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Drafter Employee Hourly Wage Mark-up Factor?
2

Drafter Employee Hourly Wage Mark-up Factor?

Drafter Employee Hourly Wage Mark-up Factor?

(OP)
Hi All,
I run a drafting service business in NYC, and up until this point I've been doing all the work myself as a no-employee sole proprietor. Now however I've run across a few larger projects to bid, and would need to hire a CAD Technician employee in order to complete the projects. I would like to include all the costs associated with an employee in my bids, but I don't know what mark-up factor I should multiply his hourly wage by. For instance, when I was an engineering employee for a firm in Manhattan, I believe their mark-up for my hourly rate was a factor of 2.1. Of course they had allot of overhead. I have little overhead, and I'm just learning about all the taxes and insurances that I'd be responsible for, so could anyone recommend a mark-up factor for my situation?

Sincerely,
Brian

www.DraftingServices.com

RE: Drafter Employee Hourly Wage Mark-up Factor?

Easier said than done but you'd be better off finishing learning about the taxes, insurance, vacation/holiday pay, employment law... and then setting your overhead at a realistic figure specific to your circumstances rather than using some ball park 'mark-up' factor that may cause you to lose money by underbidding or to lose jobs due to over bidding.

There are payroll services and the like that may be able to do some of this for you.

Posting guidelines FAQ731-376: Eng-Tips.com Forum Policies http://eng-tips.com/market.cfm? (probably not aimed specifically at you)
What is Engineering anyway: FAQ1088-1484: In layman terms, what is "engineering"?

RE: Drafter Employee Hourly Wage Mark-up Factor?

(OP)
Good points, but still isn't there a factor that could get me on my way?

Also, these drafting projects are short term (2 months in duration for two people), and I'm the small company who has been invited to bid. Therefore, even if I bid high, I'd still probably come in lower than some of my competitors.

www.DraftingServices.com

RE: Drafter Employee Hourly Wage Mark-up Factor?

Your factor depends on lots of things, but in general a 2.1 multiplier is rather low.  I would use somewhere between 3 and 4.  The other way is to find out what a prevailing hourly billing rate is for those services in your area and work backward.

RE: Drafter Employee Hourly Wage Mark-up Factor?

1.75

That's what everyone in this neighborhood uses.

RE: Drafter Employee Hourly Wage Mark-up Factor?

Have you considered hiring drafters thru an agency?  They take care of payroll, and you don't have to lay them off when your project is done.  An agency will tell you what hourly rate to charge the agency, and then you can mark up what you feel is appropriate.

For in house work, our bill rates are about 2x the salary rate.

RE: Drafter Employee Hourly Wage Mark-up Factor?

2
2x the salary is probably on the low side.  If you are just doing a time and material billing, then that may be fine.  However, if you are giving a hard # bid, then that is pretty low.  Even though most people are paid for 2080 hours, you only get about 1930 hours due to vacations / holidays / sick time / etc.  Then, you have to figure in your part of the payroll taxes (about 8%).  Then, you need to figure in the added costs to your overhead.  Do you need to provide software / computer for the employee?  What is the replacement costs on these as that is also factored into your pricing.  There will likely also be extra utility costs, equipment, space issues...what about any extra liability you have with the employee's work?  Will that raise your insurance?  Another thing to consider is that you are now going to have to review the work of another as their work will affect your reputation, so that will cut down on your production time.  This needs to be factored in to the equation.

I was always taught that if you are in a role of production, that if you are not producing 2.5-3x your salary, then you are not profitable to the company.  As an employee, that is what I always would strive to do.  As an owner, that is what I look for in evaluating the employees I have had in the past.

I hope that gives you some things to consider.

Travis Mack
MFP Design, LLC
www.mfpdesign.com
 

RE: Drafter Employee Hourly Wage Mark-up Factor?

What Travis Mack said. Plus factor in NY, location matters.
Best would be see what other set companies charge, if you can find that out in your area.

Rafiq Bulsara
http://www.srengineersct.com

RE: Drafter Employee Hourly Wage Mark-up Factor?

Drafters out here are marked up x3-4, most likely x4 for projects they know they will get.  This is under the assumption a drafter makes around $25/hr.

I would also factor in the new health care bill passing for hiring someone too.  I have trouble with the idea we will need to start hiring people sooner than later.

Civil Development Group, LLC
Los Angeles Civil Engineering specializing in Hillside Grading
http://www.civildevelopmentgroup.com
http://www.civildevelopmentgroup.com/blog

RE: Drafter Employee Hourly Wage Mark-up Factor?

(OP)
Dear All,
Thank you for the invaluable feedback. The mark-up factor obviously varies hugely from company to company (1.75x to 4x). To me it seems unfathomable to mark-up 4 times a Drafter's salary. I'm not saying that 4x is wrong, but just large. That would seem to create serious profit, and I'm surprised that the market bears it.

Sincerely,
Brian

www.DraftingServices.com

RE: Drafter Employee Hourly Wage Mark-up Factor?

It evens out when higher paid engineers are not exactly charged at 3 or 4X.

 

Rafiq Bulsara
http://www.srengineersct.com

RE: Drafter Employee Hourly Wage Mark-up Factor?

testrun,

There are quite a few cost factors often not included in the thought process to hiring someone... they may not apply in your case, hence the reason for not immediately thinking of them.  It costs money to rent the roof over the extra person's head... I often hear figures discussing the "square footage cost" of an employee.  You need to heat/cool that extra space.  You need to include group insurance plans.  You need to pay some of their taxes.  Etc., etc.

It's not as simple as "I owe anther 8% of their salary in taxes.  Again, if you already have the open desk, this may seem irrelevant to you, but imagine a company dealing with tens or hundreds of employees... that square footage quickly adds up to millions of dollars per year.  4x the pay rate isn't as outrageous as you might think when including the extra stuff, particularly when you consider what Rafiq said, that the engineers aren't charged at 4x!

Dan - Owner
http://www.Hi-TecDesigns.com

RE: Drafter Employee Hourly Wage Mark-up Factor?

The range of 1.75 to 4 x mark up is probably down to the size of companies. Small companies can successfully work on much smaller margins as they are generally much tighter ships and have few non revenue generating staff , think IT, HR, sales, reception staff, etc.

Back to the OP, you say this is a two month contract. Well assuming you need to go and buy two mid range CAD packages ad two mid to low rage workstations including monitors etc that is probably around £20K, do you expect to make that back in two months or is this more of a long term plan? Most capital investment is seen as a 1-3 year return and write off, how are you seeing it?

Also how is your cash flow or personal wealth? If this is a two month project and you don't have part payment terms (you might have I don't know) you also need to factor in the cost of paying two extra people for two months with no extra revenue as well as extra costs for new equipment, assuming you have a large enough office space already. If you have this money put by you only need to get a better return than you could by having it in an account somewhere say 1-2%, however if you need to borrow it you will probably need to factor in around 10% interest plus set up costs and also be aware that this will need to be secured against personal possessions, usually your house.

Going from being a sole trader to even employing two people is a big step in any businesses development, get it right and you are another rung up the ladder get it wrong and the consequences can be major. Whilst you seem to be getting sound advice from other posters on here I would strongly recommend you seek professional advice before doing this.

Good luck.
 

RE: Drafter Employee Hourly Wage Mark-up Factor?

we bill our drafters out anywhere from $70 - $90 per hour and not in NYC. Depends on the skill level of the drafter. I don't know what drafter wages are, but figure they are about $20 per hour plus benefits. Benefits include vacation, paid holidays, medical insurance. We provide office space, computers, software etc. So that works out to about 3 - 4 multiplier.

RE: Drafter Employee Hourly Wage Mark-up Factor?

(OP)
Thank you everyone. I've been monitoring the thread, and it has continued to be eye opening. I feel so much more equipped to bid larger (than normal) projects.

www.DraftingServices.com

RE: Drafter Employee Hourly Wage Mark-up Factor?

ajack1 has some good advice.  I have a buddy who is temp working as a basic drafter designer at a 3 man architect shop.  The architect can't meet payroll ever, and is late by at least 3-4 weeks.  Obviously you are either extremely lucky if you can keep someone, or only going to rotate in and out the worst of the worst.

You are obviously running a small office or out of your garage so the SQ. FT. issue is a nothing.  Though that can become huge once you get I think above 4+ people, as you may need an office that can handle that size.

So what did you end up doing?  I am curious as I think we are on the brink of being small to get good sized jobs, but maybe too small to get the rainmakers.  I just really don't want to teach someone we hire who just nods yes I understand but doesn't know how to double click Autocad.

Civil Development Group, LLC
Los Angeles Civil Engineering specializing in Hillside Grading
http://www.civildevelopmentgroup.com
http://www.civildevelopmentgroup.com/blog

RE: Drafter Employee Hourly Wage Mark-up Factor?

You also have to factor in the software that will be used.  If this is AutoCAD or some other basic 2D app, your factor might be lower than someone using 3D CAD application with requires more overhead to maintain (file management just for starters).  In my experience, wages are also substantially higher for any 3D CAD job, even just for drafting.

Matt Lorono
Lorono's SolidWorks Resources & SolidWorks Legion

&

RE: Drafter Employee Hourly Wage Mark-up Factor?

(OP)
@brandoncdg
Yes, ajack1 (and others too) offered excellent advice. As for your question: All things considered my overhead is still minimal, so I used a multiplier of 2 on hourly rates to bid the project. ...As for my source of employees, I know some people who I 1099'd with back in the day who would be willing to work for me as temp employees, so that's how I'd handle getting qualified laborers.

www.DraftingServices.com

RE: Drafter Employee Hourly Wage Mark-up Factor?

Do you realize that if you charge just 2x I could outsource our work to you for us to all make good money?  It's an interesting concept that could actually work better than most may think.  So now I am curious what do you charge for a drafter/designer?

Civil Development Group, LLC
Los Angeles Civil Engineering specializing in Hillside Grading
http://www.civildevelopmentgroup.com
http://www.civildevelopmentgroup.com/blog

RE: Drafter Employee Hourly Wage Mark-up Factor?

Brandon,

Define "good money".  At 2x, I haven't begun to pay the bills, which means you make out like a bandit and I am left with a loss.

Dan - Owner
http://www.Hi-TecDesigns.com

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