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The cost of doing business

April 11, 2012

I am a small business owner. My company has serviced industrial machinery for the last 20 years. For every dollar I pay an employee in hourly rate (current top rate is $25.00/hr, worth over $70,000 with overtime), I pay another dollar in worker’s compensation insurance, payroll taxes, health insurance (I pay 100% of a plan that matches my RN wife’s plan with the same carrier at a teaching hospital, cost to me over $1400/month for a family plan), and company IRA. So, before I earn a dime to pay for the company truck that they take home (no transportation cost to get to work), pay for vacation (my long term employees get 4 weeks vacation, 9 holidays, and sick time), pay for the shop, pay for the legal and accounting expenses, liability and auto insurance, and overhead (repairs on company trucks, tools, supplies, replacements for broken tools, or government mandated training days), I have to charge $60.00/hr. Add in the other costs, and I have to charge $75.00/hr for me to cover their expenses to me. I still haven’t made a dime. My pay comes from doing the same work they. In 20 years of business, I have averaged less in income than my top three employees.

The last three years due largely to the drop in business (three of my customers have gone under)  and increases in costs (taxes, fuel, insurance, and health insurance have increased by an average of 35%), in order to stay in business (I am ineligible for unemployment because I own the business but have to pay 7% of my earnings toward unemployment insurance), my pay has dropped to the lowest paid employee. My part time people make more than I do. Ultimately, I had to lay off three employees because I couldn’t earn enough through my billable hours or money I could borrow to pay them.  When I laid them off, my ex-employees were convinced I screwed them and tell everyone that I did. Currently,  I am struggling to reinvest in equipment and new types of services to rebuild the company.  Fortunately, I have a second business and a wife that works, so I don’t have to depend on this one.

So, when you complain about no jobs, start a business and learn what business owners go through, before you complain. Oh yeah, according to the government, thanks to my wife and I both working hard at two jobs, we are almost rich enough to have to pay the Alternative Minimum Tax.  To top it off, we only avoid being part of the 1% because my other business has two partners that spreads the sales of the LLC over three families.

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