1 day job turning into a 2 day job - question about adjusting the original price

[Coppersmith]

And now that I've gotten my other rants out of the way, I'll comment on the OP's original question of "adjusting the original price".

I'm of the opinion that potential clients are much happier getting a firm fixed price and I give them that price for any job where I think the variables are sufficiently controlled. Most of the time I can give a fixed price. When the job is complete I charge them exactly what I said I would charge. This is what they expect. It does not matter if I finish earlier or later. It does not matter if I use more or less materials. Those differences are my mistake, not the clients.

If I am giving a quote over the phone (which is as often as possible since it minimizes estimating expenses), I include the caveat "based on what you have told me, I can do the job for $XXXX. If the job is significantly different, the price will need to be adjusted. I'll look at the job when I get there (to do the job) and give you an updated price if necessary. If you decide you don't like the price, there is no charge." In other words, I treat this job just like I would for a "free estimate".

I always go and look at large (expensive) jobs. This minimizes the unknowns, but sometimes unknowns remain. For jobs that have big unknowns, I will offer to do the job on T&M up until I have turned the unknowns into knowns. I will tell them that I do not have sufficient information to give a fixed price, but I will charge them $XXX per hour until I do which I expect to take X hours. Once I've determined the exact nature of the situation, I will give them a fixed price to do the remaining part of the job. They have the option of agreeing (and I continue working) or disagreeing (and we settle up and I go home).

 

[480sparky]

..........they would definitely be angry if you said "the job ran longer than I expected so I'm charging you $2,250.".....

Did I ever say to do that?

 

[oldsparky52]

How does that work for the customer? If I want you to execute a scope of work, I'm not going to allow you to invert my wallet with a "between $100 and $1,000" estimate, or no estimate at all.

If you want me to execute a scope of work, I will give you a price for such execution.

My problem is people ask how much xyz cost and you tell them about $1,000. If you come in a hundred dollars more with your quote you catch flak. Besides, most of the jobs I was asked to give "budget" numbers on were $50,000+. Give a blow away budget number and the customer goes shopping. Give too low a budget number and you are thought a crook when your bid number comes in. People change what they want/think they want. I just stayed away from "budget" numbers. Give me a scope, I give you a price.

 

[Coppersmith]

One further comment on fixed price jobs: If they ask for additional work, (before or during the job), I give them a quote for doing that work. Don't throw extra work in free. It's a slippery slope.

Every once in a while you will discover a major problem that effects your job. (I mean major, not just big.) At this point you should have a discussion with the client, explain the situation, explain that this problem is way out of scope for the work you are doing, and explain that an additional charge is necessary to continue working. If they agree, fine. If they disagree, you can cease work (and probably not get paid). This is worth doing if the major problem would cause the job to be a bigger loss than not getting paid for the work completed.

 

[Coppersmith]

Did I ever say to do that?

I didn't say you did. Reread my post for confirmation.

 

[480sparky]

I didn't say you did. Reread my post for confirmation.

So your clients are happy with being told a job would take a day, agree to pay $2k, then when you're done at 10AM they merrily pay $2k?

 

[James L]

So your clients are happy with being told a job would take a day, agree to pay $2k, then when you're done at 10AM they merrily pay $2k?

I don't tell people time frames, I tell them a price.

Once they've committed to the price, it doesn't matter how little or how long I'm there. Because I can assure you if it took two weeks to do that $2,000 job they're not going to fork over extra

Well, I guess in the case of the OP they did.
I'm glad for him, really. It doesn't usually work out that way

 

[Coppersmith]

I don't tell people time frames, I tell them a price.

Once they've committed to the price, it doesn't matter how little or how long I'm there. Because I can assure you if it took two weeks to do that $2,000 job they're not going to fork over extra

Well, I guess in the case of the OP they did.
I'm glad for him, really. It doesn't usually work out that way

I couldn't have said this better even though @480sparky 's example is ridiculously extreme. We were initially talking about going a small percentage over or under on the job. Not doing the job in 1/5th the time.

 

[480sparky]

I couldn't have said this better even though @480sparky 's example is ridiculously extreme. We were initially talking about going a small percentage over or under on the job. Not doing the job in 1/5th the time.

Ah. So you just expect to take as long as it takes, customer be d(@*&#ed. Some of us work in customers homes and they take time off. They don't get too happy with the have to take MORE time off.

Glad you live in a perfect world. Just realize the rest of us don't.

 

[Shak180]

First and foremost I want to say thank you for everyone's replies.

I'm a 32 to soon to be 33 year old guy trying to figure out the business side of electrical work. I have a lot to learn and a lot of work ahead of me with figuring out the taxes, generating data from past jobs, setting expectations with customers, and the list goes on and on.

Things worked out with my schedule. The job I was supposed to do today got pushed back to next Tuesday. I went back to the customers home with a helper and got the circuit fished to the accessible portion of the crawlspace and finished the job today. I went out and bought a Greenlee FP18 that saved the day in regards to fishing the circuit.

I think getting the customer to help try and fish the wire maybe helped him understand that this job was proving to be more challenging than expected. The customer also mentioned to me that when he had the AC installed the company that did that work mentioned that they had to send the smallest guy they had to get into one of the spaces.

This picture was taken before I started fishing my circuit in. The previous electrician and data guy ran their stuff on the ground

 

[hbiss]

This picture was taken before I started fishing my circuit in.

Awww, that's all you are complaining about? I had a 280 lb guy who worked for me who would crawl through places like that with a smile. I used to tell him I could tie a pull rope on the back of his belt so if he got stuck I could winch him out. We often had crawl spaces like that under garden style co-ops and condos that sometimes even had raw sewage from leaking pipes on the floor. Cock roaches, rats, dead cats. And we didn't charge anything extra.

-Hal

 

[Shak180]

There is some very good advice in this thread so far. I'd like to point out one additional thing. It looks like you are not charging enough for your services.



"how many hours I figure a job will take to do" - Correct, but new EC's tend to under estimate hours. Keep a log of your estimated hours and actual hours. (Dividing your jobs by type will give you better results.) You will notice a trend. You will see that your estimates are off by some percentage on average. Once you determine that percentage, start adding that amount to your estimates. Continue keeping the log, continue looking at the trend, continue adjusting the amount you add until the offset approaches zero.

"material costs + a 20% mark up" - This markup is way too low. Are you taking into account the labor time to: figure out which materials are needed to do the job; order the materials; go get the materials; make another trip because you forgot something; and return materials not needed? You have inventory materials on your truck just waiting to be used. Are you taking into account the added vehicle costs of transporting these materials (more weight = more costs); and an allowance for damaged materials you throw away? I markup materials 100% and I'm on the low side from what I've read. There are EC's who have a sliding scale of markup between 100-600%.

"fuel costs" - If you are just looking at fuel, you are losing money on vehicle costs. What about oil and other fluids, repairs, amortization of purchase costs, insurance, and washing? The IRS says that a passenger car costs 56 cents a mile to operate. I calculated my service truck costs $1.00 a mile to operate.

You didn't mention overhead costs. Are you charging for indirect labor, office expense, attorney and bookkeeping fees, training expense, and lots of others? Indirect labor includes labor hours for "free estimates", job planning, training time, doing your own bookkeeping, drawing up contracts and estimates, emailing clients, and anything else where you are working your business but not getting paid by direct labor.

I also don't know if you are charging the correct labor hour rate. Have you calculated this rate based on all your direct expenses plus profit? Or did you guess or use somebody else's rate?

You have five months of data in your account books. Every one of those expenses should be applied to a category (direct labor, overhead, vehicle expense, rentals, etc.) that creates a rate you you charge clients. Any expense not in one of those categories is a loss. This is the number one mistake new EC's make. They don't charge enough money and the business eventually fails. There are plenty of threads on this subject here and on electriciantalk.com. I suggest you read them.

There is some very good advice in this thread so far. I'd like to point out one additional thing. It looks like you are not charging enough for your services.



"how many hours I figure a job will take to do" - Correct, but new EC's tend to under estimate hours. Keep a log of your estimated hours and actual hours. (Dividing your jobs by type will give you better results.) You will notice a trend. You will see that your estimates are off by some percentage on average. Once you determine that percentage, start adding that amount to your estimates. Continue keeping the log, continue looking at the trend, continue adjusting the amount you add until the offset approaches zero.

"material costs + a 20% mark up" - This markup is way too low. Are you taking into account the labor time to: figure out which materials are needed to do the job; order the materials; go get the materials; make another trip because you forgot something; and return materials not needed? You have inventory materials on your truck just waiting to be used. Are you taking into account the added vehicle costs of transporting these materials (more weight = more costs); and an allowance for damaged materials you throw away? I markup materials 100% and I'm on the low side from what I've read. There are EC's who have a sliding scale of markup between 100-600%.

"fuel costs" - If you are just looking at fuel, you are losing money on vehicle costs. What about oil and other fluids, repairs, amortization of purchase costs, insurance, and washing? The IRS says that a passenger car costs 56 cents a mile to operate. I calculated my service truck costs $1.00 a mile to operate.

You didn't mention overhead costs. Are you charging for indirect labor, office expense, attorney and bookkeeping fees, training expense, and lots of others? Indirect labor includes labor hours for "free estimates", job planning, training time, doing your own bookkeeping, drawing up contracts and estimates, emailing clients, and anything else where you are working your business but not getting paid by direct labor.

I also don't know if you are charging the correct labor hour rate. Have you calculated this rate based on all your direct expenses plus profit? Or did you guess or use somebody else's rate?

You have five months of data in your account books. Every one of those expenses should be applied to a category (direct labor, overhead, vehicle expense, rentals, etc.) that creates a rate you you charge clients. Any expense not in one of those categories is a loss. This is the number one mistake new EC's make. They don't charge enough money and the business eventually fails. There are plenty of threads on this subject here and on electriciantalk.com. I suggest you read them.

You can say that again about underestimating. I'd say recently I've been getting a little more confident to charge a little more than I was a few months ago. I still have a long way to go and I'm still in the trial and error phase of my estimating.

No to pretty much everything you mentioned in the mark up paragraph. I was treating the mark up as a way of paying myself for the time spent figuring out what materials I'll need and the time spent going to buy the material. The only stocked material I keep on my van are 15 and 20 amp receptacles, decora switches, and single gang and 2 gang wall plates. I charge a pretty good markup for those at $10 per outlet and $10 per trim plate. I get a 10 pack of outlets for about $22 and a 10 pack of single gang wall plates for about $10? I had one electrician tell me he marks up material 100% but I couldn't believe it. I guess I was being naive.

I keep all of my fuel receipts, I do my own maintenance, oil changes run me about $30 and i keep the receipts for the oil, filter, drain plug gasket, etc. This actually reminds me that I need to replace the coolant, differential fluid, and transmission fluid soon. I try to keep receipts for everything related to the business.

My overhead is pretty low, I think to pay all my bills from health insurance, cellphone, utilities, rent, insurance, advertising is about $2,000 a month. I don't have an office or warehouse. I'm just working out of single family home garage and my work van. I have a 1 year membership with RocketLawyer. I used RocketLawyer to form my S Corp and am using them as my registered agent. I'm a union member so I do my continuing education through classes at the union's training center but I do see myself taking some courses outside of the union soon. I need to take some of these indirect labor costs into consideration moving forward. I didn't even know indirect labor costs was a term. Once again I have a lot to learn.

I'm charging a labor rate of $100 per hour. The total package of a IBEW electrician in Alameda County is about $97 per hour if I remember correctly.

I haven't been keeping track of exact hours spent on jobs. That's something I'm going to start doing with today's job. I've been keeping track of the approximate material costs, how much I sold the job for, and a brief description of what the work was. I'm compiling this data in a Google spreadsheet.

 

[James L]

If you're doing service work, materials need to be marked up 100% from either your actual cost or retail, whichever is higher

Exceptions are made for high dollar items

 

[AC\DC]

I'm charging a labor rate of $100 per hour. The total package of a IBEW electrician in Alameda County is about $97 per hour if I remember correctly.

I don't know a lot about unions and how there package works. Though if it cost you $97 in total cost to hire a Union worker (you ) and your only charging $100 you need to be a lot higher. I read somewhere on one of these post maybe even this one that total cost of a worker should be half of what you charge. Double your Rates. Maybe is misread what Total Package meant.
I would recommend a business class. I keep trying to recommend my self to take business classes lol.

 

[James L]

I don't know a lot about unions and how there package works. Though if it cost you $97 in total cost to hire a Union worker (you ) and your only charging $100 you need to be a lot higher. I read somewhere on one of these post maybe even this one that total cost of a worker should be half of what you charge. Double your Rates. Maybe is misread what Total Package meant.
I would recommend a business class. I keep trying to recommend my self to take business classes lol.

You're right about the total cost of the worker being half what gets charged. I've been privy to real numbers at a couple of companies I worked for.

Back in the mi 90s I worked for a big shop (140 electricians + office) that charged $65.00 per hour. I was making $15.50 per hour at the time. They did a spread sheet for the actual costs for each employee and we all got our personal data. With all the benefits like 401k, vacation, health insurance, bonuses, etc and additional costs like Social Security taxes, worker's comp, etc they were paying out about $32.00 per hour for me. Just under half what they charged. They're still in business

I've seen a lot of other companies that charge less than double the payout, and they're always going broke, reorganizing, tax problems, debt, etc

 

[James L]

My overhead is pretty low, I think to pay all my bills from health insurance, cellphone, utilities, rent, insurance, advertising is about $2,000 a month.

If you keep living below your means, you'll be able to weather the self employment storm to get your feet planted firmly.

Up until October '19 my monthly expenses were about $1,400 per month. I got married and my expenses went up

 

[Shak180]

I don't know a lot about unions and how there package works. Though if it cost you $97 in total cost to hire a Union worker (you ) and your only charging $100 you need to be a lot higher. I read somewhere on one of these post maybe even this one that total cost of a worker should be half of what you charge. Double your Rates. Maybe is misread what Total Package meant.
I would recommend a business class. I keep trying to recommend my self to take business classes lol.

$97 covers the hourly wage, monthly health insurance buy up, pension, HRA account, 401k, and a few other things.

The problem is the union isn't doing the work I do right now. I'm mostly doing service calls for outlets not working, installing EV chargers, replacing light fixtures, installing light fixtures.

I'm not sure what my competitors are charging so I figured I'd start my rate at $100 per hour and see how things go. It's been working out pretty good. I had some lean months when I started in October of 2020 but things have been picking up the past 2 months.

My thing is I don't know how much I can charge for a troubleshooting call. I get a lot of calls and messages for "I have some outlets that aren't working" or "a light fixture isn't working". My approach so far has been $125 for the first hour of troubleshooting and $100 an hour after the first hour. I was getting 1 or 2 out of 10 jobs with that approach. Recently I switched to $125 for the first hour of troubleshooting and $100 for the following hours up to a maximum of 3 hours. I haven't landed a troubleshooting call since I made the change but then again some of it had to do with scheduling because people want you to come the moment they call you often times.

I probably should try to find some electrical focused business classes

 

[Shak180]

If you keep living below your means, you'll be able to weather the self employment storm to get your feet planted firmly.

Up until October '19 my monthly expenses were about $1,400 per month. I got married and my expenses went up

I'm living like a pauper in hopes of making this dream a long term reality

 

[AC\DC]

$97 covers the hourly wage, monthly health insurance buy up, pension, HRA account, 401k, and a few other things.

Does it cover your Liability/ Vehicle insurance, Tax perpetration/consulting, Advertisement, Time working on bids and other office jobs. Plus many others. With the help of other people on here you will find out soon that holy crap I not charging enough.
You mentioned a Helper is his wages included in your $100? or is it $100 each.
I am about your rate I am an not union so I don't have your nice package, and I need to raise mine up to meet my goals. You will want to delegate your office responsibly some day and you need money for that.

 

[Shak180]

Does it cover your Liability/ Vehicle insurance, Tax perpetration/consulting, Advertisement, Time working on bids and other office jobs. Plus many others. With the help of other people on here you will find out soon that holy crap I not charging enough.
You mentioned a Helper is his wages included in your $100? or is it $100 each.
I am about your rate I am an not union so I don't have your nice package, and I need to raise mine up to meet my goals. You will want to delegate your office responsibly some day and you need money for that.

How much does tax preparation cost normally? I had my tax guy file my corporate and personal filing for $300. I only had 1.5 months of business in 2020 so it wasn't complicated I suppose.

I've learned from this thread that I need to start incorporating time spent doing estimates, making material lists, and picking up material into my quotes.

I usually pay my helper between $40 and $50 an hour depending on the work we'll be doing. I don't usually charge the customer above my helpers rate and if I do it's only 10%.

What area of the country are you working in? I'm in the SF Bay Area