Rates - How to decide?

[khixxx]

I have been around long enough to understand the concept that there is a difference in quality. But, I have always tried to find a way to translate that concept into something the average homeowner can understand. Many don't care that I have been to school for twelve years (actually have a EE degree), have worked in nuclear power instrumentation, and have taught school for four years. All they care about is the bottom line on the invoice.

I will definitely check out the links you guys provided. Just starting out on my own, I can use all the tools that I can get to try and be successful. One of those tools is this forum and I appreciate all you folks here at the forum.

I don't know your background but I have worked in industrial for 7 years (I did the ANO outage in East AR this past spring in the I&C shop) and I tried starting my business in Residential. Man what was I thinking. That is a different animal. I would take bending 1" rigid by hand any day over dealing with a HO. At least industrial you are dealing business to business.

 

[mdj1320]

i called a bounch of contractors and put my price in the middle custumers want personal service.they want to feel that you will help them in their electrical situation.

 

[macmikeman]

If I was the original poster, I would forget trying to find out what the others are charging. Follow Aline's links and advise. Ignorance is bliss. The bliss is because if you use the cost calculator, and charge accordingly, you will be blissfully unaware of how ignorant most of your competetors are. They don't know they are loosing money every time they start up their trucks. Don't try to compete with uneducated competetors. Find good customers. Treat them right, perform, and charge what you are worth, not what the carpenter charges. (By the way, most carpenter charge either 1/2 day or full day, never by the hour. They understand lost time better than most electrical contractors who do service work)

 

[iwire]

if i were to work for someone, I'd rather work 25 hrs a week for $30/hr, than 40 hrs a week for $15/hr....but that's just me

Maybe that is 'just you'.:grin:

Before I could decide which I would like better I would need to know the working conditions.

If I had to be an aggressive PITA to get the $30 I might just pass on that.

 

[growler]

I would love to talk with some of the locals, but they seem to be pretty tight lipped about what they charge. I usually charge $50 per hour for T & M. Does this seem outrageous? Some customers are okay with it, others want to bitch.

$50 an hour is reasonable anywhere in the country, people just like to bitch. If you get a project with 100 or more hours and you can bill at $50 an Hr. then you may make a profit but if you do service calls for $50 then you are going to lose your shirt.

Give it some time and start to look at the invoices of your competitors and you will find that they are not as cheap as you think they are. Only compare your prices with companies that have been around for 10 to 20 years because a lot of the new guys are not going to be in business very long ( they don't count ).

Customers like the fact that they can call you again after 2 or 3 years and you are still in business. Pass out business cards and put stickers on all panels because it can be 5 years before getting repeat business from some customers.

 

[aline]

Hourly Rate Calculation For A One Man Shop Doing Service Work.

Below I've listed some of the expenses a one man shop would have doing service work. In my opinion the values listed are very conservative and would be too low. A half page phone book ad where I live is $1,500 per month. There are four phone books here. Also I believe there would be more expenses than what is listed here but I wanted to keep it somewhat simple.

Annual Expenses

Advertising & Marketing $20,000
Auto Gas $3,500
Auto Insurance $600
Auto Payment or Replacement cost $7,200
Auto Registration $120
Auto Repairs & Service $500
Bank Service Charges $100
Business Taxes $0
Finance Charges $500
Health Insurance $0
Liability Insurance $500
License Fees $500
Merchant Account Fees (Accept Credit Cards) $1,600
Telephone & Cell Phone $1,400
Office Expenses (Supplies) $1,600
Office Personnel $0
Owner's Pay $60,000
Professional Fees (Acountant & Attorney) $500
Retirement Plan $0
Software $0
Supplies (Shop & Truck) $600
Taxes (Property) $100
Tools & Machinery Purchases $500
Uniforms $200

Total Annual Expenses $100,020

If you factor in two weeks for vacation and six holidays you have 1,952 hours per year or 244 days. They say doing service work you're lucky if you can operate at 50% efficiancy, but lets say you can bill for 5 hrs. per day.
That gives you 1,220 billable hours.

Breakeven Hourly Rate
$100,020 divided by 1,220 hours = $81.98 Per Hour

Add 10% Profit
$81.98 divided by .90 = $91.09 Per Hour

Notice that there's no health insurance, no retirement plan or business taxes included in the annual expenses listed above.

Think you can bill for 8 hours a day?
$100,020 divided by 1,952 hours = $51.24

Add 10% Profit
$51.24 divided by .90 = $56.93

If you really take the time to factor in all the expenses that you should be factoring in, the rates would be even higher.
I know mine are.

Yet some people only charge $50 for a service call.

Sure you make some profit on material sales but if you're doing residential service work you're not going to be selling a lot of materials.

Then there was the customer I had who was a mortgage broker. He told me he felt he was doing good if he made $50 an hour and felt my rate should be lower than that. He acted insulted that a lowly electrician was charging more than what he made.

 

[emahler]

while I have no empirical evidence...i strongly believe that the numbers in you example are relatively accurate. in addition, due to an increase in productivity as a company grows, I'd bet that the man hour rate is actually higher for a 1 man operation than a 10 man operation...

 

[bikeindy]

$50.00 is too low. and if someone asks why your price is higher you can tell them that you will be fixing their problem and at your rate and your experience it will probably take you less time and cost less in materials since you will find the real problem the first time. I have had customers who have paid two or three EC's before they called me to finally fix the problem. Look in this business you still have to sell yourself, generally when I tell a customer my background they feel very comfortable in the fact that they are going to be well cared for and are more than happy to pay for my services. I love residential work I like meeting the home owners and I get plenty of referral work besides it is sooo easy to find the cause of the problem it is child's play. for a challenge I do Industrial service work.

 

[emahler]

Maybe that is 'just you'.:grin:

Before I could decide which I would like better I would need to know the working conditions.

If I had to be an aggressive PITA to get the $30 I might just pass on that.

maybe I should have said, "If I were to work for someone else"....oh wait, I did

But, then again, if my grandmother had balls, she would be my grandfather...

 

[bradleyelectric]

But, then again, if my grandmother had balls, she would be my grandfather...

I don't think I want to know about your grandmothers balls

 

[ITO]

Advertising & Marketing $20,000

I was going to ask where you got that number then I saw that some of the other ones were a little low for me so it kind of evens out.

Nice way to analyze it.

My rate including truck for a service man is $75/hour and I am one of the cheapest guys in town, the catch is I DONT do residential, and my service men do some double duty for punch lists on bigger jobs. I also am very selective about new service clients, we just don’t have enough service men for everyone so I tend to try and take care of my established commercial clients.