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Let's say that I have a small contract carpentry business with 1 partner. I've calculated a base "shop rate" of $45/hr, based on expenses + profit / hours, where expenses includes both of our desired salaries, materials, etc., and hours is our sum total billable hours.

Now let's imagine we take on a job that's going to take both of us 2 days (~12 billable hours each) to complete working together at the same time.

I realize this is probably a stupidly simple question, but... Do we charge $45 x 24 for this job? Or rather, we should charge shoprate * manhours and not shoprate * clockhours right?

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If your shop rate is $45/hr, for every hour a projects is in your shop, the customer owes $45.

It doesn't matter if one person is working on the project, or two, or 20.... the rate for every hour is $45.

Imagine if you took your car to a mechanic and he quotes you $45 an hour as the "shop rate" for labor. He fixes the car, tells you it took 2 hours. Great 2 hours at $45 is $90 in labor... then he hands you an invoice for $270 in labor. When you question the amount for 2 hours, he tells you.. "oh, I had 3 guys working on it". Would you be okay with that?

You calculated your rate based on BOTH salaries. So the rate already factors in BOTH of you.

You increase revenue by having more projects in the shop at any given time. A wise use of a partnership would be for each partner to work on independent projects allowing for at least 2 concurrent billable cycles. You actually decrease your earning if you both work on the same project. Not only because you can't take on any additional projects but because you complete the existing project much faster resulting in less billable hours.


Honestly, value-based or project-based pricing are better models in many instances.

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