Second Guessing

[480sparky]

so whats your point the price was set ahead of time the customer got his problem fixed if they are unhappy then they can call someone else next time.

If they pay you $500/hour, I'm sure they will.

 

[satcom]

If done correctly yes. Remeber flat rate is based on the next service call at 250.00 being done in 30 minutes.

The next service call has nothing to do with the first call, flat rate pricing for service requires a good pricing book, built from years of actuals records, of service work, and knowing how to assemble the service billing, for every condition, for example: a troubleshoot for an outlet with no power would go be quoted first for the troubleshoot, then once the problem is found, a second quote for the repair would be presented, no unknown for you and no unknown for the customer. Flat rate pricing is a process, not guess work.

 

[Rewire]

If they pay you $500/hour, I'm sure they will.

We get call backs all the time,we had a store call us about thier sign the first electrician told them it was a bad toggle switch but he didn't have a tall enough ladder the second one said it was a probably a bad ballast but he didnt have a replacement we got their went to the time clock noticed the pins were looseand sliding tightened them up tested the system and all worked fine. billed our service and we have been thie elctrician ever sinse even at $500.00 /hr.

 

[Rewire]

The next service call has nothing to do with the first call, flat rate pricing for service requires a good pricing book, built from years of actuals records, of service work, and knowing how to assemble the service billing, for every condition, for example: a troubleshoot for an outlet with no power would go be quoted first for the troubleshoot, then once the problem is found, a second quote for the repair would be presented, no unknown for you and no unknown for the customer. Flat rate pricing is a process, not guess work.

I know it was an over simplification of a more complicated process.

 

[satcom]

I know it was an over simplification of a more complicated process.

Yes it is, and we have been thru this many times, and what happens is someone reacts with you can't tell how many hours it will take, to troubleshoot, we have actual records for just about every troubleshoot condition, but so many of the guys that question it, will not spend the time to learn the proper process to make it work, they will not spend the money on good estimating systems or pricing books, and just say it will not work, we have been using flat rate, and contract pricing for over 30 years plus, and it has worked well for us.

 

[Rewire]

Yes it is, and we have been thru this many times, and what happens is someone reacts with you can't tell how many hours it will take, to troubleshoot, we have actual records for just about every troubleshoot condition, but so many of the guys that question it, will not spend the time to learn the proper process to make it work, they will not spend the money on good estimating systems or pricing books, and just say it will not work, we have been using flat rate, and contract pricing for over 30 years plus, and it has worked well for us.

We are moving to flat rate on many tasks we do. My goal is to not have an hourly rate.

 

[mxslick]

This is why Time & Material, with the not to exceed price of the original amount is good. You always make money on T&M right ? And you plan on making money on the original price. So do it T&M with the 1/3 down and weekly billing. May want to mark this option up since your tracking the job more than you usually would.

You're kidding, right? On a job this small you'll spend more time in dealing with paperwork and invoicing so there goes your profit.

Any job I do under say $2k is 50% down, balance on completion. Others get 50% down, NET 10 or 30 depending on the customer. Well established customers get NET terms with no down.

 

[LarryFine]

... for example: a troubleshoot for an outlet with no power would go be quoted first for the troubleshoot, then once the problem is found, a second quote for the repair would be presented, no unknown for you and no unknown for the customer.

I just describe that as a troubleshoot, where I'll either fix the problem as I find it, or explain what is required if not. $150 gets me there and covers the first hour. I've always found the problem in less than half of that.

Granted, $150 isn't $250, but I don't get into the "But, you didn't fix it!" argument if I find it's going to take more time and/or materials than expected, and it's easier to swallow for a frantic customer on the phone.

 

[Steve Beranek]

You're kidding, right? On a job this small you'll spend more time in dealing with paperwork and invoicing so there goes your profit.

Any job I do under say $2k is 50% down, balance on completion. Others get 50% down, NET 10 or 30 depending on the customer. Well established customers get NET terms with no down.

No, I'm not kidding, I never spent more than 20 minutes on a single invoice. Maybe its quickbooks or something, but I never had to unless the customer didn't pay. But 1/3 down, depending on the size of the job, should have you set for a minimum of a few weeks worth of time. T&M jobs, if done for a standard new customer would be check or cash at the end of the day. They would know the rate, and exactly what sort of material they were getting into or they could stop us from doing the work, we'd pack our material up, and go to the next job.

I agree with the money down but usually 1/3 is enough to tie them into the project and enough to purchase the material for the beginning of the project.

Well established customers that are a common T&M customer, I know some of these, would be billed immediately at the end of the job, with 30 days for payment. We would hand them the T&M ticket with the hours, and material filled out, no prices, prices for the jobs we did we common items that we had a list for, and these were written quickly onto the sheet, added up, and punched into the computer to print. If they got behind on a bill then no more T&M for them until they caught up. We may loose a thousand or so from lack of payment but we more than made up for that with our 40% return on T&M from them.

 

[One-eyed Jack]

It is the difference between thinking like a Technician and thinking like a business man.When you underbid your competitor by a thousand dollars do you think about the 999.00 you left on the table?If I am just paying the bills I am in big trouble.If I am clocking the same hours this year as I did last year and I have less income then I would say I am loosing money.

No that is faulty reasoning. You can not lose money you never had. Ok try presenting all of your lost bids or your underbid jobs(you made money just not as much as you couda,wouda if you had bid higher) to the IRS as a loss. You can't pay a CPA to make that argument for you. Bid the job to make money. If you get the job go with it. If you consider money that you did not bid as lost you are lying to yourself. If it ain't ever been in your pocket you did not lose it. You failed to aquire it,not the same thing. I didn't win the Lottery but I did not lose 50 million dollars.

 

[One-eyed Jack]

I just describe that as a troubleshoot, where I'll either fix the problem as I find it, or explain what is required if not. $150 gets me there and covers the first hour. I've always found the problem in less than half of that.

Granted, $150 isn't $250, but I don't get into the "But, you didn't fix it!" argument if I find it's going to take more time and/or materials than expected, and it's easier to swallow for a frantic customer on the phone.

Sounds good to me. They may squeal at first but if it works when you leave you did what they called you to do.
Present me with a 1000.00 bill for an AC repair that does not work. If I sleep in a hot house incompetence goes unrewarded.

 

[Rewire]

No that is faulty reasoning. You can not lose money you never had. Ok try presenting all of your lost bids or your underbid jobs(you made money just not as much as you couda,wouda if you had bid higher) to the IRS as a loss. You can't pay a CPA to make that argument for you. Bid the job to make money. If you get the job go with it. If you consider money that you did not bid as lost you are lying to yourself. If it ain't ever been in your pocket you did not lose it. You failed to aquire it,not the same thing. I didn't win the Lottery but I did not lose 50 million dollars.

Simple question if I hire you at 100.00 /hr you do an hours work and then I don't pay have you lost $100.00? Acording to your reasoning you haven't.

You can not lose money you never had

try presentting a non payment to the IRS as a loss.

 

[rodneee]

Simple question if I hire you at 100.00 /hr you do an hours work and then I don't pay have you lost $100.00? Acording to your reasoning you haven't. try presentting a non payment to the IRS as a loss.

since you brought the IRS into this......if your firm operates on an "accrual" accounting method (sales entered on date of work performed) the $100.00 bad debt would be entered as a reduction of gross income (not a deduction) which would filter down to taxable income....if your firm operates on a "cash" accounting method (meaning sales entered upon receipt of payment, not meaning coins and bills) the $100.00 bad debt is not deductible nor is it a reduction of gross income....

 

[satcom]

No that is faulty reasoning. You can not lose money you never had. Ok try presenting all of your lost bids or your underbid jobs(you made money just not as much as you couda,wouda if you had bid higher) to the IRS as a loss. You can't pay a CPA to make that argument for you. Bid the job to make money. If you get the job go with it. If you consider money that you did not bid as lost you are lying to yourself. If it ain't ever been in your pocket you did not lose it. You failed to aquire it,not the same thing. I didn't win the Lottery but I did not lose 50 million dollars.

No, he can not loose money he never had, but he can sure loose the chance to bring in that extra money on the table, when he accepts a job at $200 less then the others.

 

[One-eyed Jack]

Simple question if I hire you at 100.00 /hr you do an hours work and then I don't pay have you lost $100.00? Acording to your reasoning you haven't. try presentting a non payment to the IRS as a loss.

If it was for my labor as opposed to hired labor I lost an hour. I also lost the opportunity to make the same amount. I did not lose any actual money. Argument can be made for loss of income and a labor lien. You agreed to pay for a delivered service and defaulted. Not the same as failing to bid. You awarded me the bid in your scenario at an agreed upon price. I don't get to claim 200 hr in my labor lien. Non payment of an agreed upon contract that you fulfilled is quite a bit different than couda made more if I bid more.

 

[220/221]

This is a customer who potentially will give me more work..

Do you want to set a precedent of working cheap? ANY custiomer can potentially give yoou more business. Treat everyone kindly and professionally but don't make the mistake of setting your rates to low.


I'd ask what happened to his usual electrician. He's probably OOB or in another line of work.

 

[readydave8]

If they would like to give you a try, maybe offer at T&M with not to exceed, that way if it only takes one hours you both win?

I'm not saying I never do it, but in general T&M with a cap sounds like the worst of both T&M and contracting. Perhaps there's more to it that I don't understand.

In general I'm willing to contract a job and lose (usually time rather than money) if I'm wrong, or work T&M and do whatever the customer wants, no problem with changes or adds or other trades causing me unnessacary exta manhours. I often tell the customer that if he's not sastisfied at any point, just pay me to date and we can part as friends.

 

[hardworkingstiff]

I'm not saying I never do it, but in general T&M with a cap sounds like the worst of both T&M and contracting. Perhaps there's more to it that I don't understand.

In general I'm willing to contract a job and lose (usually time rather than money) if I'm wrong, or work T&M and do whatever the customer wants, no problem with changes or adds or other trades causing me unnessacary exta manhours. I often tell the customer that if he's not sastisfied at any point, just pay me to date and we can part as friends.

I'm with you Dave. T&M not to exceed is a bad deal for the contractor.

 

[satcom]

First, we need to understand, that when you are in business, time is money, and T&M with a cap is a contract. The contract, in simple terms, will say that i will work at a given rate for as many hours as it takes to complete the job, and will only charge you an agreed set amount. If you go over the agreed time, it is a great advantage for the customer, and a sure loss of money for you.

Then we have just plain vanilla T&M, which can cost the customer and you more time, (which is money) should the job take longer than either you or the customer thought it would.

I may be better to learn good estimating skills and present a set price contract, which in most cases will benefit both you and the customer.

 

[LarryFine]

When I get asked how I arrive at a price for a job, I explain how my experience lets me approximate much time I think it will take, including problems I'm likely to run into.

If asked to lower the price if it takes less time than I estimate, I say I will if I can charge more if it takes longer. That usually ends the discussion with a smile and a nod.