Why would a customer hire a big company over a 1 man shop?

[KVA]

Yes that is exactly what I am telling you. Why do you feel you should not? Do you think a large company with ten times your overhead charges ten times what you do?

Nope they charge the same way overhead and profit. The overhead is higher so the hourly rate is higher.

Didn't you go out of business before?

Anyway this thread is not about me lets stay on topic.

 

[Rewire]

Nope they charge the same way overhead and profit. The overhead is higher so the hourly rate is higher.

Didn't you go out of business before?

Anyway this thread is not about me lets stay on topic.

You don't understand dollar wise they spend more but as a percentage of gross it is the same as you. If they are charging more than you it has nothing to do with a higher overhead but more likely a better understanding of what it costs to be profitable. The assertion that a one man shop can save a customer big time because of persumed lower overhead is a fallacy

I came real close when the housing bubble burst to going under simply because of thinking like yours that I had a lower overhead and could charge less.

As to the original question customers seeking the cheapest electrician would have a higher probability of finding that in a one man shop. The one man shop has the ability to lower their price easier than a larger shop although the customer wins the one man shop loses. A one man shop that operates as a business that understands its true cost has no advantage over a larger shop that also operates as a business and understands its true cost. Both shops have the same limitation and that is their are only so many hours in a day that we can sell here is where the large shop gains an advantage they add employees thus adding more billable hours

 

[KVA]

The assertion that a one man shop can save a customer big time because of persumed lower overhead is a fallacy

Who said anything about saving big time? They will save hiring a 1 man over a big company but not big time but they will obviously save.

 

[Rewire]

Who said anything about saving big time? They will save hiring a 1 man over a big company but not big time but they will obviously save.

Actually you said it in your first post,
why would they save? Why do you think a large shop charges more than a one man shop? The cost for a labor unit is no different it is just the larger shop has more hours to sell. When I bill eight man hours it can be one guy 8 hours or two guys 4 hours. The customer sees no cost savings.

 

[stickboy1375]

Actually you said it in your first post,
why would they save? Why do you think a large shop charges more than a one man shop? The cost for a labor unit is no different it is just the larger shop has more hours to sell. When I bill eight man hours it can be one guy 8 hours or two guys 4 hours. The customer sees no cost savings.

I agree, the hours to complete a job are always going to be (x), so you either send 1 guy for two days, or two guys for 1 day. IMO, its better for the company to do the latter, since you can start another job the following day and keep more people happier and this is just how we do it where I work....

 

[480sparky]

In many cases, it's not a matter of halving the hours when there's two people on the job. It's usually less than half.

For instance, if one person can do the job in 8 hours, two will usually complete it in 3?.

 

[stickboy1375]

In many cases, it's not a matter of halving the hours when there's two people on the job. It's usually less than half.

For instance, if one person can do the job in 8 hours, two will usually complete it in 3?.

If you have two good guys. All kidding aside, you are correct... I worked alone for 12 years, now I have a coworker, also licensed, The labor is easily more than doubled, the extra set of hands when needed for a particular task or just divide and concur theory.

 

[Besoeker]

Just curious and this is not bashing the larger companies. Just wondering what are the benefits of hiring a larger shop mainly in residential?

By hiring a one man shop the customer can save big time because they don't have to pay for the higher overhead such as a helper.

I can only think of the larger shops having same day service but what else?

Been a few interesting responses to this but there's another reason, not yet touched on as far as I can tell, and that's resources.
If things happen to go wrong, a large company might have better resources to remedy the problem or provide compensation if they can't.

 

[growler]

I can only think of the larger shops having same day service but what else?

I think the main reason that people hire the larger shops is because these bigger companies have a larger advertising budget. They keep more vehicles on the road and have a larger pesence ( easier for the public to see and know they exist).

 

[growler]

You don't understand dollar wise they spend more but as a percentage of gross it is the same as you.

And some expenses actually go down as a company gets bigger. Advertising cost are cheaper for a larger company. A lot of the paper work is done by cheaper help (secretary or office staff) other than the electrician allowing the electrician to consentrate on doing just electrical more efficiently.

The only advantage to being small is that when things get hard it doesn't take as much work for us to survive. A big animal eats more than a small animal.

 

[tbakelis]

I'm a one man shop

I'm a one man shop

I grossed 170K last year... Not to shabby for a one man shop. I pull in other subs when I land larger jobs and stay lean the rest of the time

 

[Rewire]

And some expenses actually go down as a company gets bigger. Advertising cost are cheaper for a larger company. A lot of the paper work is done by cheaper help (secretary or office staff) other than the electrician allowing the electrician to consentrate on doing just electrical more efficiently.

The only advantage to being small is that when things get hard it doesn't take as much work for us to survive. A big animal eats more than a small animal.

Of course the owner of the large shop usually eats well longer more fat to trim.I found the moSt difficult thing for me when I started out was landing my next job while working the one I had. I don't think our customers look for us because we run multiple vans I think the look at us because of the level of service we can provide by running multiple vans

 

[growler]

I don't think our customers look for us because we run multiple vans I think the look at us because of the level of service we can provide by running multiple vans

They may not keep you as a vendor because of mulitple vans but you have to get a customer before you can keep one.

Here we have Mr. Sparky. It's hard to go driving around and not see one of their red vans. You see then all the time and that coupled with lots of advertising lets people know they are there.

On the other hand there are small companies that have been around for years that I have never herd of.

 

[Rewire]

They may not keep you as a vendor because of mulitple vans but you have to get a customer before you can keep one.

Here we have Mr. Sparky. It's hard to go driving around and not see one of their red vans. You see then all the time and that coupled with lots of advertising lets people know they are there.

On the other hand there are small companies that have been around for years that I have never herd of.

Here is where revenue comes into play Mr Sparky devotes 10% of their gross to advertising this would be similar to a one man shop the difference is in the gross revenue of Mr Sparker is triple that of the small shop. Most of the unknown shops have simply carved out a niche that earns them a living usually the have a contractor they work for or a set client. I do believe a greater presence in the market place is an advantage for the bigger shops.

 

[Fulthrotl]

I grossed 170K last year... Not to shabby for a one man shop. I pull in other subs when I land larger jobs and stay lean the rest of the time

all depends on what type of work you are doing.

some stuff can get pricy very quickly, and yet the profit isn't huge cause
the material costs are very high.... there is a lot of dollars flowing thru
the checking account, but at the end of the day you make 20% of the
gross.

now, if i was doing 170k a year in data drops, after material costs, my
profit before costs of doing business would be roughly 135k...

if i was doing motor controls, that same total revenue might have
100k in hardware costs. the percentage of markup on large ticket
items usually isn't as high... marc used to have a markup based on
unit price schedule around here, and that seemed pretty typical.

i've got a family member who is pretty successful, and he summed
it up this way.... "my job is to walk into their office and ask for as
much money as i can without being laughed out of the office."

that's hard to do. most of us don't do it very well, which is why
he lives in newport back bay and i live in huntington. not really
much reason other than that.

unless you count his willingness to work continuously without
stopping until he makes his goal, whatever it is, and then work
continuously without stopping to maintain it.

that may have something to do with it as well.

 

[ptonsparky]

After a while one man shops just can not keep up with demand. I used to be able to hang size 4 pump panels by myself. My back was always hurting, I never had a day off. Another man made response time quicker and my back ache go away. Now that I am a big shop with a whole three electricians the response time is quicker yet. On the other hand I have customers that like to have the same electrician show up. So much better than having to explain their entire operation at the beginning of each service call

 

[Rewire]

After a while one man shops just can not keep up with demand. I used to be able to hang size 4 pump panels by myself. My back was always hurting, I never had a day off. Another man made response time quicker and my back ache go away. Now that I am a big shop with a whole three electricians the response time is quicker yet. On the other hand I have customers that like to have the same electrician show up. So much better than having to explain their entire operation at the beginning of each service call

We try to keep the same tech serving the customer it helps build a long term relationship.t this point I could not keep up with the physical demands of being a one man shop I am way past doing 12 -14 hour days in the field I still do long days but they are usually office hour or customer meets

 

[chris1971]

Name recognition is also an advantage for a larger shop.

 

[petersonra]

Some customers don't think a one man shop can get the job done on time or the can handle multible jobs for them.

small shops often excel where cost is a critical part of the equation and schedule less so.

small shops rarely have the project management capability to handle larger jobs, or the financial wherewithal to even acquire the parts for larger jobs.

they also often do not have the skills or equipment readily available to do tasks outside of their typically fairly narrow field of expertise.

 

[kwired]

Nothing you say will convince me that my overhead is the same as large company with multiple trucks and employees it's impossible. That's like saying a mom and pop hardware store has the same overhead as home depot it's insane.

Also bigger companies need to have work all week every week to support all the overhead. With a 1 man if I don't work a couple days I don't have to worry about employee wages, bennies, insurance, multiple truck payments, and money for tools collecting dust.

During those couple days you may be estimating, invoicing, paying bills, etc. There are also times when you need to do those activities yet actual customer work is piling up on you. Doesn't matter if you are big or small when it is busy, the big guys don't want to pull people away from more profitable jobs either, and when they do it won't necessarily be their best performance people.

I made this mistake early on thinking I could charge less than the larger shops what I needed to do was to stop thinking in dollars and cents and start thinking in percentages. If company X a one man shop spends 100.00 on advertising company Y a large shop spends 500.00 who has a larger overhead expense?

Company Y appears to on first glance but to get a true picture we need to know gross revenue and what % is advertising.

Company X has a gross of 1000.00 so 100.00 represents 10%

Company Y has a gross of 10,000.00 so 500.00 represents 5%

For a homeowner and a small project all that matters to most of them is when can you do it and how much will it cost me?

In many cases, it's not a matter of halving the hours when there's two people on the job. It's usually less than half.

For instance, if one person can do the job in 8 hours, two will usually complete it in 3?.

True many times, other times the job only requires 1 man and the second one is not much help even if he is a good helper.

Been a few interesting responses to this but there's another reason, not yet touched on as far as I can tell, and that's resources.
If things happen to go wrong, a large company might have better resources to remedy the problem or provide compensation if they can't.

Better resources is likely, providing compensation - that is why we have insurance, but the one man shop won't make as many big mistakes either as he knows it is on him where the employee of the larger company either doesn't know any better or knows that there is more help avaliable if he gets in a jam.



Why do people choose to shop at Wal Mart vs the little shops in local neighborhoods? There are good and bad reasons for both, same with selecting a contractor.