My Nephew the Plumber

[iwire]

My nephew stopped by last Sunday, he and I talked about the company he works for.

It is a flat rate residential service company.

Your kitchen drain is stopped up Mame?

Yes we will be right out....$425.00 Master card, Visa no problem.

Your toilet needs replacing....$1,200 and up depending on what model.

What does he do for at least 1 hour per week at the office?

Sales training, every call he goes on he is expected to sell more service.

No 'free estimates' just a book of set prices for each thing they do.

It certainly gave me a lot to think about.

[chris kennedy]

It certainly gave me a lot to think about.
I'm sure you will be a darn fine plumber. I for one will miss you.


Happy New Year everyone!!!

[Minuteman]

Bob, it does cause my interest to perk up too. I know most companies make tons of money that way, and might even get a repeat customer once every blue moon, but I'm not sure that I can be THAT type of a salesman.

[peter d]

Is it Gem by any chance that your nephew works for?

[MAK]

A $1200.00 toilet replacement would probably force me to take a ride up to the big green bridge.:D

[iwire]

Is it Gem by any chance that your nephew works for?

No, its Hub Plumbing (http://www.hubplumbing.com/)

[iwire]

A $1200.00 toilet replacement would probably force me to take a ride up to the big green bridge.:D


I hear you....but they are busy.

He is doing pretty well for himself, and the work is for the most part in climate controlled conditions. He is not running pipe in a muddy trench in 35 F drizzle.

[peter d]

Truth be told, as of the past month or so I've been giving serious thought to finding other ways to supplement my income. I love this trade and I can't see leaving it for good, but does anyone else feel that it's getting harder and harder to make money doing electrical work? I know there are plenty of successful EC's out there, but for every succesfull one there must be a bunch who are scraping by or failing.

[peter d]

No, its Hub Plumbing (http://www.hubplumbing.com/)


Very similar to Gem...same basic concept and sales principles. A gold mine to say the least.

[iwire]

I'm sure you will be a darn fine plumber. I for one will miss you.

Nope, you don't get rid of me that easy. :grin:

[petersonra]

Truth be told, as of the past month or so I've been giving serious thought to finding other ways to supplement my income. I love this trade and I can't see leaving it for good, but does anyone else feel that it's getting harder and harder to make money doing electrical work? I know there are plenty of successful EC's out there, but for every succesfull one there must be a bunch who are scraping by or failing.

There are probably as many struggling plumbing contractors as struggling ECs. You just don't hear about them because it is not in your circle of interest.

[iwire]

Very similar to Gem...same basic concept and sales principles. A gold mine to say the least.

Yes, no doubt.

I have no interest in plumbing but I think we as electricians could learn something from those models.

Not sure it would work for commercial service but it appears like it can work in residential.

[emahler]

that type of system can and does work...it takes a tremendous amount of time, effort and money to make it profitable though....and as minuteman stated, it's not for everyone...however, it's based on actually making a living (and dare say, profit?) doing this type of work (as Peter said)...

so, scoff all you want at the system, but i'd bet iwires nephew (who i believe is an apprentice?) is taking home more money every week (not to mention having better benefits) than quite a few Journeymen and Electrical Contractors on this very board....that's something to ponder...

[emahler]

Yes, no doubt.

I have no interest in plumbing but I think we as electricians could learn something from those models.

Not sure it would work for commercial service but it appears like it can work in residential.

it works for small commercial...the one location mom and pop shops, but they are simply glorified residential in most cases...but not so much for multi-location and corporate commercial...

[peter d]

Not sure it would work for commercial service but it appears like it can work in residential.

It already does - Gem added electrical service a few years back, and some of the other flat rate plumbing contractors in the area are adding electrical services as well.

[emahler]

There are probably as many struggling plumbing contractors as struggling ECs. You just don't hear about them because it is not in your circle of interest.

there are...but most of them are former electrical contractors who think like current electrical contractors...

[iwire]

but i'd bet iwires nephew (who i believe is an apprentice?) is taking home more money every week (not to mention having better benefits) than quite a few Journeymen and Electrical Contractors on this very board....that's something to ponder...

They list him as a Service Technician but he still has 1.5 years to his license.

And yes he seems to be doing well for himself, decent bonus program for hours worked vs hours charged etc.

[peter d]

In case anyone is interested - the company I keep mentioning, Gem Plumbing, is one of the pioneers of the flat rate system. They are a local success story that started as a small "mom and pop" and are now one of the biggest flat rate companies in the U.S.

http://www.gemplumbing.com/

[emahler]

gem is/was a member of Nexstar (www.nexstarnetwork.com) which encompasses P/HVAV/R and Electrical Contractors...

they have since gone on to offer their own training to other contractors...

the information is there, the systems (while not perfected) are tried and true...if more guys used them, the industry would be in better shape...

edit to add: so is Hub Plumbing & Mechanical:D

[peter d]

It looks like both companies mentioned in this thread, Gem and Hub are members of Nexstar, according to their website. Like Bob said, it gives you something to think about....

[emahler]

It looks like both companies mentioned in this thread, Gem and Hub are members of Nexstar, according to their website. Like Bob said, it gives you something to think about....

Here in an article about GEM from a few years ago (http://www.pmmag.com/CDA/Archives/70593513640d7010VgnVCM100000f932a8c0____)...want to run your company like them? it costs money

(you may need to register to read the article...don't worry it's free- see they think about us electricians:D)

[360Youth]

Our salesman used to work for a company that had a flat rate charge for generator installs. He said that it worked well and balanced out in the end. I think they subbed out the electrical and their flat rate is what they got from the customer and then paid the electrician their price for install.

[peter d]

want to run your company like them? it costs money


Of course it does. I'm not advocating that everyone run out and join Nexstar and become the next Hub or Gem. Not many people have that kind of money to invest, but it's obviously worth it in the long run.

But can you imagine if every time you called an electrician, any electrician, he showed up with a book, and said, "OK, new outlet? $400. Replace that smoke detector? $200. New Circuit? $800." Etc... (Instead of "Yeah, that will be $300 for the whole job.")

Wow.....:D

Ok, back to reality...

:(

[satcom]

In case anyone is interested - the company I keep mentioning, Gem Plumbing, is one of the pioneers of the flat rate system. They are a local success story that started as a small "mom and pop" and are now one of the biggest flat rate companies in the U.S.

http://www.gemplumbing.com/

I don't understand why, this is thought of as something new, we have been using flat rate as far back as the 70's, only back then we called it contract price, and it was nothing more then prices from actuals records, of completed jobs. we had price sheets, not price books, we were able to quote a job at a fixed price and assure a profit on every transacton. Now we have all these sheets in a data file, and we can generate a price book with ease. In recent years we purchased scheduling software, and added out pricing data to the software.

This in not a difficult system to set up yourself, but it requires some work keeping track of completed jobs, and storing those records.

[emahler]

Of course it does. I'm not advocating that everyone run out and join Nexstar and become the next Hub or Gem. Not many people have that kind of money to invest, but it's obviously worth it in the long run.

But can you imagine if every time you called an electrician, any electrician, he showed up with a book, and said, "OK, new outlet? $400. Replace that smoke detector? $200. New Circuit? $800." Etc... (Instead of "Yeah, that will be $300 for the whole job.")

Wow.....:D

Ok, back to reality...

:(

Peter, my point was that I think everyone on this board at one point had visions of running a company like GEM...maybe not as big...but we all imagined the office with all the equipment, the girl(s) answering the phones, the trucks on the road, providing training to our people, etc....then reality hits...most electricians don't feel comfortable charging the amount required to cover that overhead, and they never will get beyond their comfort level...

as for the pricing...the guys with the books have figured out their costs to operate...whatever the numbers are, they are based on real costs...

the $300 guy, he hasn't...

the book guy determines the life he wants, then figures out the cost to live it...

the $300 guy settles for whatever life his business allows him to live...

thats all...

[iwire]

I don't understand why, this is thought of as something new, we have been using flat rate as far back as the 70's, only back then we called it contract price,.

I don't agree that flat rate is the same as contract pricing, they are similar but different enough to me to be separate.

To me 'contract pricing' involves estimates, biding, putting the materials out to bid to a few supply houses etc.

On the other hand when I think of flat rate all of that is put aside and the technician in the field can say....

Would you like 6 hi-hats installed in that family room while I am here, that will be $XXX.xx per fixture for a total of $XXXX.xx,

.....instantly, no estimating no pricing out the stock. etc.

[peter d]

e,

I understand. I'm all for what you're advocating, not against it. :) I think we're just saying it in different ways. I agree that the flat rate system is a proven winner, and I also say that it can work for even small companies. Like you say, it just takes the initiative on the part of EC's to implement it.

[Energy-Miser]

I don't understand why, this is thought of as something new, we have been using flat rate as far back as the 70's, only back then we called it contract price, and it was nothing more then prices from actuals records, of completed jobs. we had price sheets, not price books, we were able to quote a job at a fixed price and assure a profit on every transacton. Now we have all these sheets in a data file, and we can generate a price book with ease. In recent years we purchased scheduling software, and added out pricing data to the software.

This in not a difficult system to set up yourself, but it requires some work keeping track of completed jobs, and storing those records.
Hi,
What scheduling software are you using? I am looking for one, could use your input. Thanks, e/m

[emahler]

I don't agree that flat rate is the same as contract pricing, they are similar but different enough to me to be separate.

To me 'contract pricing' involves estimates, biding, putting the materials out to bid to a few supply houses etc.

On the other hand when I think of flat rate all of that is put aside and the technician in the field can say....

Would you like 6 hi-hats installed in that family room while I am here, that will be $XXX.xx per fixture for a total of $XXXX.xx,

.....instantly, no estimating no pricing out the stock. etc.

they are close bob...your "contract" is based on your experience of commercial/industrial projects...larger items...

residential flat rate is the same thing...the difference is,.....

you know that the recessed light will be approx $20...you know that on average, you will require 20' romex, 1 box, 1 switch, and $5 of misc items...You also know, that on average, it will take 1 guy 2 hrs...

so, rather than send out RFQ's for the individual material, you have done it previously for all the material in your book.

so, the work done is the same...it's just a flat rate manual is based on average costs and times vs. a one off bid for a large project.

does that make sense?

[emahler]

e,

I understand. I'm all for what you're advocating, not against it. :) I think we're just saying it in different ways. I agree that the flat rate system is a proven winner, and I also say that it can work for even small companies. Like you say, it just takes the initiative on the part of EC's to implement it.

i understand...i wasn't disagreeing with you either...trust me, i see that you are in favor of a better industry.

my statements were more general, not directed anywhere in particular...

I will add this, currently, it's much easier to run this system in plumbing or hvac (or in a combo P/E or P/HVAC/E shop with electrical as an add on) than in a pure play electrical shop...

there are 3 main reasons for this...

1) Plumbing and HVAC shops are years ahead of us, as a whole, regarding this...more companies in those industries use these systems...

2) they are more emergency oriented...therefore, more service oriented...

3) we have too many $300 guys in our industry...

but, it does work...as evidenced by Mr. Sparky (www.mrsparky.com)

[iwire]

so, the work done is the same...it's just a flat rate manual is based on average costs and times vs. a one off bid for a large project.

does that make sense?

I am not an idiot,:grin: I know you had to figure out the cost at some point and I am sure there is time that must be spent keeping the numbers current.

But the time invested figuring the price for each job is greatly reduced. Besides now the guy in the field has the ability to tell the customer what additional work will cost immediately, that is not something I am able to do under our typical contract job.

[emahler]

I am not an idiot,:grin: I know you had to figure out the cost at some point and I am sure there is time that must be spent keeping the numbers current.

But the time invested figuring the price for each job is greatly reduced. Besides now the guy in the field has the ability to tell the customer what additional work will cost immediately, that is not something I am able to do under our typical contract job.

see now if I was Peter, i'd agree with you in hopes of getting brownie points:D

but yep, you're right...what some guys do is have specific prices for each part of a task...so rather than look in a book and say "install recessed light with switch....$250....the guy will on site, add up all the parts...

1) install recessed light housing
2) install white baffle trim
3) install 40' 14/2 romex in closed wall
etc., etc, etc...

each item has a unit price and then all is added up...this is also considered contract pricing, as it is more specific to the individual installation...

[peter d]

see now if I was Peter, i'd agree with you in hopes of getting brownie points:D


Don't even try...you'll never come close to me. I have almost as many brownie points as Bob has posts.

[satcom]

I don't agree that flat rate is the same as contract pricing, they are similar but different enough to me to be separate.

To me 'contract pricing' involves estimates, biding, putting the materials out to bid to a few supply houses etc.

On the other hand when I think of flat rate all of that is put aside and the technician in the field can say....

Would you like 6 hi-hats installed in that family room while I am here, that will be $XXX.xx per fixture for a total of $XXXX.xx,

.....instantly, no estimating no pricing out the stock. etc.


When we estimate a contract job, we do all the same things for our flat rate,

I don't think you understand what goes into a flat rate price.

Every rate in an estimate, we don't shop prices, for every contract we have updated prices, now is we were contracting large lighting or swichgear, then we workd have to bid out for current pricing.

I think if you had a chance to see how the flat rate was established, you may get a better picture of the process.


But there are some that use an off the cuff, pricing system and call it flat rate, they are not anything like contract prices.

[peter d]

When we estimate a contract job, we do all the same things for our flat rate,



yes, but does the service tech have to figure all that stuff out on the spot? He looks in the book, tells the customer the price, and they accept or decline, and signs the contract.

All the stuff you mentioned is done for the techs in the office.

I think that's the distinction that Bob was talking about.

[satcom]

yes, but does the service tech have to figure all that stuff out on the spot? He looks in the book, tells the customer the price, and they accept or decline, and signs the contract.

All the stuff you mentioned is done for the techs in the office.

I think that's the distinction that Bob was talking about.

Be it me an estimator, or someone in the field , it is a contract in the end.


Now what may have Bob think the way he is, could be the way some use the different flat rate systems, and I do agree with Bob that some systems can be abused and in no way are like contract pricing.

[growler]

yes, but does the service tech have to figure all that stuff out on the spot? He looks in the book, tells the customer the price, and they accept or decline, and signs the contract.


A good service tech. has very little in common with the average electrician, he is more like a sales rep., he may not even be a great electrician. He is trained in sales and most of the time works on commision. The only difference between being self employed and being a service tech. is the fact that you are using the name of the company, their van and their tools and equipment but the techs. that work for companies like Mr. Sparky are really out there trying to make as much money as they can for themselves and by doing that they make money for Mr. sparky.

I have talked to many of their ex-employees and many don't like to work this way but that doesn't matter because they find the one's that do.

[satcom]

A good service tech. has very little in common with the average electrician, he is more like a sales rep., he may not even be a great electrician. He is trained in sales and most of the time works on commision. The only difference between being self employed and being a service tech. is the fact that you are using the name of the company, their van and their tools and equipment but the techs. that work for companies like Mr. Sparky are really out there trying to make as much money as they can for themselves and by doing that they make money for Mr. sparky.

I have talked to many of their ex-employees and many don't like to work this way but that doesn't matter because they find the one's that do.

Brian a good discription of what we don't do, these are the flat rate operations that are not devloped from an estimated based contract, also we have always used J-men Electricians not Techs, and we still do. Commision pay is illegal in my state, however it is legal in many and is used as you say, this may be another reason Bob has his view of flat rate.

[ceb]

I agree that IF the elect. has kept good records you could get by with flat rate pricing. However,have we not all looked at a job and in our mind from experience said it should take me x# hours only to run into something we could not see and it winding up taking xx# of hours? Now if you have flat priced the job you loose.Then on the other hand every thing falls into place you win. I think you would loose more often than win.But with the plumbers $1200.00+ to replace a toilet, pipe is already there, two bolts ( worst case need to cut with saw ) one water line, replace wax seal, two new closet bolts, reconnect water line not a lot of hidden obstacles. I would only want to replace two toilets a week for that.:grin: No I'm greedy four:grin:

[emahler]

first off...commission pay is perfectly legal in NJ...you simply have to meet the requirements.

2nd - i agree with satcom regarding the employees...the idea behind flat rate, at least for a reputable company, is not to screw the customer.. the idea is to give a qualified electrician the tools to service the customer properly.

is it abused? you bet ya...

does it catch up them? sometimes

but you can run a completely honest and reputable flat rate company...it takes just as much diligence as it does to run an honest and reputable company any other way.

the entire idea behind a business is to have the employees make more money than they take...agreed?

so if you pay a guy $100k a year, how much money do you need him to generate for you? I'd say in most cases about $300,000....this is for a resi service company (this covers his training, truck, advertising to get the calls, etc, etc, etc) so, if the guy works 2000 hrs a year, that equates to $150 gross for every hour he works.

so, you can go out and price a $300 quick job, then send this guy out to do it...(but your salary is added to this, so now he needs to make $175/hr he is on the clock...that's 4-5 of these calls a day...you do nothing but go look at jobs..)

or you can just do it T&M (good luck getting $150/hr including travel time)

or you can arm him with the tools he needs to go look at the job, use his experience and knowledge to determine what needs to be done, then utilize the tools you have given him (price book and training) to quote a fair and accurate price to the customer...then do the work on the spot.

again, it can be abused...but so can T&M and any other pricing schedule you choose to use...

[emahler]

I agree that IF the elect. has kept good records you could get by with flat rate pricing. However,have we not all looked at a job and in our mind from experience said it should take me x# hours only to run into something we could not see and it winding up taking xx# of hours? Now if you have flat priced the job you loose.Then on the other hand every thing falls into place you win. I think you would loose more often than win.But with the plumbers $1200.00+ to replace a toilet, pipe is already there, two bolts ( worst case need to cut with saw ) one water line, replace wax seal, two new closet bolts, reconnect water line not a lot of hidden obstacles. I would only want to replace two toilets a week for that.:grin: No I'm greedy four:grin:

you rarely lose...like anything else, if and when you run into issues, you let the customer know and proceed from there. sometime you change the scope of work (and the price)...sometimes you simply do a completely different install...it's no different than giving a fixed price bid on a larger project...

or is it better to take a lower rate at T&M and let the customer take all the risk (and reap all the reward)?

[satcom]

first off...commission pay is perfectly legal in NJ...you simply have to meet the requirements.


Yes it can be done legal, but the state does not make it easy, stright commision only, never was legal here, for electrical contracting.

[emahler]

Yes it can be done legal, but the state does not make it easy.

it's not to bad...we use a PEO, so they handle all the paperwork...I just submit the hours and commission, they handle the rest...

but this state doesn't make it easy to run a business, period...

I don't know for sure about straight commission, we've always given a good base salary ($600+ week) and commission on top...but I know a few plumbers, who through experience are well versed on labor laws (not good experience either) who have been operating straight commission for years...gotta assume that there is a way to do it...since I know they are being scrutinized by the labor board...

[hardworkingstiff]

I haven't seen any mention that sometimes the 'plumber' using the fixed rate system has jobs that they don't get.

If you are not making enough money, it's not the systems fault, it's your fault. You are not providing a service to the community that will pay your rate, or, your rate is low and you are not willing to raise it.

[emahler]

I haven't seen any mention that sometimes the 'plumber' using the fixed rate system has jobs that they don't get.

If you are not making enough money, it's not the systems fault, it's your fault. You are not providing a service to the community that will pay your rate, or, your rate is low and you are not willing to raise it.

i'm not following, can you elaborate?

[JohnJ0906]

My nephew stopped by last Sunday, he and I talked about the company he works for.

It is a flat rate residential service company.

Your kitchen drain is stopped up Mame?

Yes we will be right out....$425.00 Master card, Visa no problem.

Your toilet needs replacing....$1,200 and up depending on what model.

What does he do for at least 1 hour per week at the office?

Sales training, every call he goes on he is expected to sell more service.

No 'free estimates' just a book of set prices for each thing they do.

It certainly gave me a lot to think about.

I have a good friend that works for an electrical company exactly like this, except for the sales training. (Not one of the big franchises)
Incentives for sales over $x per week.
I have heard rumors that they are in the red, but I can't say for sure. He has stopped asking me if I want to work there.

[emahler]

I have a good friend that works for an electrical company exactly like this, except for the sales training. (Not one of the big franchises)
Incentives for sales over $x per week.
I have heard rumors that they are in the red, but I can't say for sure. He has stopped asking me if I want to work there.

it's all required (including the sales training)...it's real easy to go into the red with the overhead required, if the guys aren't trained to sell...

[mdshunk]

FWIW, I carry a flat rate book with me every day for those that insist on a price on the spot for work that I sort of got "ambushed" with. I guess you could say that I'm using sort of a hybrid system. About 1/4 bid the old fashioned way, about 1/2 T&M, and about 1/4 out of the flat rate book.

[emahler]

and that system will work, unless you have multiple employees doing service work...then you need something that will keep you consistent..

[mdshunk]

and that system will work, unless you have multiple employees doing service work...then you need something that will keep you consistent..
Yes, it's already been an issue for me. Sally paid 100 bucks a recessed can, and in my house it worked out to almost 200, yadda, yadda... Joe's house is just like mine, and my service upgrade was almost 1,000 more.... These are issues I created due to the hybrid approach.

I think the flat rate systems are better for larger, more densely populated areas. A bit harder to implement in rural America. I say this due to the fact that they don't always lend themselves that easily to repeat customers, as has been demonstrated by commentaries from former flat rate contractors who operated in smaller communities.

[brantmacga]

Truth be told, as of the past month or so I've been giving serious thought to finding other ways to supplement my income. I love this trade and I can't see leaving it for good, but does anyone else feel that it's getting harder and harder to make money doing electrical work? I know there are plenty of successful EC's out there, but for every succesfull one there must be a bunch who are scraping by or failing.

i'm right there w/ you. i don't plan on closing my business, but i want other options. i already have one other business that i'm in as a partner, and am working on getting at least one more going within the next 12 months, hopefully about 8 mo. I'm going to let my wife devote most of her time to it and it'll be her baby. Maybe she'll get rich and take care of me. :D

[hardworkingstiff]

i'm not following, can you elaborate?

Sure, it seems like blame is being put on the system electricians use vs. the perceived system the plumbers use. I'm just saying it's not the system.

If you can't get any work, maybe your overhead is too high, or you are not buying right, or ??? and you are not providing a market perceived value.

If you are working your tail off and not making enough money, maybe you are afraid to charge (or don't know how) properly.

I find I cannot make the money I want doing residential work. I quit doing it almost 30-years ago. In fact, I often do other type of work (non electrical), like fuel distribution, lube lines, tank installations.

A friend of mine (build docks) said "I like Lou's motto, 'I work for money' ".

If the economy gets as snug as I think it might, a lot of the 'fixed rate system' guys may lower their prices, or not be working. You need to be flexible. The bottom line is the market sets the upper limit of prices, but will allow you to work as cheaply as you are willing to go. The only way to know how high you can charge is to lose work because of price. If you can't make ends meet on the market ceiling price, then you might need a different market.

[Brady Electric]

I have often wondered why plumbers make more money than electricians do.
To me electrical in the home is more dangerous and needs to be put in properly.
Everyone knows poo flows down hill.
I agree with I-Wire it does give something to think about.
I have been in business for thirty years and I do make money. I keep up with the supply houses prices and charge according to price increases of materials and my labor rate increases with the time.
I treat everyone like I won't to be treated and am fair.
Someone once said to me. (I'm you friend so your not going to make money on me are you).
I repeated. ( Yes, because my enemies sure don't call me and if I didn't make money on my friends I wouldn't make money.)
Hope all of you have a prosperous New Year.
Thanks for all who respond to these threads because it always gives us something to think about.
Semper Fi

[satcom]

If the economy gets as snug as I think it might, a lot of the 'fixed rate system' guys may lower their prices, or not be working. You need to be flexible. The bottom line is the market sets the upper limit of prices, but will allow you to work as cheaply as you are willing to go. The only way to know how high you can charge is to lose work because of price. If you can't make ends meet on the market ceiling price, then you might need a different market.


We have been watching the local market and the 'flat rate system' guys have been raising their prices, not lowering them, and that is what other business do in weak markets. A common mistake, is to panic and lower prices in a weak market.

[BryanMD]

A common mistake, is to panic and lower prices in a weak market.

There was (still is) a very successful car dealer here who had the best marketing slogan I've come across:

"People like to do business where business is good"

The shiny new trucks and spiffy uniforms and glossy ads give the typical resi customer a nice warm and fuzzy feeling about choosing that guy but those things also reinforce the notion that they are a real operator in a business that MOST resi customers will have a need for VERY rarely.

Some independent EC's will offer themselves to be a different flavor of that sort of ice cream but most don't bother to even try.

A confident voice on the phone (closing) with a prompt appointment scheduled (closing) and a neat,clean tech knocks on the door (closing) who can promptly give them a firm price (closing) gets the job done reasonably well and collects before he leaves (closed!) is a company where the customer is consistently led to believe business is good.

[satcom]

There was (still is) a very successful car dealer here who had the best marketing slogan I've come across:

"People like to do business where business is good"

The shiny new trucks and spiffy uniforms and glossy ads give the typical resi customer a nice warm and fuzzy feeling about choosing that guy but those things also reinforce the notion that they are a real operator in a business that MOST resi customers will have a need for VERY rarely.

Some independent EC's will offer themselves to be a different flavor of that sort of ice cream but most don't bother to even try.

A confident voice on the phone (closing) with a prompt appointment scheduled (closing) and a neat,clean tech knocks on the door (closing) who can promptly give them a firm price (closing) gets the job done reasonably well and collects before he leaves (closed!) is a company where the customer is consistently led to believe business is good.

Anyone can Flat Rate price, it is not necessary to join a flat rate system company to make it work, just read the above, some very basic things you can do to.

"Some independent EC's will offer themselves to be a different flavor of that sort of ice cream but most don't bother to even try."

[tlaidman]

This is the same as Mr. Electric and Mr Rooter both Dwyer companies out of waco Texas. The cost is high because they pay as much as 8% inroyalties to the franchiser. Also they must buy all paper such as invoices, proposals, business cards, and uniforms from the main office. you must upsell calls to make any money.

[hardworkingstiff]

We have been watching the local market and the 'flat rate system' guys have been raising their prices, not lowering them, and that is what other business do in weak markets. A common mistake, is to panic and lower prices in a weak market.

Hummm, I think you should call Intel. They need your advice.

[satcom]

Hummm, I think you should call Intel. They need your advice.


Intel, is in the service, installation market?

I think they are in the commodities market, not the labor services market, there is a lot of information on different business strategies in down markets, we have been thru 4 down cycles, one lasting more then 2 years, and most of the EC's that tried to adjust downward, during these times, dropped out of the business.

[emahler]

This is the same as Mr. Electric and Mr Rooter both Dwyer companies out of waco Texas. The cost is high because they pay as much as 8% inroyalties to the franchiser. Also they must buy all paper such as invoices, proposals, business cards, and uniforms from the main office. you must upsell calls to make any money.

be intellectually honest here...of the upto 8% (which goes down with the volume you do) up to 4% of that would be spent whether you were a franchise or not...you would spend that money on graphic designs for advertising, legal fees for your invoices, etc...

in addition, you know that you aren't required to purchase anything from them. but that it's cheaper to use their vendors. sometime 50% cheaper. Their printer beat the heck out of any local vendor for business cards, invoices, etc.

[emahler]

Sure, it seems like blame is being put on the system electricians use vs. the perceived system the plumbers use. I'm just saying it's not the system.

If you can't get any work, maybe your overhead is too high, or you are not buying right, or ??? and you are not providing a market perceived value.

If you are working your tail off and not making enough money, maybe you are afraid to charge (or don't know how) properly.

I find I cannot make the money I want doing residential work. I quit doing it almost 30-years ago. In fact, I often do other type of work (non electrical), like fuel distribution, lube lines, tank installations.

A friend of mine (build docks) said "I like Lou's motto, 'I work for money' ".

If the economy gets as snug as I think it might, a lot of the 'fixed rate system' guys may lower their prices, or not be working. You need to be flexible. The bottom line is the market sets the upper limit of prices, but will allow you to work as cheaply as you are willing to go. The only way to know how high you can charge is to lose work because of price. If you can't make ends meet on the market ceiling price, then you might need a different market.

before any of this is answered, please tell me how I can lower my overhead as the market softens?

what areas can I really cut costs in?

thanks

[Rewire]

every winter it is the same here all the trained monkeys that were hired to nail on boxes and drill holes and pull a wire through it get laid off and they think the can now be a contractor( no license required here).Most were only being paid 9-10 dollars an hour so they think charging 20 an hour is big bucks.Adding to the problem is all the new E.C.s who jumped into business in the spring are running out of work and have no money to carry them until spring.It is a race to the bottom.I am holding the line and I refuse to lower my prices work is still coming in and I am getting the price I need a little work at my price is better than alot of work and loosing money.

[hardworkingstiff]

Intel, is in the service, installation market?

I think they are in the commodities market, not the labor services market, there is a lot of information on different business strategies in down markets, we have been thru 4 down cycles, one lasting more then 2 years, and most of the EC's that tried to adjust downward, during these times, dropped out of the business.

If you ajust downward without lowering your expenses, you lose money (or make less). If you estimate with a preconceived price, you will probably lose money.

If you lower your price to gain or maintain market share and you can afford the ride, you may be better off down the road (or not). It really depends on what you are trying to accomplish.

I am reading on these boards that a lot of people are blaming others for their inability to obtain work at the profit margin they expect. All I'm saying is that if you can't make it in the market you are in, you either need a new market, or maybe new marketing.

[hardworkingstiff]

before any of this is answered, please tell me how I can lower my overhead as the market softens?

what areas can I really cut costs in?

thanks

If you have 6 trucks on the road and only enough steady work for 5 trucks, get rid of one of the trucks and the worst employees. It's harsh, but it's business.

Is your office support doing all they can do? If not, maybe you have too much support.

All I'm saying is the world is shrinking. The standard of living in the USA will continue to fall as we compete with the world. Yes, I know you can't outsource our services to a 3rd world country, but we are affected.

[hardworkingstiff]

....I am holding the line and I refuse to lower my prices work is still coming in and I am getting the price I need a little work at my price is better than alot of work and loosing money.

I agree with that statement. In the past, I've sat idle for 2 months waiting for work at my price. I can afford it because I can afford it.

Now, if I had 5 trucks on the road, I would not have that luxury.

Rewire, how long would you go idle before you lowered your price?

[emahler]

If you have 6 trucks on the road and only enough steady work for 5 trucks, get rid of one of the trucks and the worst employees. It's harsh, but it's business.

Is your office support doing all they can do? If not, maybe you have too much support.

All I'm saying is the world is shrinking. The standard of living in the USA will continue to fall as we compete with the world. Yes, I know you can't outsource our services to a 3rd world country, but we are affected.

ok...so i sell my trucks and fire the employees...can I lower my mortgage/rent? maybe lower my advertising (isn't that a little counter productive?) How about my material? maybe I can beat them over the head a bit?

point is this...to run a company takes overhead...some overhead is inevitable, without it, it actually costs you money.

there are 2 basic premises to any system like we are discussing here...1- know your costs & 2- charge enough to cover those costs...

the hard reality is that any business has a mandatory amount of overhead. When the economy softens, those overhead costs do not change...what does change is the amount of work available.

we have a finite number of hours that we can sell in a given week. If you have 5 employees and need $500/man/day to cover your overhead...that's indisputable...if you can charge $100/hr, you only need to work 5 hrs a day to make the money...if you drop your price to $50/hr, you now need to work 10 hrs a day to make that money...but either way, you need to make that money.

like satcom said, many companies will raise their pricing when times are slow. This is because their billable hours may drop from 5 to 4, but they still need to make $500...

you can slash and burn to cut your overhead, but in the long run that's a losing proposition.

does that make any sense?

[emahler]

I agree with that statement. In the past, I've sat idle for 2 months waiting for work at my price. I can afford it because I can afford it.

Now, if I had 5 trucks on the road, I would not have that luxury.

Rewire, how long would you go idle before you lowered your price?

why drop his price? he's better off spending more on marketing and advertising to bring in more calls and get more work at his price...

[hardworkingstiff]

why drop his price? he's better off spending more on marketing and advertising to bring in more calls and get more work at his price...

That's probably a better plan.

[BryanMD]

Charlie/Mods:

I suppose I'm the one who started it with the quote I referred to.
I'll be more careful in the future.

[growler]

why drop his price? he's better off spending more on marketing and advertising to bring in more calls and get more work at his price...

If advertiseing were the real answer we would never have a slow down in the economy. This last Christmas all the retail stores increased their advertising and lowered prices but still didn't meet sales goals.

It's a sad fact but there is only so much pie to go around. Some companies will be able to increase advertising and get a bigger slice of the pie but for others it will just generate added overhead that drives them out of business a little sooner.

If we have the projected recession then there are a lot of companies that are going out of business no matter what they do. Some will make it because they increased advertising and were still able to get a return on their investment and others will make it because they were able to control overhead and ride the storm out.

[BryanMD]

If advertising were the real answer we would never have a slow down in the economy...It's a sad fact but there is only so much pie to go around...If we have the projected recession then there are a lot of companies that are going out of business no matter what they do.

What he said!

[dereckbc]

Iwire sounds like a biz op to me for something like a full service mechanical operation. Call it Plumb-Bob :): All you need is mister Freeze to add to the equation. Then do initial construction jobs. The other two are helpers to the job at hand.

eg. when electrical is being performed roto-rooter and Mr. freeze are helpers. Got another young family member that does HVAC and can learn electrical to take over your half when trained as licensed sparky after you retire to reap profits from partial ownership

[satcom]

What he said!

Advertising will help in a down market, target areas of work that pick-up in down markets, we made it thru down markets, but the average EC backs off, and is afraid to invest in expended advertising, and develop new niches, heck you have half of them know, convinced that word of mouth is a good method of gaining market share, so for them to invest in advertising and develop new areas, is just not going to happen.

During the last recession I watched some stores closing while others in the same business were opening additional outlets, and offering goods in demand.

[Rewire]

I agree with that statement. In the past, I've sat idle for 2 months waiting for work at my price. I can afford it because I can afford it.

Now, if I had 5 trucks on the road, I would not have that luxury.

Rewire, how long would you go idle before you lowered your price?
I don't do Idle.I use down time to look for work and re-establish contact with people I have done work for.I go see business owners and drop off cards I stop at construction sites and meet general contractors I look for the new market.

[BryanMD]

Advertising will help in a down market, target areas of work that pick-up in down markets, we made it thru down markets, but the average EC backs off, and is afraid to invest in expended advertising, and develop new niches, heck you have half of them now, convinced that word of mouth is a good method of gaining market share, so for them to invest in advertising and develop new areas, is just not going to happen.

Getting into new niches is a great point (for those capable of doing it).

Advertising is about increasing the size of your slice of the pie.
But it won't make the pie bigger.

Like in the "how to get a lead man" threads, the only way to get more of the work that does need doing (pie)... is take it away from some other contractor.

No matter how good your advertising may be (or how good your work is) advertising in and of itself won't create a NEED for the work to be done.

Or you can influence (upsell) people to do something they want (but don't need) and you can influence (upsell) people to improve what they have (but don't really need).

[Rewire]

Getting into new niches is a great point (for those capable of doing it).

Advertising is about increasing the size of your slice of the pie.
But it won't make the pie bigger.

Like in the "how to get a lead man" threads, the only way to get more of the work that does need doing (pie)... is take it away from some other contractor.

No matter how good your advertising may be (or how good your work is) advertising in and of itself won't create a NEED for the work to be done.

Or you can influence (upsell) people to do something they want (but don't need) and you can influence (upsell) people to improve what they have (but don't really need).
It is not a limited pie,the work is not fixed at a certain amount you will always have new construction,remodels and service calls they will just vary in amount at times growth is in new cunstruction and at others in remodels the idea is to target the market that has growth or create a nich market.

[BryanMD]

It is not a limited pie,the work is not fixed at a certain amount you will always have new construction,remodels and service calls they will just vary in amount at times...

Yes. But the size of the pie is objectively a given size at any given time.
And that size will objectively expand and contract at all times.

These last comments were following points about the concerns of an upcoming (current?) recession and a time of contracting pies.

When times are good there is room for less efficient management but when times turn bad is when you find out who actually can manage.

A few quotes of what I had with my coffee this morning:
"Manufacturers, construction companies, financial services all cut jobs in December -- casualties of the housing slump. Retailers also sliced jobs."

"The government added 31,000 jobs in December, while private employers actually cut payrolls by 13,000, underscoring the weakness."

"The big worry is that people will clamp down on their spending and businesses will put a lid on investment and hiring, throwing the economy into a tailspin"

http://www.baltimoresun.com/business/bal-econ0104,0,3766288.story



With all these references to pie I'm surprised Celtic hasn't popped in.

[satcom]

I don't do Idle.I use down time to look for work and re-establish contact with people I have done work for.I go see business owners and drop off cards I stop at construction sites and meet general contractors I look for the new market.

I have contractors calling me telling me things are really slow, they are sitting waiting for the phone to ring, I started preparing for the down turn months ago, I added advertising, and increased the coverage area, shifted some of the work to maint type work, which i scheduled, months before the market reacted.

[Rewire]

Yes. But the size of the pie is objectively a given size at any given time.
And that size will objectively expand and contract at all times.

These last comments were following points about the concerns of an upcoming (current?) recession and a time of contracting pies.

When times are good there is room for less efficient management but when times turn bad is when you find out who actually can manage.

A few quotes of what I had with my coffee this morning:
"Manufacturers, construction companies, financial services all cut jobs in December -- casualties of the housing slump. Retailers also sliced jobs."

"The government added 31,000 jobs in December, while private employers actually cut payrolls by 13,000, underscoring the weakness."

"The big worry is that people will clamp down on their spending and businesses will put a lid on investment and hiring, throwing the economy into a tailspin"

http://www.baltimoresun.com/business/bal-econ0104,0,3766288.story



With all these references to pie I'm surprised Celtic hasn't popped in.
The one thing I have seen throughout the years no matter the economy when people are sick they will they will sometimes put off going to the doctor or if the car is making a funny noise they will put off going to the mechanic but you let the lights go out and they will call an electrician.

[BryanMD]

The one thing I have seen throughout the years no matter the economy when people are sick they will they will sometimes put off going to the doctor or if the car is making a funny noise they will put off going to the mechanic but you let the lights go out and they will call an electrician.

PERFECT example of the *need* I referred to earlier.

Your advertising didn't make that circuit fail.
Your advertising *might* get him to call you to fix it though.
(As opposed to the other 200? EC's in the YP when he looks for a name)

[emahler]

sometimes increased advertising is used simply to maintain market share and allow you to be ready to take advantage of the next upturn...

[growler]

you let the lights go out and they will call an electrician.

That's true but how many of your service calls are actual emergency type service work.

Many service calls are just someone that wants to change out a light fixture, intstall a ceiling fan or add a receptacle for the new plazma TV. As the economy slows you can forget about many of these.

Now back to that emergency service call. Instead of competing with five people for that call now there are ten people wanting that work. Why ? Because a short time ago many of them were involved in new contruction or remodeling and didn't want to fool with emergencies. They also went out looking for that niche market to stay afloat.

The pie does get bigger and smaller with the economy it's called GDP. Which includes all good and services provided.

Talking about pie makes me hungry. :grin:

[satcom]

PERFECT example of the *need* I referred to earlier.

Your advertising didn't make that circuit fail.
Your advertising *might* get him to call you to fix it though.
(As opposed to the other 200? EC's in the YP when he looks for a name)

Just make sure your one of those 200 in the yellow pages,

[BryanMD]

Just make sure your one of those 200 in the yellow pages,

Which brings us full circle (again).

Did everyone learn something? ;)

[hardworkingstiff]

Did everyone learn something? ;)

I learned I should raise my prices in slowing times.






I'm not sure it will help me keep my marketshare.

[satcom]

Which brings us full circle (again).

Did everyone learn something? ;)

My guess would be no they din't, they will not try to react before the market does, they will not invest in more advertising, and in come cases they don't have any advertising now.

[fpilsparky1]

uh, ya, sounds like "Mr. Electric". i worked for this guy. I drove that damm Mr. Electric truck around for like two long years. Damit...I flippen hated to go to the supply house in that damm thing.....FEDC

It kinda worked..... Mrs. Smith wanted her whatever fixed. So like 125 to show up and like an extra 85 to fix if it was ez. If not ez then I had this book with prices and stuff......I would make stuff up to meet my hourly goal......say whata about them goals

my boss was not so happy he had to pay a bunch of money to the main office of "Mr. Electric" and then there was the whole(or hole) of advertizing..... I mean Mr Electric is not Coke or Sears so what DO your advertizing dollars =?

hmmmmmmm.......does plumbing really pay better....better than and other services....cuz like a service is like cleaning ladies, electrical volks, Doctors, and cooks, what about those people that pick up dog poop, thats a service....

[ItsHot]

uh, ya, sounds like "Mr. Electric". i worked for this guy. I drove that damm Mr. Electric truck around for like two long years. Damit...I flippen hated to go to the supply house in that damm thing.....FEDC

It kinda worked..... Mrs. Smith wanted her whatever fixed. So like 125 to show up and like an extra 85 to fix if it was ez. If not ez then I had this book with prices and stuff......I would make stuff up to meet my hourly goal......say whata about them goals

my boss was not so happy he had to pay a bunch of money to the main office of "Mr. Electric" and then there was the whole(or hole) of advertizing..... I mean Mr Electric is not Coke or Sears so what DO your advertizing dollars =?

hmmmmmmm.......does plumbing really pay better....better than and other services....cuz like a service is like cleaning ladies, electrical volks, Doctors, and cooks, what about those people that pick up dog poop, thats a service....Sounds like you got them figured out. How dare someone try to franchise our trade, and then beat little 'ole ladies out of their social security money!!!

[growler]

uh, ya, sounds like "Mr. Electric". i worked for this guy. I drove that Damn Mr. Electric truck around for like two long years. Damit.....I flippen hated to go to the supply house in that damn thing.....FEDC

It kinda worked..... Mrs. Smith wanted her whatever fixed. So like 125 to show up and like an extra 85 to fix if it was ez. If not ez then I had this book with prices and stuff......I would make stuff up to meet my hourly goal......say whata about them goals


Does anyone see the problem here? The owner of this company spent his money on a Mr. Electric franchise and then doesn't bother to hire or train service people. It's a loser even before it gets started.

fpilsparky may be a good electrician but if the owner used technicians/electricians with this attitude then he's in the wrong business.

In my opinion fpilsparky could be a poster boy for the type of electrician that you don't want operating a service truck.

No offense fpilsparky, you may be a great construction contractor but doing service work takes a whole different attitude. It helps if people actually like the work and good communication skills are as important as electrical knowledge, not to mention motivation.

[mdshunk]

No offense fpilsparky, you may be a great construction contractor but doing service work takes a whole different attitude. It helps if people actually like the work and good communication skills are as important as electrical knowledge, not to mention motivation.
I agree with that assessment very much. I've said before that a good service electrician is a pretty rare cat. Not only does he have to be technically on top of his game, but he has to be visually presentable, well spoken, a nice guy, and a half-decent salesman. He needs to have a cool temper and an even disposition, as well as well-mannered and a clean worker in a person's home or business. All of these traits may not exist in every service electrician, but that is certainly the goal. Technical compentance is no the beginning and end of a service man. There are lots of guys that could get the job done, but that customer may never use your company again because of the fella's other less desirable traits.

[Energy-Miser]

I agree that IF the elect. has kept good records you could get by with flat rate pricing. However,have we not all looked at a job and in our mind from experience said it should take me x# hours only to run into something we could not see and it winding up taking xx# of hours? Now if you have flat priced the job you loose.Then on the other hand every thing falls into place you win. I think you would loose more often than win.But with the plumbers $1200.00+ to replace a toilet, pipe is already there, two bolts ( worst case need to cut with saw ) one water line, replace wax seal, two new closet bolts, reconnect water line not a lot of hidden obstacles. I would only want to replace two toilets a week for that.:grin: No I'm greedy four:grin:
I think the $1200 figure was just thrown out as an example, may not be what is actually charged. I sure hate to be handed a $1200 bill for a toilet replacement. Not sure who put that figure out first, but am right that it was just given as a for instance? e/m

[iwire]

I think the $1200 figure was just thrown out as an example, may not be what is actually charged.

No, that is the minimum the company my nephew works for charges for a simple replacement with a low level brand water closet.


Really.

Keep in mind, they aim to people with money, they also know how to play the game, they put down rugs in the work area, they wear 'booties' on their feet and strive to leave the area cleaner then when they started.

[aline]

I think the $1200 figure was just thrown out as an example, may not be what is actually charged. I sure hate to be handed a $1200 bill for a toilet replacement. Not sure who put that figure out first, but am right that it was just given as a for instance? e/m
As electricians we hate to hand our customers a $1200 bill for jobs like this.
That's why we come here and complain about how little electricians make compared to plumbers. :)

If we handed more of our customers $1200 bills for jobs like this we wouldn't be having this discussion.

[aline]

If an electrician were to post on this forum that he was getting $1200 for a job like that he would be riduculed for being a crook, being inefficiant or an idiot for charging that much when obviously he could do the work for much less. I mean really how long could this job possibly take? :)

[iwire]

As electricians we hate to hand our customers a $1200 bill for jobs like this.
That's why we come here and complain about how little electricians make compared to plumbers. :)

If we handed more of our customers $1200 bills for jobs like this we wouldn't be having this discussion.

I think that you summed it up very well.

[ItsHot]

As electricians we hate to hand our customers a $1200 bill for jobs like this.
That's why we come here and complain about how little electricians make compared to plumbers. :)

If we handed more of our customers $1200 bills for jobs like this we wouldn't be having this discussion.How can we judge what the plumbers charge? Is a toilet worth $1200? I know when you really need one it is priceless!!! Also I know that you usually need to turn on the lights when you use one!

[Energy-Miser]

No, that is the minimum the company my nephew works for charges for a simple replacement with a low level brand water closet.


Really.

Keep in mind, they aim to people with money, they also know how to play the game, they put down rugs in the work area, they wear 'booties' on their feet and strive to leave the area cleaner then when they started.
Hey if they can get it more power to them. Wasn't too long ago that there was a big fuss at a contractor with NASA for $700 toilet seat ! But that was just the seat. Hate to see what they charge for the whole toilet. Back to the issue, I think cusomers under-value electrical work, because they think that they can do it themselves, when push comes to shove. They don't think that they can do plumbing on their own. Personally I don't see why one should be any easier to DIY than the other, but I think that that is the perception FWIW. e/m.

[BryanMD]

Wasn't too long ago that there was a big fuss at a contractor with NASA for $700 toilet seat ! But that was just the seat. Hate to see what they charge for the whole toilet.

Independence Day Movie:
Prez: How do you pay for all of this?
Judd Hirsch: What? You don't think they actually charge $700 for a toilet, do you?

Back to the issue, I think customers under-value electrical work, because they think that they can do it themselves, when push comes to shove. They don't think that they can do plumbing on their own. Personally I don't see why one should be any easier to DIY than the other, but I think that that is the perception FWIW. e/m.


There are plenty of DIY jobs going on in plumbing work.

Service Plumbing is dirty work.
You might get shocked/killed doing electrical but you won't get sick from it.