Fixed Bids vs. T&M

[jeff43222]

I'm curious how other ECs price out residential remodeling jobs. I work almost exclusively in single-family dwellings built before WWII, and I do fixed bids up front. Lately I've been wondering if I should change my pricing policies.

When do you do fixed bids and when do you go with T&M? The only time I've done T&M is on troubleshooting calls (a very small part of my business). I ran into a plumber on a job today and talked with him about this, and he said his work is almost all T&M, even on remodeling work.

The reason I ask is that I'm finding that more often than not, I run into hidden snags that wind up costing me significantly more time than I planned on. For example, today I was planning on putting in a new receptacle and circuit in a kitchen, but when I drilled down through the newly-cut outlet hole with my flex bit, I discovered the flex bit was getting hung up on a rim joist, and the only way to drill down inside the wall was to open up the wall, drill down, then patch it afterward. Since the HO was out of town, I was unable to ask him how he wanted me to proceed (open the wall, go with surface-mounted conduit, cancel that task, etc.), thus causing me to stop and basically lose the day.

I'm a little concerned that if I switch over to a totally T&M model, I'll lose a lot of potential business because people are usually leery of T&M billing, as it can get out of hand very fast, and it's much harder for them to know if they are being ripped off. My fixed-bids model is bringing in plenty of business, but I'm not making nearly as much money as I think I should for all the work I'm doing.

[ July 14, 2005, 07:06 PM: Message edited by: jeff43222 ]

 

[celtic]

Re: Fixed Bids vs. T&M

Have you seen my post "The Elusive Neutral "?

What started out as a $2300 code violation job, turned into a $3600 find the neutral game. (Total price = $5900)
Yesterday, I played "let's find a neutral" again. Not to the same degree ~ 2 ceiling fan job for $300(an existing fan did not work, another fan in another location was to be installed), turned into get the one working and forget the new location( a suggestion I had made based on logistics of the new fan's location). Price was $350.
In both cases, the HOs were thrilled...and the fan job customer told me that she loved me

Both jobs were figured at a set rate and quickly turned into T & M. The problem I see with T&M is that for 8 hours (1 day) you know what you make - no additional profit...the faster you work, the less you make. Conversely, on a bid price you can "build" profit into the number and the faster you work the more you make. I would not even consider putting it on cruise control on either pricing - I work at one speed.
Bid and T&M do not work (at least for me) on every job. On some jobs (bid), your (profit)margin will be higher based on your own abilities...your abilities limit you on the margin in T&M.
I have considered going to T&M..or a variation of it, something like the first 3 MAN hours at $xxx, and every MAN hour thereafter at $xx. This might work with a crew, but as a solo operator the "profit" would be low.

[ July 14, 2005, 08:10 PM: Message edited by: celtic ]

 

[stud696981]

Re: Fixed Bids vs. T&M

The only time we use the bid price is for new construction and SOME major remodels where the walls are opened for other things and it is quite clear what we are up against.

Other then that we go with T&M, that way all parties involved get a fair price.

 

[growler]

Re: Fixed Bids vs. T&M

I would say, go for T&M every time you can get it on a remodeling job. Flat rate is good for easy service calls. Around here it's hard to get T&M on remodeling because the GC's are stupid and try to give a firm bid to get the work. Many are not good business men , this is what comes when a trade is not restricted and the work goes to the low bidder. I did try to hit them up for a lot of additional charges but that getting harder to do.

 

[wpaul29]

Re: Fixed Bids vs. T&M

For remodeling jobs I would go with T&M. Thats what I am doing right now. If the house is gutted thats one thing but most remodels are not like that. The customer is always changing their mind on something. Plus you run into alot of stuff you don't expect like the issue you stated. There are just to many variables any of which can cost you time an effort not seen in a bid price. I would try it an see how things go for you.