Flat Rate Contracting

[MJJBEE]

to be done safely, no way in under 2 hrs....

why punish yourself for being competent?

i guarantee $75/billable hour is not enough....is that the going rate?

what's your guaranteed paycheck each week? do yo have one?

I just signed an invoce for an EC 4 hours $76.75 /hour plus a $10 truck charge ths seems in the ballpark to me.

 

[emahler]

I just signed an invoce
for an EC 4 hours $76.75 /hour plus a $10 truck charge ths seems in the ballpark to me.

4 hr min? most guys, who make money at that rate, somehow bill 12 hrs wen their guy only worked 8...so it's not their true rate...

 

[petersonra]

$75/hr is the going rate for my area.

You don't think it's possible to change 2 receptacles, one circuit breaker, and clean one termination inside of 2 hrs?? Any longer than that and you're milking the job in my opinion.

I suspect I could do it in 2 hours. I have changed out receptacles before and it did not take me more than 10 or 15 minutes, and I have done maybe 3 in my whole life. Someone who does it everyday ought to be able to do it a whole lot faster.

 

[petersonra]

The two plumbers mentioned in my previous post couldn't sleep at night either because they had to work a second night job because they didn't charge enough in their contracting business to provide themselves with a benefit package.

I have a hard time understanding that, unless they were otherwise insurable. I knew an older lady who got blue cross in her late 50s recently, reasonably healthy, and it was only $400 a month with $500 deductible.

You can get family insurance for $1000 a month. If you can't make that much more working for yourself as opposed to working for someone else you should not be working for yourself.

 

[HighWirey]

Went to a customer house last night because they wanted me to do some work that was suggested fron a "free electrical inspection". Seems they had a problem with their air conditioning system, so they called a "flat rate" contractor. They sent out an A/C technician to look at and quote the repairs. They also sent some sort of electrician to give them a free quote on their electrical system.

Over the years I have attended several electrical estimating seminars, and read those books.

The seminars, as well as any book on the subject states that Rule Number One is "Know Your Cost".

Most of us in the electrical world have envyed HVAC contractors, because they seem to have read the same estimating books as have we. They just remembered and applied what they read.

You mentioned something about "in a perfect world, under ideal conditions". When is the last time you worked a project where the conditions were perfect and ideal? Even if you quote T&M, ballpark by the book. Then if your bill is lower, you will be a hero.

Recently had a similar experience as Satcom:
Silverado truck to the Chevrolet shop for some brake work (not a brake job, just to repair a squeek). Service manager telconed me a $400 quote. Go for it . . .

Picked the vehicle up that PM, bill was $380. $30 in parts, unknown amount of labor. I thought he was a hero. $400 quote, $380 bill (there is a little psychology mixed in there, I'll bet).

Roger, get with the program.

Best Wishes Everyone

 

[petersonra]

Silverado truck to the Chevrolet shop for some brake work (not a brake job, just to repair a squeek). Service manager telconed me a $400 quote. Go for it . . .

Picked the vehicle up that PM, bill was $380. $30 in parts, unknown amount of labor. I thought he was a hero. $400 quote, $380 bill (there is a little psychology mixed in there, I'll bet).

These days most auto repair labor is handled out of a book. if the book says it takes X hours to do a particular task on a specific vehicle, thats what gets charged. Good mechanics can work this system if they get paid out of the book. I knew several guys who worked for my brother when he was an auto service manager who regularly got 70 to 80 hours of pay per week for 40 hours of actual work.

 

[brantmacga]

These days most auto repair labor is handled out of a book. if the book says it takes X hours to do a particular task on a specific vehicle, thats what gets charged. Good mechanics can work this system if they get paid out of the book. I knew several guys who worked for my brother when he was an auto service manager who regularly got 70 to 80 hours of pay per week for 40 hours of actual work.

That's how all the auto mechanics and body shop guys I know get paid.

 

[aline]

I have a hard time understanding that, unless they were otherwise insurable. I knew an older lady who got blue cross in her late 50s recently, reasonably healthy, and it was only $400 a month with $500 deductible.

You can get family insurance for $1000 a month. If you can't make that much more working for yourself as opposed to working for someone else you should not be working for yourself.

They also wanted the paid vacation, sick leave, retirment plan, employer matched 401k plan, steady paycheck, etc.

The sad truth is they probably didn't have much if anything left over after paying their bills so they needed the second job just so they could have some spending money. I'm sure there are contractors out there that pay themselves less than they could make working for someone else.

I just received a phone call from a sign company. They installed a sign for a customer but the sign doesn't work because the power source is dead. The sign company was calling around to find someone to come out and troubleshoot the problem for their customer.

I quoted him a minimum troubleshooting fee of $135 for the first hour and $60 for each additional half hour.

He said I was the highest.
One guy quoted him $80 per hour with an $80 minimum.
Another guy quoted him $35 per half hour with a $35 minimum.

We all have the same size ad in the same phone book. The $35 per half hour company is a large shop with a lot of trucks. They do residential, commercial and industrial work. The $80 per hour guy I believe is a 2-4 man shop.

I know I don't make jack on these type of calls unless I can make it up on the repairs. Often it's a simple fix though and I'm not there more than a couple of hours. I don't know how or why anyone would work so cheap.

I'm amazed. I really thought my prices were low.

I questioned the sign guy about the $35 minimum and $35 per half hour guy.
I told him that sounded rediculously low and he agreed. He said he charges a lot more. I didn't think to ask what he would charge. He also agreed that the hourly rate didn't mean much. What really mattered was the final price and that would depend on the experience and skill of the person doing the troubleshooting. A guy could be half my hourly rate but if the electrician he sends out takes 3 times longer to find the problem who's the better deal. This is why I don't like T&M. The lower hourly rate guy seems to be cheaper but is he really cheaper in the end?

This isn't the sign guys problem. They just install the sign and connect it to the customer's power source. In this case the customer's power source is dead so it's the customer's problem. The sign guys are only licensed to work on or install the power within 10ft. of the sign. An electrician is required for anything else. The sign guy is just calling around as a favor to his customer because the customer doesn't speak english very well.

 

[peter d]

WOW. $669.90 plus sales tax!!!!

Yeah, I said WOW too, but not for the same reason. I said wow because there's a contractor who's actually charging the right rates for his work. EC's like that are few and far between.

 

[aline]

What really gets me is the $35 per half hour company in my previous post used to charge $49 per half hour about a year ago.

Also it seems to me the $80 per hour guy used to be $85 per hour.

I guess with the rising gas prices they decided to lower their rate so they could get more work to make up for the increase in fuel costs.

Here I've been thinking I need to raise my prices due to the increase in fuel costs. I guess I've got it all wrong. I need to lower my prices.

 

[peter d]

The whole job should be less than $300.00 including GFCI protecting the other bathroom and I still will make money.

Think about this...do we tell doctors, lawyers, mechanics, the appliance repair guy, and others who have an hourly rate well above $100 what a job or visit "should" cost? Do you walk into Stop and Shop and tell the manager what they "should" be charging for groceries? Of course not. All those I have mentioned above have figured out what their costs are and charge accordingly.

 

[emahler]

amazing difference in thought between electricians and electrical contractors....

 

[aline]

Think about this...do we tell doctors, lawyers, mechanics, the appliance repair guy, and others who have an hourly rate well above $100 what a job or visit "should" cost? Do you walk into Stop and Shop and tell the manager what they "should" be charging for groceries? Of course not. All those I have mentioned above have figured out what their costs are and charge accordingly.

Just think how much more doctors, lawyers and mechanics would have to charge if they made house calls like electricains do.

I wish people would start bringing their houses to me to be worked on.

 

[petersonra]

All those I have mentioned above have figured out what their costs are and charge accordingly.

Actually what they have done has figured out what the market will bear and charged accordingly. Customers by and large do not care what your costs are. They care what you want to charge them. It is a serious mistake to believe you can set your prices based on some model of what your costs are. It just does not work that way in the more or less free market we live in. It is a good way to determine if it is practical for you to go into business, but not a good way to determine your rates once you are in business.

It is a good exercise in any case. And you may be surprised at how much elasticity there is in what you can charge (I got that word from my brother Dr. Carl the economist).

It is also a serious mistake to believe that because you have high overhead costs that other similar businesses also have those costs. Some business people are just far more efficient at what they do than others are. It is entirely possible that one guy can make money charging $50 for a product or service and another guy lose money charging $100 for the same product, in fact, such a situation is actually pretty common.

 

[peter d]

amazing difference in thought between electricians and electrical contractors....

That's just it though...many EC's are nothing more than electricians who happen to run a business. They are good at the trade but know virtually nothing about running a business to make money.

 

[peter d]

It is a serious mistake to believe you can set your prices based on some model of what your costs are.

Please tell that to Nexstar and ESI, I'm sure they would love to hear from you. :roll:

 

[emahler]

That's just it though...many EC's are nothing more than electricians who happen to run a business. They are good at the trade but know virtually nothing about running a business to make money.

exactly what i said....

 

[peter d]

exactly what i said....

Then we agree.

 

[bikeindy]

What really gets me is the $35 per half hour company in my previous post used to charge $49 per half hour about a year ago.

Also it seems to me the $80 per hour guy used to be $85 per hour.

I guess with the rising gas prices they decided to lower their rate so they could get more work to make up for the increase in fuel costs.

Here I've been thinking I need to raise my prices due to the increase in fuel costs. I guess I've got it all wrong. I need to lower my prices.

Just having this conversation with my wife, you can't make up fuel cost by doing more work unless you change the type work you are doing where you are driving less. Doing more service work costs more, so if fuel is going up your rate must go up unless some other cost goes down. I just raised my rate for service calls. since the thread is about flat rate contracting I guess you can count me as one of those, I don't do a lot of time and material work. some times with my flat rate I make more than other times but I have it figured for an average. It works for me and my customers they all seem happy to pay.

 

[satcom]

It is a serious mistake to believe you can set your prices based on some model of what your costs are. It just does not work that way in the more or less free market we live in.

We have been doing it for the last 25 plus years, along with many other contractors, can you explain why many of the contractors that don't base their pricing on overhead cost and operating expenses, have short business lives. It is not aNexstar or ESI, concept, it is a basic business practice.