Sick of T&M issues need help choosing Flat Rate

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wolfman56

Senior Member
Today I'm having a fight with a HVAC contractor. I quoted him $85 per man hour. Two of us did the job so I billed him for two men at $85 per hour, $170 per hour. I've done this for many customers successfully. He actually hired me because the flat rate guys prices seem too high to him. I was unlucky enough to do a job that was tough enough that it would have been a low or no profit job for the flat rate guys. There fore my invoice was higher then what the local flat rate guy would have charged. He thinks hes getting screwed. And the fight goes on.

I really want to do flat rate for obvious reasons. I've even talked with the person who made the ES2 system. If I was entirely a residential service company I would buy into his system in a heartbeat. However I'm not. My company is just my son and I. We do fire restoration as well as all sorts of remodels, Commercial small work, and Industrial small work. It is hard for me to justify spending $89 every month for a system where I really don't need the whole boat. I don't have time to build a flat rate book for myself.

What I would like is something more like what I think the original Electrical Success system was originally before it went high tech, (I've never really seen it), where I could make a one time payment and use it for several years. I think there is a real need for something like this because there are many contractors that want to do SOME service work, but not enough to warrant buying into a whole a complete service business related system that requires a monthly fee.

I also try very hard to stay away from monthly obligations, if business has a slow period it's hard to bring expenses in line with income when your obligated to pay whether you had work or not.

Any Ideas??
 

wolfman56

Senior Member
$89 a month is one hour of your time.

You probably spend that much of your time screwing around with these kind of problems.


Good call, haven't looked at it that way. I'll consider it.

My problem is a monthly obligation to make a payment. I'm old school, I see monthly contracts as evil because if you ever need to cut back you can't. I'ts like leasing a truck or office equipment, and everything else that obligates you to a monthly payment. All those little monthly obligations add up to a lot of cash, and they are NEVER paid off. That's what bankrupts people and business.

RW
 

cowboyjwc

Moderator
Staff member
Location
Simi Valley, CA
While I always caught guff about doing T&M work I never lost money on a job either, so when you say it's obvious why you want to learn flat rate pricing when you just said that the flat rate guy would have lost money, is, well, not that obvious to me.
 

svh19044

Senior Member
Location
Philly Suburbs
In a perfect world, they are the same thing.

If you can do T&M, you can do flat rate. YOU know what YOU need for your company to turn a profit. For a father/son team, you are probably going to find that the time spent on the software itself is a more daunting task than without. However, it's an excellent idea to learn it and use it if you plan on expanding to multiple field employees. Or in other words, if you plan on taking the office seat and allowing your son and another man in the field, you should go this route. If not...you are probably wasting money at this point (waste isn't quite fair, as again, it's a good practice to get in to for the future).
 

ceb58

Senior Member
Location
Raeford, NC
Check out Craftsman's books. I have their elect. construction program. You can plug in your hourly rate and it has time all ready assigned to the different task. I have used it for several years and it is in line with the actual time it takes but most of the time you do the job faster than it gives you so it works to your favor. I think it was like $35.00 to down load it and it has free upgrades. It is also compatible with Quick books if you use that for tracking and it will do your invoice or estimate.
 

Fulthrotl

~Autocorrect is My Worst Enema.~
There fore my invoice was higher then what the local flat rate guy would have charged. He thinks hes getting screwed. And the fight goes on.

I really want to do flat rate for obvious reasons. I've even talked with the person who made the ES2 system. If I was entirely a residential service company I would buy into his system in a heartbeat. However I'm not. My company is just my son and I. We do fire restoration as well as all sorts of remodels, Commercial small work, and Industrial small work. It is hard for me to justify spending $89 every month for a system where I really don't need the whole boat. I don't have time to build a flat rate book for myself.

Any Ideas??

well, if it's you and your son, you can approach it with this question:

how much money do i want to have walking away at the end of this job?

google bare bones business, and you will get ellen's website. download
her weekend biz plan, and do it. the books will cost you about $20.

it's tax season, so you should have your numbers together for last year.
you will need them for your budget.

you'll punch in your numbers, and find out that what you probably need
to have coming in the door to make an adequate living is above $125 an
hour.

"but i can only get $85 an hour in my market!"

that is why electricians go broke. they sell $125 hours for $85.

i just sat down wed. with someone who's pretty successful, for a critique
of my website.....

the website should be an extension of my business plan. right now, it isn't.
a rewrite is in order, and that'll happen over the next two weeks.
the website rewrite starts with a tuning of the business plan. the business
plan is what the website designer is going to build the site off of.

in my case, my mouth and feet aren't going the same direction. i say i want
one thing, but my actions aren't in alignment with that. most of us are like that.

ellen at bare bones biz is brutal, but after almost bankrupting here family plumbing
business, she took it to $40M in sales in two years. one of those kinds of stories.

so, she knows what she's doing.
 

ritelec

Senior Member
Location
Jersey
you'll punch in your numbers, and find out that what you probably need
to have coming in the door to make an adequate living is above $125 an
hour.

"but i can only get $85 an hour in my market!"

that is why electricians go broke. they sell $125 hours for $85.


Lets not even talk about $70.


I gotta move.


Question: Where's the work #1 in the great Country of ours....and that you can charge $125 hrly for???


I think it's a lucky duck thing. Some got it, some don't.
 

LEO2854

Esteemed Member
Location
Ma
Lets not even talk about $70.


I gotta move.


Question: Where's the work #1 in the great Country of ours....and that you can charge $125 hrly for???


I think it's a lucky duck thing. Some got it, some don't.

The money is right there for the taking.

When you give an estimate ,Give a grand total only price="Flat rate"

The key is how well you can sell the product and convincing the customer that you are the right man for the job.

You must add up all your costs per year and ad you desired salary and divide that by 1,000 billable hours that will give you an hourly rate that will make you a profit.

You will be shocked to see how much your necessary hourly rate is and that is where the Grand Total price for the job works.

You do not want to tell clients your hourly rates and itemized stock prices or even how many hours it will take ,

That just gives them ammo to shoot you down to the bottom of the barrel.

In some cases T&M is required by the customer and that just gives them the upper hand and makes your life much harder.

And unless you have the lowest hourly rate you will not get the job anyway.
 

growler

Senior Member
Location
Atlanta,GA
Today I'm having a fight with a HVAC contractor. I quoted him $85 per man hour. Two of us did the job so I billed him for two men at $85 per hour, $170 per hour. He thinks hes getting screwed.


Let me see, fight with HVAC contractor, get back to basics. First off, distract him and get him to look in another direction and then hit him really hard. Once you knock him down then kick him a couple of times to let him know you mean business and let him know it's time to pay up. Don't forget a radio to cover the noise and there should be no witnesses. :angel:


This method can work but it's easier and less jail time if you explain what the possible cost could be and get him to sign a work order or contract.
 

cowboyjwc

Moderator
Staff member
Location
Simi Valley, CA
Let me see, fight with HVAC contractor, get back to basics. First off, distract him and get him to look in another direction and then hit him really hard. Once you knock him down then kick him a couple of times to let him know you mean business and let him know it's time to pay up. Don't forget a radio to cover the noise and there should be no witnesses. :angel:


This method can work but it's easier and less jail time if you explain what the possible cost could be and get him to sign a work order or contract.

Yeah, but if you hit him to hard, then you gotta load him in the trunk and take him out to the desert and dig the hole and all of that is non billable hours, so it just really cuts into your overhead.:roll:
 

kwired

Electron manager
Location
NE Nebraska
Did you ask the HVAC contractor if he does his jobs T&M or if he bids or flat rates them?

I think you have to do some variety of bids, flat rate, as well as T&M. You may prefer to do one method as much as possible.

For me T&M most of the time. I do have a lot of repeat clients, most of time they just call and tell me what they want done and never even question what it will cost. If it is a larger project - or maybe they have third party financing involved they may at very least want some estimates - I usually estimate high - as it is easier to ask them for less money in the end than it is to ask for more.

There are people that will want to know what it is going to cost. You have to know whether they are looking for just an estimate or if they want a fixed price. If fixed price you better have a pretty clear scope of work and make sure they know if there is work done outside the scope it is not covered in the price. Seems like there are not very many jobs that ever end with just what the customer initially requested and nothing else.
 

satcom

Senior Member
Today I'm having a fight with a HVAC contractor. I quoted him $85 per man hour. Two of us did the job so I billed him for two men at $85 per hour, $170 per hour. I've done this for many customers successfully. He actually hired me because the flat rate guys prices seem too high to him. I was unlucky enough to do a job that was tough enough that it would have been a low or no profit job for the flat rate guys. There fore my invoice was higher then what the local flat rate guy would have charged. He thinks hes getting screwed. And the fight goes on.

I really want to do flat rate for obvious reasons. I've even talked with the person who made the ES2 system. If I was entirely a residential service company I would buy into his system in a heartbeat. However I'm not. My company is just my son and I. We do fire restoration as well as all sorts of remodels, Commercial small work, and Industrial small work. It is hard for me to justify spending $89 every month for a system where I really don't need the whole boat. I don't have time to build a flat rate book for myself.

What I would like is something more like what I think the original Electrical Success system was originally before it went high tech, (I've never really seen it), where I could make a one time payment and use it for several years. I think there is a real need for something like this because there are many contractors that want to do SOME service work, but not enough to warrant buying into a whole a complete service business related system that requires a monthly fee.

I also try very hard to stay away from monthly obligations, if business has a slow period it's hard to bring expenses in line with income when your obligated to pay whether you had work or not.

Any Ideas??

I have no idea how the flat rate guys work in your area, but around here they put most of the hourly rate guys out of business in the last 3 years, yes they do tend to charge higher rates, many average 150 to 200 a man hour when you break down their flat rate, they not only do service work, but they also bid commercial fit work and types of residential, myself i am hard pressed to see how anyone can operate a contracting business at an hourly rate, and grow a business that will produce a living wage and grow the business in the long term.
 

growler

Senior Member
Location
Atlanta,GA
I have no idea how the flat rate guys work in your area, but around here they put most of the hourly rate guys out of business in the last 3 years.

Why would anyone want to hire an hourly rate contractor? I have seen a few that were dumb enough but some of them learned a hard lesson. If you don't know the contractor how would you have any idea ( other than wishfull thinking) how much work they will accomplish in an hour? If the job is on a budget ( like most) what happens if something doesn't go right and lots of extra time is needed? Who has a crystal ball and call tell what may go wrong on a job? The higher price for flat rate is insurance and to spread the cost of a hard job out over a number of jobs.

I hate to say this about someone I don't know but this HVAC contractor must be an idiot not to know he was taking a chance.

But then again who actually knows what the flat rate contractor's price would have been. I'll bet the HVAC contractor didn't show a written estimate and a scope of work to go along with the stated lower price.
 

CopperTone

Senior Member
Location
MetroWest, MA
Good call, haven't looked at it that way. I'll consider it.

My problem is a monthly obligation to make a payment. I'm old school, I see monthly contracts as evil because if you ever need to cut back you can't. I'ts like leasing a truck or office equipment, and everything else that obligates you to a monthly payment. All those little monthly obligations add up to a lot of cash, and they are NEVER paid off. That's what bankrupts people and business.

RW

When we buy new trucks we finance them - we hold on to our money and only make small payments over time - yes you pay a little more in interest but you dont have to drop 18k up front and then that money is gone - I would rather make payments of things like this than lump sum. I could always sell the vehicle and hopefully break even on what I owe on it.

With that being said - I pay the insurances up front for the year because I hate the mundane task of writing those checks every month.

You really need to come to the realization that it costs a lot of money to run a business and money that you make is not all yours. Money is a fluid thing in business (like the tide) it flows in and it flows out - in the end hopefully enough of the money stays on the beach for you during low tide.

My point is - if you need a tool to do a job right, then you need have it. a two man shop charging $85/hr per man hour shouldn't exactly be short of money - unless you have no work.

$170/hr for 2 electricians - at 30 billable hours in a week is $5100.00 plus your mark up on materials - could be another $500 - 1000/week . That will put you out of business?
 
Last edited:

Fulthrotl

~Autocorrect is My Worst Enema.~
The money is right there for the taking.

When you give an estimate ,Give a grand total only price="Flat rate"

The key is how well you can sell the product and convincing the customer that you are the right man for the job.
You must add up all your costs per year and ad you desired salary and divide that by 1,000 billable hours that will give you an hourly rate that will make you a profit.
You will be shocked to see how much your necessary hourly rate is and that is where the Grand Total price for the job works.
You do not want to tell clients your hourly rates and itemized stock prices or even how many hours it will take ,
That just gives them ammo to shoot you down to the bottom of the barrel.
In some cases T&M is required by the customer and that just gives them the upper hand and makes your life much harder.
And unless you have the lowest hourly rate you will not get the job anyway.

yep. all of that.

now, when someone asks me what my hourly rate is, i say $75.
my auto mechanic is $85. most crafts aren't cheap any more.
and i may come out and do a service call for $75. depends.
but i can't afford to sell many hours below my cost. if it's more
than an hour or two, i prefer a quote. it's sort of a loss leader, hourly.

we live in a consumer culture. not a barter one.
people want a price, everything is "turn key".

most every difficulty i've had with customer relations has been
wrapped around T&M.

i quoted a difficult run of 1/2" pipe with a 20 amp dedicated circuit,
all told about 120' long, at $2,500. it was a pain to get across a building
entrance.

if it had taken a week, i'd a got $2,500. i got lucky, and it took 3 hours.

a steel fab guy i've done work for, had to put a door back in it's tracks on
a hanger, after high winds pushed it out of the rails, six feet out of plumb.

it was a blimp hanger. the door was 165' tall. he quoted them $85,000.
the facility director took his bid, thinking cranes, and something worthy
of building the pyramids.

he rented a 50 ton forklift, lifted it up 4", moved it over 6', set it back on the
rails. 5 am on a weekday.... when the facility manager showed up at 9 am,
the job was done. 4 guys, 4 hours. and a forklift. they'd already returned
the forklift, and i was checking out the electric controls, to make sure
everything worked. it did.

it's called contracting.

if he'd a dropped the door, he'd a been out of business.
as it was, he was strutting around like a stud duck for months. talking with
him was difficult, as there was only one topic.
 

kwired

Electron manager
Location
NE Nebraska
I have no idea how the flat rate guys work in your area, but around here they put most of the hourly rate guys out of business in the last 3 years, yes they do tend to charge higher rates, many average 150 to 200 a man hour when you break down their flat rate, they not only do service work, but they also bid commercial fit work and types of residential, myself i am hard pressed to see how anyone can operate a contracting business at an hourly rate, and grow a business that will produce a living wage and grow the business in the long term.

It really depends on where you live and what kind of customers you have. Where I live I don't know everybody but probably do have friend, relative, other associate that does know potential customers. That is a perk of living in an area with lower population. I'm sure a lot of business practices of mine would not work very well if my work was in metropolitan area. I do have people that want to know up front what something will cost, they usually are only concerned with wanting to know if it is close to $200, or close to $2000. They trust me enough that when I say $200 that if it ends up being $250 there was probably a little more to it than I estimated. Like I said before I usually estimate high and inform them it is probably high. It is easier to talk them into $200 when you estimated $300 than it is to try to get $200 when you said it would only be $100.
 

LEO2854

Esteemed Member
Location
Ma
It really depends on where you live and what kind of customers you have. Where I live I don't know everybody but probably do have friend, relative, other associate that does know potential customers. That is a perk of living in an area with lower population. I'm sure a lot of business practices of mine would not work very well if my work was in metropolitan area. I do have people that want to know up front what something will cost, they usually are only concerned with wanting to know if it is close to $200, or close to $2000. They trust me enough that when I say $200 that if it ends up being $250 there was probably a little more to it than I estimated. Like I said before I usually estimate high and inform them it is probably high. It is easier to talk them into $200 when you estimated $300 than it is to try to get $200 when you said it would only be $100.

If your estamate was only $100 then you should only get $100 unless they added work to the project.

It is unfair business practice to estamate $100 knowing it will cost more just to get the job then jack up the bill after the fact that type of stuff really angers customers myself included and wiil give you a bad reputaition because they will spred the word .

First the customer does not know how much something will cost till you give them a quote and you must sell the job on the spot if you leave without the green light you have already lost the job because the next guy that comes over may low ball just to get the job then jack up the price at the end.


So the price you give must be high enough in case of trouble so you will still make money but you must keep your word on the price you gave otherwise they will not tell their friends they found a great Electrician.
 

svh19044

Senior Member
Location
Philly Suburbs
So the price you give must be high enough in case of trouble so you will still make money but you must keep your word on the price you gave otherwise they will not tell their friends they found a great Electrician.

This is sound advice and a principle that I have always worked off of. "Sometimes you eat the bear, and sometimes the bear eats you" comes to mind. Very rarely should the bear end up eating you though. :slaphead:

The auto industry probably has the hour book down better than anyone else, 10 hour book job takes 4 hours, until you run in to those rusty bolts.
 
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