Electrician's Success International???

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aline said:
From what I understand the net profit for service contractors using a flat rate system runs between 10% to 20%. This doesn't sound like over inflated prices to me.

Here's a link to an article about a service contractor that I believe uses these over inflated pricing sheets.
http://www.qsc-phcc.org/snowBio.html
Note the line about double digit profitability reaching a high of 15.7%.

Is 15.7% profitability considered over inflated?
Doesn't sound over inflated to me. Wouldn't that be about $45 net profit if you sold a GFCI replacement for $289.

Here's a link to a cost calculator where they recommend 25% net for labor and 10% net for material.
http://www.mrhvac.com/bec.htm
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Thanks

This looks similar to what Ellen rohr uses for a understanding costs format
I like the Idea of it calculating the different divisions.

we have broken out the costs of our 2 divisions i will soon run the data through the Calculator
 
electricguy said:
Thanks

This looks similar to what Ellen rohr uses for a understanding costs format
I like the Idea of it calculating the different divisions.

we have broken out the costs of our 2 divisions i will soon run the data through the Calculator
Click to expand...

Exactly if someone using T&M not flat rate, included all their costs, and added a small profit, they would be somewhere near, the same price as a flat rate user charges, and it would not be an excessive charge, remember you have a lot of contractors, that have no idea of what their real costs are, they may respond to a service call, and never realize they lost money on it, because scheduled jobs are their bread and butter, usually profits from another job, bleed over to pay for any loss on a service call. Many contractors, do not include non productive hours in their cost calcuations, be it T&M or contract pricing, you need to have a good understanding of real costs.
 
iwire said:
I have not lost interest.

I have grown tired of talking to a brick wall, I don't care how anyone runs their business....it's their bussiness, more power to them. :)

What I have a real problem with is those that feel their way is the only 'right' way.

My 'right way' is to work for others, I get to pick and choose who I work for and I personally would never work by the piece, which is where this discussion started for me, for those that want to work by the piece great for them. :)
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Bob, my comments weren't even aimed in you general vicinity...but let's look into this a little bit.

1st - your viewpoint is that of an employee, nothing wrong with it. But, let me ask you this, when you look for an employer, do you look to earn the money needed to live the life you want? or do you just live the life that your employer will let you?

2nd - do you ever spend time working that you are not paid for? or does your company pay you for driving time? standby time? Trips to the supply house?

Because, unfortunately, many contractors on this very board do the above without realizing it.

They price their services based on the going rate, and live their life according to what everyone else will "let them make".

They spend 10-12 hrs a day and only bill 5-7. Essentially giving up to 5 hrs a day of labor away for free.

So the reality is, you have probably done more planning for your life and your future, than many contractors who own their own job.

So whether you are T&M or flat rate...whether you are piecework or hourly...we all want the same thing. To make money doing something that we like to do. Some of us want a better life than others...some of us don't even realize that we have the option to lead a better life.

it might be like talking to a wall, but the thing is, most guys who operate flat rate have taken all these things into account. They have figured out how to make a better life than they ever imagined. They found the doorway through the wall. So while you feel you are talking to a wall, they are actually on the other side, trying to tell you where the door is. Whether you want to use the door, or run head first into the wall, is your choice. But don't say that the door doesn't work if you haven't even found it, let alone tried to open in.

(note- in the above paragraph 'they' and 'you' are used as a general term. They are not aimed at anyone specific)
 
satcom said:
they may respond to a service call, and never realize they lost money on it, because scheduled jobs are their bread and butter, usually profits from another job, bleed over to pay for any loss on a service call.
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You hear this a lot, " I can't make any money on small jobs". :confused:
 
satcom said:
... one of the fallbacks in some that are operating a flat rate, are also trying to pay piece work, or some form of it,...
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Not so much piece work as much as it is base wage plus commission. A guy could live on the base wage, but with the "commission" option, he can make a killing. How many times have you spotted additional work at a home and just kept your mouth shut and moved on? :cool:
 
I have also noticed that most guys who are anti-flat rate base their arguement on opinions and feelings.

When facts get presented, they suddenly lose interest and move on to another subject.
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I won't lose interest. I find the subject fascinating.

The flat rate is not an issue with me. I just have a problem with those who abuse it.

Example:

Some of the service companies here will quote an inflated rate then offer a senior discount, a AAA discount or some other marketing BS to make it seem like you are getting a deal. People do it every day and that's fine....for them.

Some of the service companies around here encourage their employees to sell product that is not necessary. (Reset the GFCI for $35 or replace it for $289..or $150?) WWYD? I would assume that 90% of these guys would replace it.

Flat rate has it's place. I just don't have the balls to charge that kind of money for simple things. Am I an idiot? Probably. That's why I am not in charge of estimating.
 
JohnConnolly said:
I won't lose interest. I find the subject fascinating.

The flat rate is not an issue with me. I just have a problem with those who abuse it.

Example:

Some of the service companies here will quote an inflated rate then offer a senior discount, a AAA discount or some other marketing BS to make it seem like you are getting a deal. People do it every day and that's fine....for them.

Some of the service companies around here encourage their employees to sell product that is not necessary. (Reset the GFCI for $35 or replace it for $289..or $150?) WWYD? I would assume that 90% of these guys would replace it.

Flat rate has it's place. I just don't have the balls to charge that kind of money for simple things. Am I an idiot? Probably. That's why I am not in charge of estimating.
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John,

it doesn't make you an idiot....but there are a few things worth mentioning...

1) i fully agree with you about abusing the system...but I am also against the T&M guys who abuse the system. It's something that contractors have to be mindful of every day.

2) flat rate does not necessarily equate to "obscene or outrageous" pricing. Flat rate is pricing based on your actual costs. It simply gives the customer more knowledge and the ability to make better decisions. How many times, after completing a T&M job and giving the customer the bill, have you heard "If I knew it would be that much, I wouldn't have had you do it"

3) if you are already giving guesstimates or NTE's with T&M billing you are 1/2 way there. T&M billing with a NTE is great for the customer. Not for the contractor though. What that type of billing does is shift all of the risk to the contractor and give all of the rewards to the customer. They have a guaranteed maximum price, but if you get done quicker, they get a discount. If it takes you a little longer, you eat the loss.

4) if you have never done a break even calculation, you may be surprised to find out that the "inflated" rates are actually correctly calculated. I don't know how long you have been in this industry, my guess is for quite some time. Most guys I know who have been doing this for years have failed to keep up with the times. I'm not saying that is the case, but look at your city. 5-6 yrs ago you could buy a nice house in the Pheonix area for $130,000. That same house is now $230,000. Think about the added expense for any new guy you hire. 6 yrs ago a $40,000/yr salary would let him buy that house. Today, not so much.

5) as for the GFCI, we would never just reset it for $35. For one, it costs us more than $35 (or $55, or $65) just to go to the house. 2nd, what caused it to trip. We would spend time to attempt to determine the cause. Bad toaster? Our base service call is $149. We would probably replace the GFCI once we determined the cause of the trip. We would spend about 1/2 an hour in the house. another 1/2 hour in travel time. The customer would have their problem looked at, preventitive measures taken to lessen the likelihood of it happening again, and actually get something for their money.

BTW - before we even went out to the house, we would attempt to advise them over the phone - for free- to reset the GFCI.

It's all about how you personally perceive things. My feelings are this, if I bring my car to the mechanic to have the oil changed, while it's up on the lift, I want him to look at everything. If he notices my breakline is cracked, but not necessarily leaking yet, I want him to tell me about it. What is the cost to replace it right now? Next week? Let me make the decision based on all the information. Same thing our customers feel. How much is it to fix that problem? "well ma'am, it's $55/hr and it might take 1 hr or it might take 10. I really don't know" vs. "well ma'am, it will be $275 to fix that problem" Now, the homeowner is armed with the information that they need to make an informed decision.

Satcom brought up a great point about money bleeding from one division to the other. I challenge any company that does resi and lt commercial service work T&M to break out their costs. You won't win or lose anything...just get an understanding of the actual costs of running a resi service company.

John, in your city there are several larger service companies running flat rate. I know 1 guy quite well, and truth is, he doesn't charge enough. He knows his costs, and covers them. But he makes very little profit currently. His goal is marketshare. But, I believe he is upwards of 20 trucks just doing residential electrical service. I don't know the size of your company. But I know that there are very few, if any, companies doing resi service T&M, that have 20 trucks.


flat rate is not one specific way. Other than the basics (determine your true costs, set your pricing to cover your true costs, give the customer the information to determine what is best for them) there are a bunch of ways to run it. The grandfather of modern day flat rate, Frank Blau, was and still is a union plumbing shop. Paid his guys hourly rate, usually above union scale.

How many T&M guys will guarantee their employees a paycheck for 40 hrs, even when times are slow?

I think there is a misconception that becoming a flat rate contractor ceases your ability to operate under your own conditions. There is no mythical "book", it's a price guide that you create specifically for your company. If you crunch your numbers and determine that you can profitably change out 1 GFCI at someone's house for $80, then that will be you price. My arguement is that when you crunch your numbers, you find that number to be closer to $200 to make a trip to replace 1 GFCI. Hence the reason that flat rate guys appear more expensive.

Good luck and I would love to here your feedback.


(edited for spelling and grammer only)
 
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Emahler
Very well defined. The problem with the industry (and I was one) is that we are not used to charging what we needed too in fear of the othe guy comming in lower so we always set our rate to match. big mistake but we all did it.

We as an industry must raise the bar for ourselves and realize we are worth it and must charge enough to make a profit. No one is advocating selling things a customer does not need or want but there will always be that type out there.
I believe that eventually most contractors doing service work will be doing this type of system. Elect, HVAC and plumbing. Auto service has been doing it for years and now it is the norm.

There is nothing wrong with making a profit. The customer will pay the price if they know they are getting value.
 
georgestolz said:
Maybe I wasn't clear. Both companies remain open under the same ownership. There isn't any % of sales fee?
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The continuing rate is somewhere in the ballpark of $289./week. There would be no benifit of running a second company to avoid ESXI fees.
 
Then what purpose would there be in a company starting a second company, essentially in competition with themselves? Can you think of a reason?
 
georgestolz said:
Then what purpose would there be in a company starting a second company, essentially in competition with themselves? Can you think of a reason?
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Not an ESI company. Are you thinking of a Mr. Electric company? I heard of 1 of them in this area doing that. That is a franchise, not a membership.
 
There are a bunch of Mr. Electric's around the country that maintained a second company. Usually the 2nd company was either resi new construction or a larger commercial operation.

Mr. Electric is a royalty based system. Guys would operate it as a seperate entity strictly for residential/lt. commercial service and repair. Since you pay a % of your gross, it's not a cost effective way to do any type of bid work. The margins are too small. Resi/Lt commercial service work, when done properly (and quite frankly the way that Mr. Electric's system - and that of Nexstar and ESI as well) has much higher margins.

But I believe that ESI is not royalty based, nor is Nexstar. Mr. Sparky may be, not sure.
 
Thanks for all of the feedback everyone. I think you all have saved me the time and hassle of going to the presentation. My company is doing just fine the way I've been running it and I don't think the ESI type of template would work very well in this community.
 
bk,

i'm not saying join, i'm not saying it's right for you...but if they are spending their time and energy trying to sell the idea, the market is probably there.

someone from your area will sign on. wouldn't it be nice to know what they are going to do?

good luck...
 
Bob,
ESI is definitely not for everyone. As you can see by the responses on this forum, everyone seems to know all about how to run a profitable business, although few ever achieve it. It amazes me that we can figure out how much is "too much" to charge for a service, And by charging T&M rates we can actually make LESS money the better and faster we get at our job.(A green technician actually makes more for the company than an experienced one!) and we all charge the RIGHT anount for our business, yet most Electrical contractors avg. 1-5% profit if they are making any money at all. Somehow it is accepted that Owners of Gen Contractors and Mc Donald Franchises are allowed to make 10 to 25% profit margins. (and sometimes more).for their services, and electrical business owners are just not entitled to that kind of profit. I was in that same boat before joining ESI.(I used to think I was a pretty good businessman, yet never seemed to make any money! HA!) The thing that they and nexstar do is they teach you how to run a business the right way. They do not give you the magic bullet for success, but for people who like to improve their lives and the lives of their employees, it's worth a look. If you already know all there is to know about this business, dont waste your time. Best of luck to you in your business and in your future endeavors!

Paul Allen
FL Master Electrician
 
Paul, each person's expierence is different, I live in Washington DC and I fail to believe all those different trucks I see everyday as I drive around belonging to electrical contractors are all poor men barely making a living. 25% of my work is for other electrical contractors so I am not justt addressing my expierences, I've seen where many live, what they drive, boats, nice offices ECT. either they are ALL in heavt debt or they are making a decent living.

Do not judge everybody by your management skills.

But then again I never knew a contractor that admitted to making a profit, good way to avoid giving raises and bonuses.

Myself I do OK as do ALL my employees, I'll keep the extra fees, thank you.
 
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Just today I get this e-mail

Hello XXXX,
After waiting to hear from you I realized that you are just too busy.
An electrician came to my home yesterday, gave me an estimate and will do the needed work plus a ceiling fan I just purchased, next wk.
Tho very expensive, at least the work will be done.
Thank you very much for the help you gave me and I know you would have helped me if you could.
Sincerely.
ms XXXX

Notice the wording "Tho very expensive, at least the work will be done"

The company that is doing the work is almost 3 times my price, so there is a market for them.

When she first called it was not an emergency, and she was put on schedule for work to be done this friday, what happened is between her call to me, and the other company showing up and getting a $49 dispatch fee, I assume she figured she spent $49 already so was commited him doing the work.

It all depends on how you want to run your business, some customers just want service, and price is not much of an issue, others may have only a pricing concern, the ones with price only concerns, are usually the problem customers.
 
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