In the conducting of a business there are sundry items - such as rent, light, fuel, clerk hire, bookkeeping, stationery, delivery horse and wagon, advertising, display, salary for the contractor and uncollectable bills - which are charged against the business and are as much items of expense to charge against the several contracts as the fixtures that will be installed in the several buildings.

The only question to determine is the exact amount which must be charged against each operation. Contractors who have been in business for a few years know about what percentage their operating expenses are of the gross amount of work performed, and allow that percentage when estimating new work. For instance, if the annual operating expenses tabulate about as follows:

and the volume of business per year amounts to $50,000, the operating expenses would amount to 6 4/10 per cent. of the business contracted for, and, in estimating new work, under the item of operating expenses an allowance of 6 4/10 per cent. of the estimated cost of the work should be made. If this allowance were not made, and 10 per cent. profit were figured on the operation, the actual profit earned would be less than 3tV per cent., for the other 6 4/10 per cent.

would go to defray the operating expenses of the business.

When a contractor starts in business he has no means of knowing just what his operating expenses will be. However, he can make a pretty fair calculation, basing his estimate on the monthly expense he is then operating under. Rent is one of the main items of expense, and this, together with lighting, heat, horse and clerk bill, he can approximate fairly close - so close, in fact, that he cannot go far astray.

The main point to emphasize is the necessity of adding to an estimate a certain percentage to cover the cost of operating the business. If the operating expenses are costing the contractor 10 per cent., and, making no allowance for this, he adds only 10 per cent. profit to his bill, he will find to his sorrow that he has performed the work without profit to himself. The following items will be found to include the chief operating expenses of a business:

Salary for the contractor.

Salary for foreman or superintendent.

Salary for bookkeeper and office help.

Shop and office rent.

Heat, light and power.

Uncollectable accounts.

Horse and wagon.

Telephone service.

Fire insurance.

Accident insurance for employees.

Loss of and wear on tools and plant.

Depreciation of furniture and fixtures.

It will be noticed that salary for the contractor is one of the items of operating expense, and the plumber should not forget for a minute that he should draw a salary in addition to the profit from the business. In a business sense, as well as physically, the contractor and his business are separate and distinct items. He works for the business - not for himself - the same as he would for another firm or corporation, and the business must pay him the same as he would receive pay from any other business or concern. The profit arising from the business belongs to the business, and is in the nature of interest or dividends on the money invested. For example, the contractor can always command a salary for his services, and his money he can always put out at interest. If instead of working for another he prefers to combine his capital and services in a business, he must still draw his salary and interest on the money invested, or else he is operating at a loss. In determining what interest or profit he should make on his investment, he must remember that there are risks in business that are not encountered in the lending of money, and he must be reimbursed accordingly for his risks, knowledge and experience. Above all, he must not make the mistake of so many beginners of considering the profit his salary, and not allowing in the estimate for his services.