Free Estimate Questions

[Dnkldorf]

this was not part of the equation...it was simply an example based on an equal # of estimates run and the same closing ratio...you can create 1,000,000 variables....but the assumptions and variables for this example were given..

Actually this is a huge part missing from your equation.

The cost to obtain the calls, and the number of calls needed to obtain your results, have a direct impact on your marketing budget, which effects how much it costs you to provide this estimate in your equation.

 

[emahler]

Actually this is a huge part missing from your equation.

The cost to obtain the calls, and the number of calls needed to obtain your results, have a direct impact on your marketing budget, which effects how much it costs you to provide this estimate in your equation.

so does:

employee pay
owner pay
office rent/mortgage
truck(s) payment
mileage
# of oil changes per year
fill up with regular or super
employee turnover
insurance rates
benefits
cell phone plan
use GPS or not
type of vehicle owned by owner
# of CSR's
gas or electric heat in the shop
A/C in shop or not
Fluorescent or incandescent lighting in warehouse
electric or gas water heater in the shop
etc
etc
etc


so why don't you calculate all the variables and get back to us...

for the sake of this example, all these items, including the advertising, are part of the overhead covered by the $500 per job....

 

[aline]

If a product or service costs you $75, and you sell it for $49, then you are using your dispacth fee as a loss leader.

If the person pays the fee, and doesn't use your service, the loss must be passed on to the people using your service, aka "punishing" those who use your service.

Correct as usual, but instead of having to passing the entire $75 on to the people using my service I only have to pass on $26.

I also spend less time running around giving estimates on a $500 job that the homeowner decides to either do himself or just doesn't have the job done at all.
Which also means less expense I have to pass on to my customers.

Here's a call I went out on recently.
At the time things were quite slow and I told my call taker to not quote a dispatch fee if it sounded like a fairly substantial job. The caller said they needed their basement wired and also needed a new panel added in the basement since the existing panel was full.

When I got there the boxes were already nailed in place and all the materials for the job had been purchased by the customer. He wanted a price to for the basement wiring and a seperate price for installing the new panel.

I gave him the prices and below is the response he e-mailed me.

Thank you for your time in compiling these price quotes. My wife mentioned your excellent service and taking the time to explain things in terms she could understand. We have not had any experience with how much electrical work would cost, so this really helps us as we plan on finishing our basement and how much we will need to save to continue forward.

At this time, we do not have the funds for this. We recently had to pay quite a bit to repair a broken pipe and to clean up a lot of mold that we discovered in the basement as we tore out the old sheet rock to insulate.

Seems like everytime I don't charge a dispatch fee these are the calls I end up on.
Charging a dispatch fee seems to weed most of these calls out.
Sure I may miss a good oportunity from time to time but I feel overall I come out ahead by charging a dispatch fee.

 

[aline]

Only the paying customers pay for everything: gasoline, insurance, licensing, your meals, your mortgage, etc.

Everything you say, see, or do without charge is paid for by those who hire you. That's just a fact of business.


What else is there?

Nothing.

Free estimates aren't really free.
Nothing is free the only question is which customer pays for it.
If you go out and reset a GFCI for a customer and don't charge that customer for it then another customer has to pay for it.

Some say you're being dishonest if you charge a dispatch fee and then tell the customer you'll wave it if they accept your price for the job.
I could charge the same price for the job wether or not I waive the dispatch fee. Waiving the dispatch fee gives them an incentive to have me do the job while I'm there.

I don't think it's any more dishonest than telling a customer estimates are free then adding it into the bid.

Do you advertise that gasoline, insurance, licensing, your meals, your mortgage, etc. is free?

I've never seen this in anyone's advertising.

 

[active1]

Look at the big picture.


Assume the $500 jobs were done in only 3 labor hours after the tec is there and has gone over it with the customer. Also for numbers assume you only had $75 in material (MU not figured to keep simple).

No service call charge:

1 Hour answering the phone (6 min each)
5 Hours drive time (1/2 and hour drive between from shop and between jobs)
2.5 Hours getting in the door and selling
15 Hours labor performing electrical work (5 jobs 3 hours each)
-----------------
23.5 hours labor

$2500 Sales
- $500 material
----------------
$2000 / 23.5 hours = $85/hr


Charge $75 for a service call:

Out of 10 calls only 5 accept to pay the $75 fee and it resaults in only 4 sales.

1 hour answering calls

2.5 hours driving between jobs (1/2 hr drive time)

1.25 hour getting in the door and selling (15 minuites each)

12 hours doing the work (4 jobs 3 hours each)

------------
16.75 Hours total

$2375 in sales (4 x $500 jobs + 5 x 75)
-300 material
--------------
$2075 / 16.75 hours = $123.90 /hr



Again charge $75 for a service call but have a low amount of sales:

Out of 10 calls only 4 accept to pay the $75 fee and it resaults in only 3 sales.

1 hour answering calls

2 hours driving between jobs (1/2 hr drive time)

1 hour getting in the door and selling (15 minuites each)

9 hours doing the work (3 jobs 3 hours each)

------------
13 Hours total

$1800 in sales (3 x $500 jobs + 4 x 75)
-300 material
--------------
$1500 / 13 hours = $115.38 /hr


The first no service call charge plan will keep you phyically 1 day busier and add 1-2 more customers to your list. It will also slightly increase your gross for the year. While not figured in it will use more fuel and wear on the trucks. The charging a service call fee, and reducing the number of small sales calls makes the company much more efficient.

IMO I agree with a post past that 40% at best maybe even 30% is what is to be expected on free small service call close rates. THe 50% used above is not realistic for new customers with not past referance to your business.

Also I believe that the way advertising is used and policies on how a business charges dramaticaly affect the type of customer base that is created. I have seen it where business advertise free and next to nothing charges to create a customer base. The trouble is those are not the customers you want. In general they will want everything free or for next to nothing, want to supply their own material, look for an angle to not pay for something, have little loyalty, ask for partial or sub standard repairs, do not value your service or time, and not care about quality or safety. With free estimates the same customers are also more likely to keep getting an quote until they get one that is way lower. As said that is one reason for the lower close rate on the free estomates.

Just the opposite the customers that you want will pay a bill without blinking, will pay more for someone they believe will do a quality, safe, and clean job.

Also figure many times there is an appointment time for the estimate. Very few say come by anytime Monday. To make these appoitments can cost you other jobs. Such as if you had a 2:00 estimate. You may be at a job earlier and have to pass on some extras to make the 2:00. Or you can't take an emergency call by one of your exsisting customers because your heading in a different direction to make that free 2:00. Tring to be on time may mean being there early and waiting because of when the last job got done. Meaning dead time. Only worse than a late customer is a nobody home on a free estimate. I think it does happen more on free ones. It could be they were already sold by another EC or some could careless because it was free.

 

[LarryFine]

No service call charge:

1 Hour answering the phone (6 min each)
5 Hours drive time (1/2 and hour drive between from shop and between jobs)
2.5 Hours getting in the door and selling
15 Hours labor performing electrical work (5 jobs 3 hours each)
-----------------
23.5 hours labor

$2500 Sales
- $500 material
----------------
$2000 / 23.5 hours = $85/hr


Charge $75 for a service call:

Out of 10 calls only 5 accept to pay the $75 fee and it resaults in only 4 sales.

1 hour answering calls

2.5 hours driving between jobs (1/2 hr drive time)

1.25 hour getting in the door and selling (15 minuites each)

12 hours doing the work (4 jobs 3 hours each)

------------
16.75 Hours total

$2375 in sales (4 x $500 jobs + 5 x 75)
-300 material
--------------
$2075 / 16.75 hours = $123.90 /hr



Again charge $75 for a service call but have a low amount of sales:

Out of 10 calls only 4 accept to pay the $75 fee and it resaults in only 3 sales.

1 hour answering calls

2 hours driving between jobs (1/2 hr drive time)

1 hour getting in the door and selling (15 minuites each)

9 hours doing the work (3 jobs 3 hours each)

------------
13 Hours total

$1800 in sales (3 x $500 jobs + 4 x 75)
-300 material
--------------
$1500 / 13 hours = $115.38 /hr

Which one brings in the most money per week?

 

[hardworkingstiff]

Correct as usual, but instead of having to passing the entire $75 on to the people using my service I only have to pass on $26.

I also spend less time running around giving estimates on a $500 job that the homeowner decides to either do himself or just doesn't have the job done at all.
Which also means less expense I have to pass on to my customers.

Here's a call I went out on recently.
At the time things were quite slow and I told my call taker to not quote a dispatch fee if it sounded like a fairly substantial job. The caller said they needed their basement wired and also needed a new panel added in the basement since the existing panel was full.

When I got there the boxes were already nailed in place and all the materials for the job had been purchased by the customer. He wanted a price to for the basement wiring and a seperate price for installing the new panel.

I gave him the prices and below is the response he e-mailed me.

Seems like everytime I don't charge a dispatch fee these are the calls I end up on.
Charging a dispatch fee seems to weed most of these calls out.
Sure I may miss a good oportunity from time to time but I feel overall I come out ahead by charging a dispatch fee.

I like your dispatch fee idea. Cuts down on the tire kickers but doesn't scare away the serious customer.

 

[jmsbrush]

I too, have a dispatch fee, but it is difficult when the other 12 to 15 Ec's in the book advertise free estimates.

 

[Rewire]

I too, have a dispatch fee, but it is difficult when the other 12 to 15 Ec's in the book advertise free estimates.

You have just discovered the fatal flaw,you can charge a dispatch fee and some customers will pay it but many more will just move to the next guy on the list.

I see no upside in limiting my slice of the customer pie.I tried the dispatch fee and we saw a marked drop in business we limited our customer base and still had to bid compettitive against others. Real world showed me this was not a good business move.

 

[short circuit faulted]

No Free Estimate is truly Free - Someone Pays

No Free Estimate is truly Free - Someone Pays

I believe the orginal question was who charges a troubleshooting fee versus an estimate fee. IMHO if you are not charging an estimating/troubleshooting fee you are either overcharging your "paying customers" or losing money for each call you respond to for an estimate or troubleshoot. Gas prices have backed down from the four dollar a gallon mark, however you still have fuel, time, insurance and other overhead expenses associcated with giving "free" estimates/troubleshooting. Therefore no "Free" estimate is truly free - someone either your existing customers or you end up paying the associated costs.

It is simple to help over the phone an existing or perhaps new customer when they describe a power outage that consists of thier bathrooms and or gargare/outdoor outlets. Some new customers actually remember your service and call you back for other work. There are even cases in this scenero where the GFI is actually bad and you get the work.
Now the fellow who calls and asks how to connect a starter on air compressor, that he just got this job with plant and they believed him when he said he had electrical experience; I calmly explain "I cannot and will not help you kill yourself".

Fees whether for troubleshooting or estimates should be used to cover your associated costs plus a 10%-15% markup to cover OH & P for providing the service, otherwise you if you want to go the "Free estimate" route be prepared for six percent of those who see the add to call for your "free advice" with the majority of them going to the orange box to solve thier problem. Consider it a weeding out method, some calllers upon finding out we charge for an estimate or trouble shooting end up making a choice to either utilize our services or to run the "Free estimate guys in the ground getting all the info they can to solve the problem.

Have a Good Day All!

Steve

 

[Rewire]

I believe the orginal question was who charges a troubleshooting fee versus an estimate fee. IMHO if you are not charging an estimating/troubleshooting fee you are either overcharging your "paying customers" or losing money for each call you respond to for an estimate or troubleshoot. Gas prices have backed down from the four dollar a gallon mark, however you still have fuel, time, insurance and other overhead expenses associcated with giving "free" estimates/troubleshooting. Therefore no "Free" estimate is truly free - someone either your existing customers or you end up paying the associated costs.

We have a base service call fee which is totally different from our estimate which we do not charge a fee.We don't give estimates for changing a light bulb estimates are usually for larger jobs.Not having a direct charge for an estimate is a marketing tool.I look at three things when evaluating a new method,
1 can it be done consistantly

2 can it be done in any geografic market

3 will it deliver for the customer

It is simple to help over the phone an existing or perhaps new customer when they describe a power outage that consists of thier bathrooms and or gargare/outdoor outlets. Some new customers actually remember your service and call you back for other work. There are even cases in this scenero where the GFI is actually bad and you get the work.
Now the fellow who calls and asks how to connect a starter on air compressor, that he just got this job with plant and they believed him when he said he had electrical experience; I calmly explain "I cannot and will not help you kill yourself".

I give no DIY advice over the phone as liability attaches. If a large portion of the home is out I will recommend calling the utility first

Fees whether for troubleshooting or estimates should be used to cover your associated costs plus a 10%-15% markup to cover OH & P for providing the service, otherwise you if you want to go the "Free estimate" route be prepared for six percent of those who see the add to call for your "free advice" with the majority of them going to the orange box to solve thier problem. Consider it a weeding out method, some calllers upon finding out we charge for an estimate or trouble shooting end up making a choice to either utilize our services or to run the "Free estimate guys in the ground getting all the info they can to solve the problem.

Our estimates never come with advice,a good call screener can weed out the lookyloos.

 

[Dnkldorf]

A free estimate, in the mind of the consumer, is free......at the moment.

The practice is nothing but a marketing tool, and an oppurtunity maker.

Some of you don't see it as that.

 

[emahler]

A free estimate, in the mind of the consumer, is free......at the moment.

The practice is nothing but a marketing tool, and an oppurtunity maker.

Some of you don't see it as that.

For a true service company, free estimates can be the difference between profitability and bankruptcy.

Some of you don't see it as that.

 

[Rewire]

For a true service company, free estimates can be the difference between profitability and bankruptcy.

Some of you don't see it as that.

If profitability or bankruptcy hinges on if you charge or don't charge for an estimate then your business is in real trouble.

Anyone can see that.

 

[aline]

A free estimate, in the mind of the consumer, is free......at the moment.

That's the problem.
In the mind of the consumer the estimate is free.

In their minds since we're giving it away for free it must not be worth much or costs us much to provide.

They really don't understand just how much it costs a contractor to send someone out to give a free estimate. When you give them a price for that $500 job that they want several free estimates on, they only look at the time they think the job is going to take and don't even consider the fact that you not only have to cover your expense for their free estimate but also the expenses for the other free estimates you gave and didn't get.

They sit there wondering why contractors charge so much and figure we must be making a killing.

I can understand the free estimate thing for large jobs but I think the consumer is expecting too much these days.

I get calls and the first thing they say is "Do you give free estimates?"

I'll ask what do you need an estimate for.

They respond with "I have an outlet that doesn't work or I want to relocate one light fixture."

I had one guy that wanted a track light that was over by a window in a basement bedroom relocated to the center of the room and a new fixture installed.

I told him there would be a $29 dispatch fee to come out and look at the job to give him an exact price. I also gave him a rough idea of how much I thought it might cost. He told me he wanted several bids and he already had a few contractors that were coming out for free.

I have no desire to be one of them.
I believe more and more consumers are taking far too much advantage of the free estimates contractors provide and are expecting too much for free.

Then there's all the calls I get from someone who is looking into buying a home and they have a list of things from a home inspector that they want free estimates on. They don't even own the home but they expect all these contractors to run out and give them free estimates for the work just so they can negotiate with the seller.

 

[Rockyd]

Thank you Aline!!!

If your doing items for free, you must be a trust fund baby, the business is expensive. Just breathing has a nut to be met in the morning. The average shop vehicle has at least a million dollar insurance policy, and an employee (who will charge the shop regardless of winning, or losing a bid). Running hither and yon for cheap is a ticket to bankruptcy.

Thanks Aline for laying the case out against the "give away the house" group, and pointing out the realities of a succesful approach.

 

[aline]

If profitability or bankruptcy hinges on if you charge or don't charge for an estimate then your business is in real trouble.

Anyone can see that.

I'm sure there are many contractors who can't see that.

I'm sure there are many that don't have a clue about how much a lot of the things involved with operating a business cost.

I'm sure there are many contractors who truly do give free estimates and don't cover these costs in the prices of their jobs along with a lot of other overhead items. They throw in some arbritriary percentage they heard about or read about to cover overhead expenses.

I'm sure there are many contractors that don't stay in business long or work very hard their whole life and in the end have nothing to show for it but a worn out body, worn out tools, worn out trucks and a job as the walmart greeter instead of a retirement.

The key is to track everything.
Is your business more profitable charging a dispatch fee?
Is your business more profitable not charging a dispatch fee?

The only way to know is to track it.
This includes tracking all of your time spent giving estimates and everything else.

Common sense would tell you to choose the method that is most profitable but there's no way to know which method is more profitable unless you track it properly which I doubt few contractors would take the time to do.

A lot don't even take the time to look at a P&L statement weekly or monthly. They find out how they did for the year at the end of the year when the accountant tells them.

 

[aline]

I remember going out and giving a bid on one bedroom in a basement that the homeowner wanted finished.

My price was around a $1,000 for this job, I really thought it was a low price and figured I wasn't going to make much on this job.

Another contractor's price was $500.

Here's a job that requires at least three trips out.
One trip to meet with the homeowner, go over the job and provide an estimate.
One trip out to do the rough-in electrical.
One trip out to do the trim-out electrical.

I can't possibly see how this contractor could be covering his expense for going out and giving this estimate plus covering the expenses of other estimates he didn't get with a price this low.

The homeowner probably thought it was all too much and did the work himself.
Everyone knows just how easy electrical work is. Anyone can do it.
Often times when I get there the homeowner has already purchased the material for the job and it's sitting there in the middle of the floor or else some of it is already installed.

Yes, I believe there are nut cases out there that truly do give free estimates along with a lot of other free things that cost them money and fail to factor into their pricing.
Homeowners do think this stuff is expensive but the reallity is it should be more expensive than it is. Homeowners are getting great bargains out there and don't even realize it.

 

[emahler]

Some EC's focus on gross sales, some focus on net profits, some don't even know there is a bottom line on their P&L. And some don't even know what P&L stands for.
For those intersted in getting a better grasp on their business, listen to Aline. He's simply giving information, already in use everyday, by thousands of the most successful PHCC/E companies in the country.

 

[aline]

For those intersted in getting a better grasp on their business, listen to Aline. He's simply giving information, already in use everyday, by thousands of the most successful PHCC/E companies in the country.

I have to disagree about listening to me. I'm just a guy on an internet forum that you know nothing about.

My suggestion would be to determine the type of work you want to do whether it be residential/light commercial service work, new housing construction, large commercial projects, industrial type work etc.

Find the most successful contractors doing this type of work.
Find out what they do and how they do it.
Find out why they are succesful at this type of work.
Try to determine if there are things that they're doing that you can improve upon.

I believe you will have a better chance of being successful too if you follow their business model instead of inventing your own. The wheel has already been invented but there's always room for improvement.

The other option is to follow the business model of the majority of the contractors out there instead of the most successful ones. I would prefer to follow the business model of the most successful though. I think the odds of success would be better.

If you want mediocre performance and profitablility from your company then follow the business model of the mediocre companies. Keep in mind though that if you fall short you may end up with poor performance and profitability instead of mediocre.

On the other hand if you follow the business model of the most successful companies and fall short you may just end up with mediorcre performance and profitability.

Although I read the advice given on forums and take it into consideration.
I put more value into advice given by the companies with a proven track record of success.