pay rate training wages holiday wages vacation pay FICA tax food attacks suit attacks life insurance medical coverage workers compensation insurance general liability insurance CPR training refresher training drug screening uniform cost background check cost vehicle insurance vehicle registration fuel call literally everything that goes into putting that officer on site there are a lot of calculations that go into determining your billing rate but ultimately you're trying to determine what each one of those cost hour per hour once you have those cost you add them up to get your total direct expenses and once you have your total direct expenses you can tack on your profit margin on top of that number to get a billing rate that makes sense let's take a look at a couple of simple examples to get you started so let's say we're starting with a wage rate of $15 an hour to that wage rate let's add your FICA tax which at the time of this recording is seven point six five percent seven point six five percent of $15 is a dollar and fifteen so your billing rate is now your wage rate of fifteen dollars and FICA tax of $1 fifteen which is sixteen fifteen next let's add in your statement employment tax which we'll say is two point five percent two point five percent of fifteen dollars is 38 syn now your billing rate is $16.53 that process goes on and on for all of your insurance taxes etc if you don't know what those numbers are you can contact your CPA and your insurance company to get those numbers next you'll want to move on to your direct expenses like uniforms security guard management software cell phones etc to calculate those costs per hour you'll have to do a little more math so let's say you want to use officer reports calm at the client side because you aren't trying to run a security guard company without officer reports calm right because that's just as bad as guessing what your billing rate should be click the link above to check out officer reports comm do it now click officer reports comm charges you $50 per month so over the course of a year that comes out to about six hundred dollars per year next you'll want to calculate the total number of hours per year for the contract let's say the contract is twenty-four hours a day seven days a week that equates to one hundred and sixty hours per week or eight thousand seven hundred and thirty six hours per year now you simply divide six hundred by eight thousand seven hundred and thirty six and you get seven cent per hour so now your billing rate is $16.60 the last example that we'll take a look at is uniforms for your uniforms you'll need to look at the total cost of your uniforms across all of your personnel at that site and estimate how long those uniforms will last first calculate your uniform cost per officer let's just say that amount is $100 props on a hundred and sixty eight hour per week contract let's say you'll have five officers so in a one year time period your uniform cost for that site will be five hundred dollars so now you divide the five hundred by eight thousand seven hundred and thirty six hours to get six cent per hour add that to your billing rate and now you're at $16.66 per hour let's just say $16.66 is your fully loaded cost for your billing rate once you have that cost you'll then add your profit margin to that number generally speaking although there are some outliers in the security industry profit margins range from mid single digits up to low double digits once you add your profit margin you now have a fully burdened billing rate that you can be confident [Music] there are a lot more elements that go into pricing your services like turnover depreciation on billable overtime but I won't get into all of those elements because this could be a two to three hour video and we're currently developing a pricing tool to help simplify all of this for you if you're interested in being notified when that tool is ready please click the link in the description box below I hope this video was able to share some light on how to properly price your security guard service in summary you should not be using simple market pricing because one you could be pricing your services too far outside the normal pricing range that buyers are expecting and no one will sign a contract with you or two you are not charging enough and you're losing money on your contracts the correct pricing method for security guard service is cost plus pricing cost plus pricing is a pricing method where a fixed percentage is added on top of the cost of one hour of security guard service and that's the end of video number eight if you're thinking about starting a security guard company and you find this type of information helpful then please subscribe and click the notification bill to make sure that you are alerted as we introduce new videos in the series lastly if you have questions or comments please leave them below because I try to respond to all comments and questions that I get on to the next video [Music] you