Charging for estimates is not working!

[aline]

Counting on the other guy not showing up is a bad business model.What happens in our area is one guy wants a dispatch fee and 100 other guys will come out for free one of them being me and I do show up on time.

I'm glad you pointed that out. Now I'm going to have to rethink my whole business model because all the other guys not showing up was exactly what I was counting on.

What are the odds of you getting the job when 100 other guys are also bidding on it?

I went out and gave a guy a free estimate to wire his basement. When I got there some boxes were already nailed up and he had wire and other materials sitting there. He told my I was the 10th contractor to come out and give him a price.

What do you think the odds of me getting the job are?

I gave another free estimate to upgrade a service, install power out to a barn, out to a shed and install additional cirucits. When I contacted her later to find out if she wanted us to do the work she said she had decided on someone else. She said she had gotten 7 estimates and decided to go with the lowest one.

Again what are the odds of my getting the job?

I don't always charge a dispatch fee for estimates. If it's a large enough job and I feel it's worth it for me to compete against 10 other guys in hopes of getting the job I won't charge a dispatch fee. However when a customer is wanting 10 estimates for a $500 job I'm going to charge a dispatch fee. It's not worth it for me to gamble a $100 or more in expenses to compete against 10 other guys in hopes of getting a $500 job. Some people decide not to hire anyone to do the job and either have their boyfriend or brother in-law do the work or do it themselves. And there are plenty of contractors in my area tripping over each other to run out and give free estimates for these $500 jobs. I think they're nuts.

I have a customer who I've done some commercial work for so when she wanted an estimate to wire her basement I told her I wouldn't charge a dispatch fee to come out and give her an estimate. When I got there the job was halfway done all the materials had already been purchased. She said her boyfriend was doing it but she wasn't sure he knew what he was doing. He had #12 and #14 romex mixed together on the same circuit. I gave her an estimate to do the work and she called me back the following day to tell me she could not afford my price so she was just going to have her boyfriend do the work. She lives in $700,000 home and she putting in a dedicated home theater room.

If everyone charged a dispatch fee, even a small one like $20, it would limit how many estimates the customer would be willing to get. They might only get one, two or three instead of seven to ten and if they got three they would have spent a whopping $60 to get the estimates. If the contractor puts the dispatch fee towards the job they then spent $40 for the estimates.

I started charging a dispatch fee because I got tired of all the crap I describe above. If a customer is too cheap to pay me a small dispatch fee of say $29 to come out and give them an estimate I don't think I really want them as a customer.

 

[aline]

My dispatch fee is based on how busy I am. I don't have a set dispatch fee that I always charge. The busier I am the more I charge for a dispatch fee. If I have no work I may not charge a dispatch fee at all.

What gets me are the guys that are so busy they can't even keep up with the work they currently have but they'll still go out to give free estimates on a $500 job. It's like they're afraid they might not get that one $500 job if they charge a dispatch fee to go give an estimate, even though they don't really have time to do the job anyway. I think they must feel obligated to give a free estimate to every customer that calls even if they don't have time to go give an estimate much less have time to do the work.

Often they're the ones that shedule to come out and give a free estimate but then don't show up or bother to call.

The first thing I do when a customer calls is ask where they heard about me from. Not only does this help me track my return on advertising investments but it also helps me know what to expect when I mention a dispatch fee.

In one phone book I'm in there are serveral contractors that charge a disptach fee. When a customer calls me from this phone book I know the dispatch fee will be an easier sell.

In another phone book I'm in none of these contractors are advertising in it. All the contractors in this phone book have "Free Estimates" in their ads. When a customer calls me from this phone book I know the dispatch fee is going to be a much harder sell. I have not had nearly as much success booking calls from this phone book so I need to decide wether I want to continue advertising in it or consider not charging a dispatch fee when a customer calls from this phone book if I can't increase my booking ratio.

If a customer calls and tells me they found me on Angie's List I allready know they've spent money finding me and selling them on the dispatch fee will be easier as well.

I think where you advertise and who you target with your advertising will make a difference on wether or not you'll be able to get that dispatch fee.

I can remember when it seemed like everyone in my area gave free estimates. It seems more are starting to charge dispatch fees and convert to flat rate pricing. I think the times are changing. It's costing more and more to go out and give estimates. One of the biggest factors is traffic. It's taking longer and longer to get from point A to point B and if you've got employees running around giving estimates they're going to want to get paid to sit in traffic.

 

[JohnJ0906]

I think when electrical contractors learn the fine art of salesmanship is when things are going to start improving.

AND when we stop doing side work under the table.
People don't want to pay an EC when they can get the guy wiring the house down the block to come by in the evening to add those ceiling fans for a 1/3 of what the EC charges.

 

[macmikeman]

I don't know how this is going to fit into this, (by the way, I charge homeowners for estimates) but on some of the buildings I wired in the past I "paid" the customer to estimate the job. I had to put up hundreds of dollars before just to get my hands on a set of plans to bid, and then when I did bid, I had to post a bid bond. Most of that money I would get back eventually, without interest. Those bids sometimes took weeks to put together. Somebody had to pay for all that. The customers who used us were the payer. They also payed for customers who asked us to bid but we were too high for the job. I'm pretty sure thats how all the buildings downtown got done..

 

[zappy]

Isn't it true "it takes money to make money"?

Isn't it true "it takes money to make money"?

You spend money on advertising HOPING you will make a profit from it.You waste your valuable time and gas etc. going to give a free estimate HOPING you'll get the job.What's the difference?

 

[bradleyelectric]

You spend money on advertising HOPING you will make a profit from it.You waste your valuable time and gas etc. going to give a free estimate HOPING you'll get the job.What's the difference?

If you spend some money to improve on your salesmanship you don't have to spend that money on free estimates.

 

[aline]

You spend money on advertising HOPING you will make a profit from it.You waste your valuable time and gas etc. going to give a free estimate HOPING you'll get the job.What's the difference?

When you spend money on advertising hopfully you're tracking the return on that investment so that you know what the return on that investment is. You want to spend your money on advertising that gives you the best return for your investment.

The same thing applies to giving estimates. You should track how much it costs you to give free estimates and what the return on those costs. How much money are you getting back compared to how much you are spending giving free estimates?

When you charge for estimates you need to track your costs for providing these estimates and track the return on these costs. You may find that by charging for estimates you will spend less money giving estimates, close more jobs and have a higher return on your investment.

Unless you track things like this you really don't have any idea what's giving you the biggest bang for your buck. A lot of contractors don't bother to track their advertising or other expenses and don't know what the return on these investments are. I'm sure some have advertising that's not even paying for itself but they don't track it and they don't know.

It's all about getting the most from your investments. If you're getting a higher return on your investment with free estimates than keep doing it. If you're getting a higher return on you're investment by charging for estimates why would you keep giving free estimates? Unless you've tried both how, do you know which one is going to give your the best return on your investment?

Try it both ways. Track the expenses and the results then decide.

I always keep track of how much time I spend giving estimates and then figure what that would cost me if I was paying an employee to do it.

 

[celtic]

You spend money on advertising HOPING you will make a profit from it.You waste your valuable time and gas etc. going to give a free estimate HOPING you'll get the job.What's the difference?

Why spend money on both equations when one can be charged for?

 

[Rewire]

My dispatch fee is based on how busy I am. I don't have a set dispatch fee that I always charge. The busier I am the more I charge for a dispatch fee. If I have no work I may not charge a dispatch fee at all.

How do you decide when you are to busy and charge is it when you have two jobs ,three jobs four?I am never to busy to bid on work and I never pass on an opertunity to get more.It sounds like you know that a dispatch fee costs you work and you just wont admit it otherwise you would be consistant in charging it.

 

[greg y]

How can you have to much work in the economy we are in now? Our little shop is always bidding work and getting it and now we are going to be busier.

 

[aline]

How do you decide when you are to busy and charge is it when you have two jobs ,three jobs four?I am never to busy to bid on work and I never pass on an opertunity to get more.It sounds like you know that a dispatch fee costs you work and you just wont admit it otherwise you would be consistant in charging it.

Of course it costs me work and I do admit it.

When I'm busy it costs me the less profitable work that I really don't have time to do.
If you do some research on charging dispatch fees you will find it's common to adjust the dispatch fee according to how busy you are.

Check out this article.
http://contractingbusiness.com/ar/cb_imp_13003/

 

[emahler]

Of course it costs me work and I do admit it.

When I'm busy it costs me the less profitable work that I really don't have time to do.
If you do some research on charging dispatch fees you will find it's common to adjust the dispatch fee according to how busy you are.

Check out this article.
http://contractingbusiness.com/ar/cb_imp_13003/

Aline, when you truly know your numbers, you know that not every call/customer is for you. When you don't know your numbers, you think you need to get every job no matter what...because all you see is the top line of the P&L...never the bottom line...

and like you say, when times are slow, and you have cut your OH (and thereby lowered your needed numbers) you may take on some of the work that you wouldn't have in the past...until things turn around...then you let other chase their tales for the low paying work...

 

[Rewire]

Aline, when you truly know your numbers, you know that not every call/customer is for you. When you don't know your numbers, you think you need to get every job no matter what...because all you see is the top line of the P&L...never the bottom line...

and like you say, when times are slow, and you have cut your OH (and thereby lowered your needed numbers) you may take on some of the work that you wouldn't have in the past...until things turn around...then you let other chase their tales for the low paying work...

profitable work is profitable work if you don't want work I say wrap it up I'll take it.Several of the big boys who wouldn't even give the small jobs a second look are thinking the'll "pick up some" until things improve and quess what they find we are already their and well established with men who are trained in small jobs to turn a profit not to mention the fact that I have been selling this for years so good luck but changing markets is like launching a new product it takes months to get to the reward stage.

 

[emahler]

profitable work is profitable work if you don't want work I say wrap it up I'll take it.Several of the big boys who wouldn't even give the small jobs a second look are thinking the'll "pick up some" until things improve and quess what they find we are already their and well established with men who are trained in small jobs to turn a profit not to mention the fact that I have been selling this for years so good luck but changing markets is like launching a new product it takes months to get to the reward stage.

just one question....do you read posts before you respond, or do you just respond to what you want the posts to say?

 

[Rewire]

just one question....do you read posts before you respond, or do you just respond to what you want the posts to say?

I tell my kids it takes to fools to argue so ,You win.

 

[emahler]

I tell my kids it takes to fools to argue so ,You win.

I was thinking the same thing, hence my question to you.

 

[aline]

Personally I'm not trying to argue or win. I'm just throwing this stuff out there so people with open minds that are not aware of it can research it and make up their own minds. If you're dead set in your ways and don't want to change that's fine with me.

For me starting a business is an investment just like buying a stock is an investment.
I want the highest return on my investment I can get. If charging for estimates gives me a higher return on my investment than that's what I want to do.

Charging for estimates is not some wild idea I thought up myself. I got the idea from companies like Mister Sparky, Mr Electric, Benjamin Franklin Plumbing, One Hour Heating & Air Conditioning, etc.

These companies all have systems in place that they have found to work very well for them. Well enough that Clock Work Home Services is selling franchises of these businesses all over the U.S. If it's good enough for them it's good enough for me. I'd rather follow the business model of these successful companies than the business model of many of the companies posting on this forum that don't have a company like Clock Work Home Services knocking on their door wanting to franchise their business. I think my odds of success are better but that's just me.

 

[zappy]

Of course it costs me work and I do admit it.

When I'm busy it costs me the less profitable work that I really don't have time to do.
If you do some research on charging dispatch fees you will find it's common to adjust the dispatch fee according to how busy you are.

Check out this article.
http://contractingbusiness.com/ar/cb_imp_13003/

Thank you for that article,that's good knowledge.

 

[Rewire]

Personally I'm not trying to argue or win. I'm just throwing this stuff out there so people with open minds that are not aware of it can research it and make up their own minds. If you're dead set in your ways and don't want to change that's fine with me.

For me starting a business is an investment just like buying a stock is an investment.
I want the highest return on my investment I can get. If charging for estimates gives me a higher return on my investment than that's what I want to do.

Charging for estimates is not some wild idea I thought up myself. I got the idea from companies like Mister Sparky, Mr Electric, Benjamin Franklin Plumbing, One Hour Heating & Air Conditioning, etc.

These companies all have systems in place that they have found to work very well for them. Well enough that Clock Work Home Services is selling franchises of these businesses all over the U.S. If it's good enough for them it's good enough for me. I'd rather follow the business model of these successful companies than the business model of many of the companies posting on this forum that don't have a company like Clock Work Home Services knocking on their door wanting to franchise their business. I think my odds of success are better but that's just me.

A local plumber has flipped the script on BFP they have a TV add with a cash register ringing up in the background they show shots of a guy laying down a door mat and putting on booties with the anouncer saying "before the big boys even ring your doorbell you have been over charged" then they show a shot of one of their guys walking to the door and simply taking off his shoes at the end of the add they say "and estimates are always free". One of the most sucsessful businesses in the US is Wal Mart but say your going to follow the Wal Mart business plan and watch the feathers fly. I tried charging for estimates last summer and it was a failure,at least in my area. I was contacted by Mr Electric about becoming a franchise and i turned them down I want the freedom to dump things that just don't make sense in my market.I never dismiss anything before I give it a good look. The gretest bar to knowledge is contempt prior to investigation.

 

[BryanMD]

... a TV add with a cash register ringing up in the background they show shots of a guy laying down a door mat and putting on booties with the anouncer saying "before the big boys even ring your doorbell you have been over charged" ...

and the pendulum swings again LOL