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

[AC\DC]

I would think being in SF Bay Area you would be a lot higher. Considering Cost of living is extreme from what I have been told. I live in a small coastal town we're all the California are moving to cause they messed up there state.

 

[oldsparky52]

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.

We all understand how difficult it can be getting started. Let me share something I learned. If your prices are too low, good customers are going to be a little nervous about using you because your prices are so low. Bad customers (the cheap ones that don't want to pay a fair price) will be all over you.

Raise your prices ASAP. If you are going to do service work, ask someone about flat rate pricing. I never used it, but a lot of successful people swear by it.

Best of luck to you and I hope you become successful while remaining happy.

 

[oldsparky52]

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%.

IMO this is a mistake. You should charge a minimum of double what your helper cost you.

 

[James L]

I don't usually charge the customer above my helpers rate and if I do it's only 10%.

First time your helper tears up somebody's house and you have to fix it, you'll be at a net loss on your helper. You should be at least close to double what you pay him

 

[Coppersmith]

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.

When you are a one man band, it's easy to forget to (or don't bother to, or be afraid to) charge for your labor when you're not actually at the jobsite working. It's takes a while but you eventually learn that you must pay yourself for every minute that you are working your business. Think about it: did you quit working for someone else (and getting paid every minute you did so) so you could work for free?

Here is an easy way to tell if you should be charging for your time: ask yourself "if I assigned an employee to do this task, would they want to be paid?" Here are some examples:

If I sent an employee over to the supply store to pick up material, would they want to get paid for their time? - answer: yes.
If I sent an employee to go look at a job and give a "free estimate", would they want to get paid for their time? - answer: yes.
if I gave an employee the office cell phone and told them to answer customer calls, would they want to get paid for their time? - answer: yes.
If I sent an employee to a training class, would they want to get paid for their time? - answer: yes.

"But", you ask "how can I charge for things like estimates and answering the phone?" The answer is "indirect labor" also known as "overhead labor". This is the labor that is not charged to a particular job, it's charged to all jobs. Your labor rate should include an amount for "direct labor" and an amount for "indirect labor". Indirect labor is how the office staff gets paid. When you are sitting at home answering phones, building a material database, editing a business form, or doing online training, and you cannot allocate these hours to a particular job, you are office staff.

Keep track of all your indirect labor hours for a month. Divide that number by the number of billable hours in a month. That gives you how many indirect hours you need to charge per direct hour. Multiply that number by your direct labor rate and that gives you the indirect labor rate per hour.

 

[Shak180]

When you are a one man band, it's easy to forget to (or don't bother to, or be afraid to) charge for your labor when you're not actually at the jobsite working. It's takes a while but you eventually learn that you must pay yourself for every minute that you are working your business. Think about it: did you quit working for someone else (and getting paid every minute you did so) so you could work for free?

Here is an easy way to tell if you should be charging for your time: ask yourself "if I assigned an employee to do this task, would they want to be paid?" Here are some examples:

If I sent an employee over to the supply store to pick up material, would they want to get paid for their time? - answer: yes.
If I sent an employee to go look at a job and give a "free estimate", would they want to get paid for their time? - answer: yes.
if I gave an employee the office cell phone and told them to answer customer calls, would they want to get paid for their time? - answer: yes.
If I sent an employee to a training class, would they want to get paid for their time? - answer: yes.

"But", you ask "how can I charge for things like estimates and answering the phone?" The answer is "indirect labor" also known as "overhead labor". This is the labor that is not charged to a particular job, it's charged to all jobs. Your labor rate should include an amount for "direct labor" and an amount for "indirect labor". Indirect labor is how the office staff gets paid. When you are sitting at home answering phones, building a material database, editing a business form, or doing online training, and you cannot allocate these hours to a particular job, you are office staff.

Keep track of all your indirect labor hours for a month. Divide that number by the number of billable hours in a month. That gives you how many indirect hours you need to charge per direct hour. Multiply that number by your direct labor rate and that gives you the indirect labor rate per hour.

That fear of charging for labor that doesn't involve holding a pair of Kleins in my hand is a real thing. I'm not inundated with leads so I've been of the mindset of try to get at least 80 to 90% of the jobs those leads bring me to. That has been to my detriment at times due to being low on the price and feeling like I'm spinning my wheels. The last couple of months I've been gaining the confidence to add a couple more hours here and there on estimates. It's been paying off but I know now that I should be charging a little more in some regards.

Thank you for all the info Coppersmith. I'm going to be rereading your responses and everyone else's for awhile to make sure I step up my game and take the advice and put it into action.

 

[Shak180]

First time your helper tears up somebody's house and you have to fix it, you'll be at a net loss on your helper. You should be at least close to double what you pay him

At this point I only bring my helper when I have a project that necessitates another body. He works for another EC full time and helps me out on the side. I never send him out on solo jobs because I don't have a second service van for him to jump in with all the materials necessary.

 

[Shak180]

We all understand how difficult it can be getting started. Let me share something I learned. If your prices are too low, good customers are going to be a little nervous about using you because your prices are so low. Bad customers (the cheap ones that don't want to pay a fair price) will be all over you.

Raise your prices ASAP. If you are going to do service work, ask someone about flat rate pricing. I never used it, but a lot of successful people swear by it.

Best of luck to you and I hope you become successful while remaining happy.

Thank you for the well wishes and advice. I'm going to be a little higher with my estimates moving forward. I need to do some research on flat rate pricing. It sounds like the solution to the "my outlets or lights aren't working" calls that I charge $125 to fix usually.

 

[Shak180]

I would think being in SF Bay Area you would be a lot higher. Considering Cost of living is extreme from what I have been told. I live in a small coastal town we're all the California are moving to cause they messed up there state.

For some things like bigger electrical jobs the prices are higher but for service work I've had customers tell me they have someone replacing an existing light fixture for $125

 

[James L]

If I sent an employee to go look at a job and give a "free estimate", would they want to get paid for their time? - answer: yes.

"But", you ask "how can I charge for things like estimates......?" The answer is "indirect labor" also known as "overhead labor".

This is one that people have the hardest time with, I think. I say it this way....

Estimates are only free for the people who say "no"
People who who say "yes" have to pay for theirs

And everyone who says "yes" has to chip in to pay for all the time you spend with everyone who says "no"

I was trying to explain this to an electrician only a month ago, and he got so mad I thought he was gonna punch me. Calling me a thief and a crook...

btw...solid advice you've given all around

 

[ptonsparky]

Double or higher., Took me too many years of being mostly broke to figure that out.
I was in a hog confinement with my head in an exhaust fan duct, hogs eating my ladder and anything that dropped when I realized I was selling my body as if I was a street corner hooker. Raised my rates and those jobs disappeared. I'm still selling my body but the beds are more comfortable.

 

[Coppersmith]

Charging your client double an employee's cost for a construction type job (where they generally work eight hours a day) will probably work out okay, but I'm a big fan of figuring out the exact charge. This allows you to charge enough, but not charge too much. You win more jobs this way.

Charging double for a residential service truck electrician is actually not enough. Workers expect to get paid for eight hours a day*, but the average billable hours on a service truck is four hours a day. If you double the cost of your employee, you break even on his/her labor costs, but you cover none of your overhead costs and make zero profit.** In order to make money from a service truck, you need a different labor rate than for construction jobs. That labor rate is:

[service labor rate] = 2 x [direct employee costs per hour (wages, taxes, benefits)] + 2 x [overhead costs per hour (indirect labor + other overhead costs)] + [desired profit per hour]

In English: Charge double the employee cost plus double the overhead cost plus your profit.



*If you find workers willing to accept a variable number of paid hours per week based on how busy you are, you are very lucky.

**This assumes we agree that the labor rate quoted covers direct labor costs, indirect labor costs, other overhead costs, and your desired profit per hour.

 

[James L]

At this point I only bring my helper when I have a project that necessitates another body. He works for another EC full time and helps me out on the side. I never send him out on solo jobs because I don't have a second service van for him to jump in with all the materials necessary.

I get that. But I'm sure you turn him loose to complete the tasks that are assigned to him. Nobody's perfect. Everybody makes mistakes. Everybody tears up something

 

[Coppersmith]

This is one that people have the hardest time with, I think. I say it this way....

Estimates are only free for the people who say "no"
People who who say "yes" have to pay for theirs

And everyone who says "yes" has to chip in to pay for all the time you spend with everyone who says "no"

I was trying to explain this to an electrician only a month ago, and he got so mad I thought he was gonna punch me. Calling me a thief and a crook...

btw...solid advice you've given all around

I've had basically the same experience. Some people unintentionally run their businesses as charities. (At least until they go under.)

Thanks for the compliment

 

[James L]

Charging double for a residential service truck electrician is actually not enough. Workers expect to get paid for eight hours a day*, but the average billable hours on a service truck is four hours a day. If you double the cost of your employee, you break even on his/her labor costs, but you cover none of your overhead costs and make zero profit.**

I think most people in our area will just charge a show-up fee that amounts to an hour.

I worked for one company about 15 years ago where I ran a service truck. At the time, he charged $60 service charge, then $60 per hour billed in 1/2 hour increments.

I explained it to customers like this... We charge $60 to ring your doorbell. Then we charge another $60 if you open it.

I remember, after I stopped working for him full time, he would call me to handle service calls for him, and paid me $30 per hour on a 1099. First time I sent an invoice to him, I had a service charge of $30 for each job, plus my time. That way it would match the way he would bill it

His wife did the books and she removed the service charges the first time around. I called him and told him I had the same kind of time, gas, Etc to show up as what he was billing the customer for so I wanted that $30 service charge added back onto each one of those invoices. He admitted that was fair and he told his wife to put them back on.

 

[Frank Licata]

We all understand how difficult it can be getting started. Let me share something I learned. If your prices are too low, good customers are going to be a little nervous about using you because your prices are so low. Bad customers (the cheap ones that don't want to pay a fair price) will be all over you.

Raise your prices ASAP. If you are going to do service work, ask someone about flat rate pricing. I never used it, but a lot of successful people swear by it.

Best of luck to you and I hope you become successful while remaining happy.

Typical 2021 prices around here: Massachusetts $150 per man-hour , New Hampshire $125 per man-hour

 

[Fred B]

Typical 2021 prices around here: Massachusetts $150 per man-hour , New Hampshire $125 per man-hour

Man I'm in the wrong area. Here you're lucky to get half that. Only way to get more is Union shops. Of course too many handymen doing wiring at cut rates, $20/hr. Here in a state that is noted for excessive regulation, refuses to regulate electrical work, no licensing other than a few individual municipalities.

 

[Coppersmith]

Man I'm in the wrong area. Here you're lucky to get half that. Only way to get more is Union shops. Of course too many handymen doing wiring at cut rates, $20/hr.

Potential clients evaluate all purchases on a “price-quality spectrum”. They instinctively know that a lower price means that the quality is generally lower and that better quality work is more expensive. But, if they cannot see a difference between poor quality and good quality work, they will go for the cheaper price. Since much of the work we do is hidden, potential clients cannot see the difference.

Most potential clients are also unaware of the benefits of using a licensed and insured electrician. There are two strategies to help push potential clients toward the higher price/better quality work: show comparisons of the visible work; and inform them of the hidden dangers.

To show comparisons of visible work, you can have an album of side-by-side photos. This album can be carried with you to show potential clients as well as on your website. Have photos of your best quality work next to photos of “the other guys” poor quality work. You can feature conduit runs, fixture installs, switch boxes, panel installs, and things that are normally hidden like cable runs in attics. Before you quote a price, you can say, “I’d like to show you some photos of my work.”

To inform them of hidden dangers, you can make them aware of how they are protected by your licensing, bonding, and insurance. (This only works if you are, even if you are licensed in another jurisdiction.) You have to be careful that this doesn’t come off as a scare tactic, or it won’t be believable. (But my warning is a bit scary.) Below is what I had printed on the back of my business card at one time. (Feel free to copy it if you want.) You can say “before you make a decision on who to hire, I’d like to point out that we are fully licensed, bonded and insured for your safety. It would be in your best interest to ask any other contractors you are considering if they are providing you the same protections.”

 

[sw_ross]

^^^^^ - On a similar topic our quarterly newsletter from the North Dakota State Electrical Board included this sheet in our spring edition.

 

[Frank Licata]

Man I'm in the wrong area. Here you're lucky to get half that. Only way to get more is Union shops. Of course too many handymen doing wiring at cut rates, $20/hr. Here in a state that is noted for excessive regulation, refuses to regulate electrical work, no licensing other than a few individual municipalities.

Report unlicensed scabs like handymen! Report at state level.