Do you do partial/full day rates?

[James L]

That should be a 500 min job. People will ask for a free estimate and you say 350ish and they'll keep shopping around. You say 500 min then you can have more buffer but even at 500 min say that's only under the most ideal circumstances.

That one an add-on to a panel change, which was part of a whole house remodel. I knew ahead of time, so I was able to order the interlock and had it on hand. Didn't require any extra trips.

If I was going to bid that as a separate job, it would have been 600-650

 

[Seven-Delta-FortyOne]

I think if you're going the route of time + materials, then it ought to stand. It's not time + materials + wasted time.

I think a T & M rate should factor in that wasted time. I believe out of a 2,080 hour work year, a service electrician will only have about 1,200 hours of billable time.

Just suppose you want to make $200,000 per year. That's $96.00 per hour on a full 2,080 hr year.

But in order to make that same $200,000 per year on only 1,200 billable hours, the rate needs to be $166.00

$166.00 x 6 hours is $996.00
I think most electricians would be okay with that

Well, you wouldnt have “made” $200k.

Because you haven’t accounted for any of your overhead, which for most companies, is pretty substantial.

And you have not accounted for any company profit either.

 

[James L]

Well, you wouldnt have “made” $200k.

Because you haven’t accounted for any of your overhead, which for most companies, is pretty substantial.

And you have not accounted for any company profit either.

Overhead might be substantial for a company, but for a sole proprietor there can be very little overhead.

I have my vehicle, but I would be paying to drive to work if I had a job. Unless I might catch a bus to work

Cell phone? I'd have one even if I had a job. But it's $55 per month.

My liability and worker's comp are $143 per month

My invoicing app is $10 per month.

I pay about $600 to have my taxes done, which would be about $50/mo. But everyone has taxes, right?

Work clothes? I guess people with a job go to work naked

Honestly, I don't see it. I'm always hearing this overhead bit from one-man gangs, but really it's BS. A lot of guys seem to be looking for an opportunity to waste money, then call it overhead

And profit. If you don't think "your" profit is money "you" made, I don't know what to tell you. I know all of my profit is money I made. It's mine

 

[Seven-Delta-FortyOne]

Your wages are not “profit”.

Your wages should be labor+labor burden+a percentage that you would add on if you were paying an employee.

“Profit” is something on top of that, that is what the “company” makes. Profit costs can be surviving slowdowns in work, business growth, warranty work, callback, unexpected costs like vehicle breakdowns, etc.

And I guarantee you, you have dozens of overhead costs.

I have had this conversation with probably hundreds of fellow contractors. I’m only saying that to point out that I am familiar with small one man shows believing they have basically no overhead, but when I dig into it with them, there is actually quite a bit.

If you have a van or service body, that is not cheap. That is overhead, and without it, you would not be in business. You could take the bus to McDonald’s and work, but you can’t as a service electrician

Tools, tool repairs, tool replacement, license, bond, insurance, computer, cell phone, office supplies, vehicle maintenance, stock on hand, fuel (which is far more than if you driving to one place and working there all day), advertising, logos, clothing (which is specialized for a contractor), Code books, continuing education, etc.

 

[James L]

Your wages are not “profit”.

Your wages should be labor+labor burden+a percentage that you would add on if you were paying an employee.

“Profit” is something on top of that, that is what the “company” makes. Profit costs can be surviving slowdowns in work, business growth, warranty work, callback, unexpected costs like vehicle breakdowns, etc.

And I guarantee you, you have dozens of overhead costs.

I have had this conversation with probably hundreds of fellow contractors. I’m only saying that to point out that I am familiar with small one man shows believing they have basically no overhead, but when I dig into it with them, there is actually quite a bit.

If you have a van or service body, that is not cheap. That is overhead, and without it, you would not be in business. You could take the bus to McDonald’s and work, but you can’t as a service electrician

Tools, tool repairs, tool replacement, license, bond, insurance, computer, cell phone, office supplies, vehicle maintenance, stock on hand, fuel (which is far more than if you driving to one place and working there all day), advertising, logos, clothing (which is specialized for a contractor), Code books, continuing education, etc.

I agree that wages are not profit.
You're also not going to be shelling out $200k on an employee.

Don't get it twisted. You're not going to pay $120,000 for an employee yet pay yourself $200,000 and say you didn't make any profit.

You're also not going to have $80,000 worth of overhead

 

[A.Adams]

I have a mechanic that works on my equipment in the field. I get charged by the hour including travel. If it’s 6 hours, I get charged 6 hours, not 8.

You should be able to make productive use of those 2 hours.

There’s a difference between “productive” and “profitable”. Being productive isn’t hard to do. Being profitable is something that’s much harder to accomplish when you have an accumulation of hours over the year that aren’t profitable.

You’ve got to know your full overhead + profit for the year and then break that down by X number of weeks you plan to work (and subtract 1+ week for those inevitable things that come up) and then figure on a max of 32 billable hours in a week. If you do this you’ll know what rate you need to charge for 6 hrs. It doesn’t matter if you charge for 6 or 8 as long as you know what your daily rate needs to be and adjust your hourly accordingly.

 

[mtnelect]

Determining your hourly rate through proper accounting techniques is all well and good. But, what the "Market Can Bear" is the final determination if you can stay in business.

What good is charging $200.00 an hour, if no one will hire you. You have to develop a "Business Plan" that can circumvent that scenario like the franchises do.

 

[mtnelect]

Determining your hourly rate through proper accounting techniques is all well and good. But, what the "Market Can Bear" is the final determination if you can stay in business.

What good is charging $200.00 an hour, if no one will hire you. You have to develop a "Business Plan" that can circumvent that scenario like the franchises do.

It's called "Flat Rate" pricing. Thats what I have used for over 21 years, and still prospering !

 

[Mr. Serious]

For service calls, I add a trip charge if they're outside my normal area. I have a formula that adds very little for the first few miles, then more and more for mid distances, then the full approximately $5.00 per mile for anything over about 45 miles outside my normal area.

 

[PizzaSolei]

If I'm bidding and see its around 6 hours, but not 8, I will treat it as a full day. If T&M, I usually just charge for the 6. I too have a higher 1st hour rate.
But if you think about it, rental places charge you for either half day or full. If your job takes 6 hours, that's too late to book another job, so why not charge the full day.

Agreed

 

[PizzaSolei]

I think if you're going the route of time + materials, then it ought to stand. It's not time + materials + wasted time.

I think a T & M rate should factor in that wasted time. I believe out of a 2,080 hour work year, a service electrician will only have about 1,200 hours of billable time.

Just suppose you want to make $200,000 per year. That's $96.00 per hour on a full 2,080 hr year.

But in order to make that same $200,000 per year on only 1,200 billable hours, the rate needs to be $166.00

$166.00 x 6 hours is $996.00
I think most electricians would be okay with that

I think if you sit down and really look at reasonable time spent doing everything, that number of BILLABLE HOURS is about right, the rest needs to get absorbed and accounted for.

 

[James L]

I think if you sit down and really look at reasonable time spent doing everything, that number of BILLABLE HOURS is about right, the rest needs to get absorbed and accounted for.

Yes, that's what I was saying.
Billable rate has to be high enough to cover all the non-billable hours.

Here's a layman's way of saying some of it - everyone who says yes has to pay for all the time you spend with everyone who says no.

There's other non-billable time besides free estimates, and everyone who says "yes" has to pay for it

 

[OK Sparky 93]

Considering this a post is about rates, then what goes into that rate and over how many billable hours and what (you) is considered a billable hour.

I have read before and have gone back to the book How Much Should I Charge. I’ve seen it referred to here and elsewhere.

Why did I or anyone decide to do their own thing? To have a better life. To maybe have a retirement. Or what?

Most of my time the last 20 plus years working for someone else, I was at the point of one catastrophe from being in poverty. Sure I made money, and I never worked a 2000 hour year. Didn’t make enough to cover the trips to the doctor and kids this or that and have extra to invest for that time I can’t do anything anymore. That is getting closer than I’d like. What’s a vacation?

So what does it take for one to live, to just get by. Going to be different for everyone.

Can one make it on $20k. Doubt it. I can’t!

Whatever it is double it. 1/2 t plus burden is
labor rate. The other 1/2 is the owners salary. It is overhead.

Every legitimate business will have. Each business OH will vary.
What else is OH?
Taxes
Insurance (this will vary depending on what types of jobs you are going to do)
Phone
Office expenses ( computer, laptop, tablet pens pencils markers paper) whatever it’s there. My P&L shows it all
You are going to have a truck and its upkeep, some may have more than one.
What about a health insurance policy for you and your family.
What about retirement?
Someone stiffs you?
Tools

Used to be a time when you could work for a company and they would invest in a retirement for you. It s OH.

Does take long to have $100k a year which includes your owners salary.

The question is how many billable hours are you going to break that down into?

What are you going to call a billable hour?

Is it just the time you are at your customers property.

Is everything else is covered by your OH, like the time it takes to have parts on your truck ready for any thing, or time at the supply house specific for that job.

1000 hours seems to be the number that is thrown around for the number of billable hours for a service type operation. Any other project I presume would have based on a different amount of hours. What is it? Is based on a number of days like Seven-delta says?

So we have a $100k that is now
$100/hour
Technician rate $35/hour
Plus burden. I’ve seen multipliers from 1.3 to 1.5. Let’s say 1.4!

With no profit, we have a$149hr

It is suggested to figure 20%

$149/.80
You now have $186.25 / hr

Now if you are a one man show, you are paying your self for both the technician and the owner. If it is just one of those, then it most definitely isn’t worth it. Whatever your number is. What makes comfortable.

Now if someone ask what is going to cost to replace this whatever.?

How about troubleshooting. People want to know what’s it going to cost. I ask. I want an idea. I don’t try to talk my auto mechanic down from what is price is based on what I am sure he has figured what it cost him.

I can sell parts all day at my cost or mark them up a little, but what it cost me or you should be covered already.

With an understanding of what goes into it, coming up with a rate is not the difficult part.

It’s the answer to the question, how much will it cost

If you go on a call for instance to change an outlet or to add SPD to a panel

That may take 15- 20 minutes or a little more if you are invoicing then, 1/2 hour. Do you bill for a 1/2 hour, do you have a trip charge?

Do you have a trip charge no matter what, or only if you do the job?

I’ve seen rates of $250 on here. I’ve seen more and I’ve seen less.

When you have a call and there is never a question about what you charge, how do you deal with that?

The way I see it, it is time and it is material, just how is it presented.

What about call backs if and when it happens? Is this something you should budget for in your OH?

What about covering those manufacturers warranties on parts you supply? Your installation should be top notch so that should never be an issue, but what about a helpers? If it happens does it just come out of your profit?