Another EC price.

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480sparky said:
If low price is your best selling point, you're doing it wrong.
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Not a valid counterargument to the example presented of 2 electricians with different experience attempting to charge the same price, just bs posturing and inflammatory insinuation. Expecting a first year business to charge the same price as a five year business is akin to handing them a loaded gun.
 
Jerramundi said:
Eh, sometimes you need to make sacrifices to get your foot in the door.

(1) Charge for everything VS (2) Charge for nothing... are both absolutist statements. There is an expansive gray area in between those two realities.
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You are confusing two issues.

Issue one: Some businesses give away a certain amount of product (labor, materials, travel costs) to make the sale. There is nothing wrong with that. I personally give "free" estimates. Note that free means free to the client. Nothing a business gives away is free to the businesses. (If you got a product free from a supplier and gave it away, it's still costing you labor time to acquire it and give it away.)

Issue two: You have to pay for these items you give away somehow. The usual method is to include that cost in your overhead. Including the cost in your overhead causes your rates to be higher. this means that ALL YOUR PAYING CUSTOMERS are paying for the things you give away, even if you are only giving things away to a few customers. Even if you are giving things away to people who NEVER BECOME YOUR CUSTOMER and never pay you.

So:
"sometimes you need to make sacrifices to get your foot in the door" - yes, you give things like free estimates away.
"Charge for everything" - yes, everything, even the free stuff you give away, is paid for by your customers.
"Charge for nothing" - yes, you can spend hours making an unsuccessful bid which the prospective customer never pays for.
"There is an expansive gray area in between those two realities" - Nope, some people get stuff for free and everybody else pays for it.

Jerramundi said:
A customer facing a decision between two electricians that are quoting the exact same price, but one has 1 yr in business and the other has 5 yrs in business, will go with more experience every time.
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I would say this mostly false. Most customers don't research how long someone is in business so this does not influence their decisions. Positive reviews will influence a customer, but someone in business a short time can have more and better reviews. If two electricians quote the exact same price, the one that is friendlier or sounds more knowledgeable will probably win out. Setting your rates low to win business is a horrible idea. It's called "the race to the bottom".

There is only one way to set your rates that guarantees you will make a profit and thus stay in business: Add up every single cost of running your business including all the stuff you give away and then add a profit amount to that. Charge all of that to your customers.
 
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Jerramundi said:
Not a valid counterargument to the example presented of 2 electricians with different experience attempting to charge the same price, just bs posturing and inflammatory insinuation. Expecting a first year business to charge the same price as a five year business is akin to handing them a loaded gun.
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Invalid argument as well. Some 1-year outfits have far more experience than 5-year outfits. It's not the years you've been hanging out your shingle... it's the years in the trade.
 
Coppersmith said:
You are confusing two issues.
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I disagree that my statement that "sometimes you have make sacrifices" is confusing two issues. I am simply saying that you can charge for 99.9% of costs, but maybe not charge for the hour of office time it takes to compose an estimate.

If you want to make a semantic argument about it that it still "costs" time, you're not entirely wrong, but it's still a valid example of the aforementioned gray area between (1) charge for everything (2) charge for nothing and is by definition a "sacrifice." Nothing about your rant about costs refutes this idea.

Coppersmith said:
Issue one: some businesses give away a certain amount of product (labor, materials, travel costs) to make the sale. There is nothing wrong with that. I personally give "free" estimates. Note that free means free to the client. Nothing a business gives away is free to the businesses. (If you got a product free from a supplier and gave it away, it's still costing you labor time to acquire it and give it away.)
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There is no misunderstanding that everything "costs" something, even if it's not monetary and just time and/or energy. I'm just willing to give an hour away without sneaking it back into my overhead because (1) I'm content with $50k/yr and have no desire to be rich, (2) I feel good doing something others, and (3) value working class solidarity.

Coppersmith said:
Issue two: You have to pay for these items you give away somehow. The usual method is to include that cost in your overhead. Including the cost in your overhead causes your rates to be higher. this means that ALL YOUR PAYING CUSTOMERS are paying for the things you give away, even if you are only giving things away to a few customers. Even if you are giving things away to people who NEVER BECOME YOUR CUSTOMER and never pay you.
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You and Dale Carnegie should get together. I bet you two would have a blast. Personally, I think he was a manipulative SOB. I would argue referring to something as "free" but then charging for it in your overhead is manipulative AF, but that's just IMHO.
 
Jerramundi said:
Expecting a first year business to charge the same price as a five year business is akin to handing them a loaded gun.
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Since the correct price to charge is based on the costs of operating the business and the desired profit, any two businesses with the same costs and same profit desire can and should absolutely charge the same price regardless of experience. It is up the customer to decide which business to hire. An informed hiring decision is made on a variety of factors. Experience is just one of them. A personal recommendation from a happy client and a money-back guarantee can trump experience.
 
Jerramundi said:
but maybe not charge for the hour of office time it takes to compose an estimate.
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This is the heart of the matter. Why work for free? Did you get into business to give away your labor? If you are successful then one day you will be able to ask an employee to compose an estimate. I guarantee s/he will not do it for free. And then you will have to pay for it. Why not pay yourself?
By not charging for that hour what you are in fact doing is lowering your rate. Your dollars per hour earned is lower. You make less money for your efforts. If you want to make less money then by all means, lower your rate, but proper accounting practices demands that you charge for that hour otherwise you are just fooling yourself.
 
Coppersmith said:
Since the correct price to charge is based on the costs of operating the business and the desired profit, any two businesses with the same costs and same profit desire can and should absolutely charge the same price regardless of experience. It is up the customer to decide which business to hire. An informed hiring decision is made on a variety of factors. Experience is just one of them. A personal recommendation from a happy client and a money-back guarantee can trump experience.
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This assumes that the 1st yr business and the 5 yr business will have the same operating costs. Forget profit for a minute. They absolutely will not have the same operating costs. A 5 yr business will have a more developed network and the ability to purchase materials at a lower price (i.e. purchasing power).

The only way to be even remotely competitive is make a few sacrifices, which is not to be confused with foolishly giving everything away for free. Every new business does it, no matter how much you want to assert otherwise. Maybe instead of that fancy new office space, you start out in your garage, etc. That is a sacrifice and used to be a little something called the American Dream. Now-a-days we seem to expect every business to have marble counter-tops if it is to be perceived as viable.

Me personally... I see the tricked out F-250 and immediately know where my money is going as the consumer. I'll take the working class joe in his beater truck any day.
 
Jerramundi said:
This assumes that the 1st yr business and the 5 yr business will have the same operating costs. Forget profit for a minute. They absolutely will not have the same operating costs. A 5 yr business will have a more developed network and the ability to purchase materials at a lower price (i.e. purchasing power).

The only way to be even remotely competitive is make a few sacrifices, which is not to be confused with foolishly giving everything away for free. Every new business does it, no matter how much you want to assert otherwise. Maybe instead of that fancy new office space, you start out in your garage, etc. That is a sacrifice and used to be a little something called the American Dream. Now-a-days we seem to expect every business to have marble counter-tops if it is to be perceived as viable.

Me personally... I see the tricked out F-250 and immediately know where my money is going as the consumer. I'll take the working class joe in his beater truck any day.
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agree with you on the “marble countertop” sentence.
 
My apologies to the OP for hijacking the discussion. I'm a political and philosophical junkie in my spare time and couldn't help myself. I officially bow out. I've spoken my peace.
 
Lets be careful, it looks like some words/terms are being thrown around which may not be being used in the same manner. I find myself haveing to go back and reread the post several times to get the correct intent.

For example, the point of view that all costs to the business, like quotation time, needs to be charged .
This does not mean it needs to appear as a separate charge item on an invoice, but rather it needs to be accounted for when determining a business's total overhead in order to decide labor rates and margins.
 
AC\DC said:
Keep going interesting debate.
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I think I've said everything that needs to be said except this: the above statements I made assume you are following the standard business practice of trying to maximize your income. If you don't care to maximize your income, then giving away your labor may be right for you. I personally imagine I have a meter over my head that measures dollars earned per hour worked. I want to peg that meter on the high side. I like to work less hours so I can enjoy work/life balance. I have to make the hours I work count.
 
Coppersmith said:
I think I've said everything that needs to be said except this: the above statements I made assume you are following the standard business practice of trying to maximize your income. If you don't care to maximize your income, then giving away your labor may be right for you. I personally imagine I have a meter over my head that measures dollars earned per hour worked. I want to peg that meter on the high side. I like to work less hours so I can enjoy work/life balance. I have to make the hours I work count.
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I agree with this sentiment.

I try to tell my friends still working for themselves to make sure they are on the right side of the bell curve.
being on the left side will drive them out of business.
 
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