I stumbled onto another online forum called "electrical-contractor.net" and they have some discussion threads talking about Flat Rate vs Time and Materials and the benefit of flat rate pricing. I am new to this estimating business and need to get a good system in place. Right now I am finding I am underestimating the time needed to do old work in residential. Does anyone have any info that can help me? Does anyone have any MS Office files or something that can be used for residential old work? I am also trying to locate the Home Depot Worksite CD. I just found out this exists and I assume I should ask them at the service counter about getting a copy?
Flate Rate vs T&M vs Cost Plus
- Thread starter jfls41
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charlie tuna
Senior Member
- Location
- Florida
Re: Flate Rate vs T&M vs Cost Plus
there is no quick fix to your problem --- it's something that you must adjust to your own work and types of service. i once had another contractor tell me "figure what you would think the labor was and double it" ---you know it kind of works for me!!!
there is no quick fix to your problem --- it's something that you must adjust to your own work and types of service. i once had another contractor tell me "figure what you would think the labor was and double it" ---you know it kind of works for me!!!
Re: Flate Rate vs T&M vs Cost Plus
Ok, so lets say I quote a customer 16 hours to re-wire a bedroom, I think it will take 8 hours and I double it to 16... I end up taking only 9 or 10 hours to do the job, do I adjust the hours down on my invoice so the customer only pays 10 hours or do I not show the hours on the invoice? How does this work?
Ok, so lets say I quote a customer 16 hours to re-wire a bedroom, I think it will take 8 hours and I double it to 16... I end up taking only 9 or 10 hours to do the job, do I adjust the hours down on my invoice so the customer only pays 10 hours or do I not show the hours on the invoice? How does this work?
Re: Flate Rate vs T&M vs Cost Plus
You give the customer the quote for the BID, not the cost for the work. If you break it down past indicating the difference for the time and materials (time=$, materials=$) you are working for time and materials only. You have to add in all the extras that the customer does not believe they have to pay, BUT you HAVE to collect to survive.
paul
You give the customer the quote for the BID, not the cost for the work. If you break it down past indicating the difference for the time and materials (time=$, materials=$) you are working for time and materials only. You have to add in all the extras that the customer does not believe they have to pay, BUT you HAVE to collect to survive.
paul
jimwalker
Senior Member
- Location
- TAMPA FLORIDA
Re: Flate Rate vs T&M vs Cost Plus
Part of my old job was estimating fire jobs.I took it item by item on site.Exspected material and time.Might look like this ,item #1 bed room #2 outside wall receptacle ,23 feet 12-2,1 plastic nail on box,1 duplex receptacle,1 plate cover,3 red wire nuts,staples,.75 man hours rough .25 man hours trim,ITEM #2 ------- .Then add in travel time for the total job.This worked out great.Keep in mind that the customer usually is better off on a T and M rather than a flat charge.If they need a flat charge then you must figure on high side for everything.Most remodels want a locked in price,if it was a fire job they will need a locked in price to deal with the insurance.The real hard part was it often had to be broken down to damage from fire and items required to bring house to code.Code often took a $100 repair to a $1500 service change
Part of my old job was estimating fire jobs.I took it item by item on site.Exspected material and time.Might look like this ,item #1 bed room #2 outside wall receptacle ,23 feet 12-2,1 plastic nail on box,1 duplex receptacle,1 plate cover,3 red wire nuts,staples,.75 man hours rough .25 man hours trim,ITEM #2 ------- .Then add in travel time for the total job.This worked out great.Keep in mind that the customer usually is better off on a T and M rather than a flat charge.If they need a flat charge then you must figure on high side for everything.Most remodels want a locked in price,if it was a fire job they will need a locked in price to deal with the insurance.The real hard part was it often had to be broken down to damage from fire and items required to bring house to code.Code often took a $100 repair to a $1500 service change
Re: Flate Rate vs T&M vs Cost Plus
I don't have a contract up and running as i am not contracting anymore. it contained disclaimers and required info.
What is relevant to this aspect of this discussion is that my bid contained the scope of the work to code, to pass inspection. A reference to a specific set of plans, or to a complete listed description, with limitations for remodeling. It contained inclusions like being present for inspections. It contained the manner in which changes were to be agreed upon, either as set price or per hour+costs and %profit. And it contained a price for said work with a sentence like this... "I propose to do the above described work for the price of...."
This sentence was set apart from the others and was followed by a place for me to sign and date and for the owner or contractor to sign and date.
That type of contract is generally suitable for small projects, remodels, etc. But for McMansions and above you actually need a contract designed for you by your lawyer and insurance agent (lawyer last).
hope this helps. I never usually described materials unless it was time and materials. Some contractors just add 40 to 50 % on each, some use price guides with different guidelines for types of work. I thought that was a paperwork nightmare since I was doing the work as well. I said it cost this much, and if they wanted it broke down I assumed that they were going to argue about my time as well, and that my time would be spent better elsewhere. I would rather be poorer than feel pissed on just because i have to work. I didn't think it was their business to pick my bid apart.
If they needed a lower bid, I asked them to lower the amount of work. There were a few that I bid high to give a discount to, to make sure that job was ready, clean, completely framed and rough plumbed and the mechanical was roughed, AND I had the job to myself.
paul
I don't have a contract up and running as i am not contracting anymore. it contained disclaimers and required info.
What is relevant to this aspect of this discussion is that my bid contained the scope of the work to code, to pass inspection. A reference to a specific set of plans, or to a complete listed description, with limitations for remodeling. It contained inclusions like being present for inspections. It contained the manner in which changes were to be agreed upon, either as set price or per hour+costs and %profit. And it contained a price for said work with a sentence like this... "I propose to do the above described work for the price of...."
This sentence was set apart from the others and was followed by a place for me to sign and date and for the owner or contractor to sign and date.
That type of contract is generally suitable for small projects, remodels, etc. But for McMansions and above you actually need a contract designed for you by your lawyer and insurance agent (lawyer last).
hope this helps. I never usually described materials unless it was time and materials. Some contractors just add 40 to 50 % on each, some use price guides with different guidelines for types of work. I thought that was a paperwork nightmare since I was doing the work as well. I said it cost this much, and if they wanted it broke down I assumed that they were going to argue about my time as well, and that my time would be spent better elsewhere. I would rather be poorer than feel pissed on just because i have to work. I didn't think it was their business to pick my bid apart.
If they needed a lower bid, I asked them to lower the amount of work. There were a few that I bid high to give a discount to, to make sure that job was ready, clean, completely framed and rough plumbed and the mechanical was roughed, AND I had the job to myself.
paul
Re: Flate Rate vs T&M vs Cost Plus
I had an experience in Vail, Colorado:
The G.C. (Builder) wanted a proposal to wire his million dollar house. He asked for the proposal to be itemized. (being a newby) I did what he asked.
1: service and permit_$xxxxxx
2: wire the house_____$xxxxxx
3: Something else, don't remember.$xxxxx
He picked my proposal apart to his liking and wanted me to ONLY do the service. Then he wanted to buy the materials and have me work hourly. He gave the house to another contractor. I told him find someone else.
I had an experience in Vail, Colorado:
The G.C. (Builder) wanted a proposal to wire his million dollar house. He asked for the proposal to be itemized. (being a newby) I did what he asked.
1: service and permit_$xxxxxx
2: wire the house_____$xxxxxx
3: Something else, don't remember.$xxxxx
He picked my proposal apart to his liking and wanted me to ONLY do the service. Then he wanted to buy the materials and have me work hourly. He gave the house to another contractor. I told him find someone else.
hbiss
EC, Westchester, New York NEC: 2014
- Location
- Hawthorne, New York NEC: 2014
- Occupation
- EC
Re: Flate Rate vs T&M vs Cost Plus
I stumbled onto another online forum called "electrical-contractor.net" and they have some discussion threads talking about Flat Rate vs Time and Materials and the benefit of flat rate pricing.
Not that I would want to discourage you here but why don't you go over there and ask? Most of us are members there also but that's where the thread started.
-Hal
I stumbled onto another online forum called "electrical-contractor.net" and they have some discussion threads talking about Flat Rate vs Time and Materials and the benefit of flat rate pricing.
Not that I would want to discourage you here but why don't you go over there and ask? Most of us are members there also but that's where the thread started.
-Hal
Re: Flate Rate vs T&M vs Cost Plus
I see nothing wrong with him asking his question here and referencing the other forum.
What's the beef?
In a nut shell, Flat Rate is a dishonest way of doing business, it's nothing more than hiding overcharges from the customer. If Flate rate works so great the way some people say it does, why doesnt everyone use it. Because it does not work!
Best bet to help your company grow is to be honest from the time you ring the bell and introduce yourself.
Im not saying not give them an expected cost, but atleast be fair. A steady customer is better than no customes at all and a bad reputation is very hard to shake once word gets out because word of mouth business is your best advertisement.
And that is a fact.
[ March 09, 2005, 11:53 PM: Message edited by: bigjohn67 ]
I see nothing wrong with him asking his question here and referencing the other forum.
What's the beef?
In a nut shell, Flat Rate is a dishonest way of doing business, it's nothing more than hiding overcharges from the customer. If Flate rate works so great the way some people say it does, why doesnt everyone use it. Because it does not work!
Best bet to help your company grow is to be honest from the time you ring the bell and introduce yourself.
Im not saying not give them an expected cost, but atleast be fair. A steady customer is better than no customes at all and a bad reputation is very hard to shake once word gets out because word of mouth business is your best advertisement.
And that is a fact.
[ March 09, 2005, 11:53 PM: Message edited by: bigjohn67 ]
Re: Flate Rate vs T&M vs Cost Plus
Flat rate doesn't work?
There is a electrical contractor in Atlanta, Georgia that started in 1996 and has grown almost 2,000 percent, served more than 40,000 customers, operates more than 25 service trucks and does 6 million in sales each year with a net profit between 15 and 20 percent.
His company appeared in Inc. magazines list of the 500 fastest growing companies. Apparently many of his customers do not feel they are being overcharged or ripped off.
Seems to me that flat rate pricing has worked quite well for him.
Is 15 to 20 percent net profit too much?
I don't think it is.
Flat rate doesn't work?
There is a electrical contractor in Atlanta, Georgia that started in 1996 and has grown almost 2,000 percent, served more than 40,000 customers, operates more than 25 service trucks and does 6 million in sales each year with a net profit between 15 and 20 percent.
His company appeared in Inc. magazines list of the 500 fastest growing companies. Apparently many of his customers do not feel they are being overcharged or ripped off.
Seems to me that flat rate pricing has worked quite well for him.
Is 15 to 20 percent net profit too much?
I don't think it is.
hbiss
EC, Westchester, New York NEC: 2014
- Location
- Hawthorne, New York NEC: 2014
- Occupation
- EC
Re: Flate Rate vs T&M vs Cost Plus
I see nothing wrong with him asking his question here and referencing the other forum.
What's the beef?
No beef at all. Just that those were the guys who started the discussion and should be able to explain what they were talking about if you were to ask them. Like I said, most of us are over there too so ask away, it's the same bunch!
-Hal
I see nothing wrong with him asking his question here and referencing the other forum.
What's the beef?
No beef at all. Just that those were the guys who started the discussion and should be able to explain what they were talking about if you were to ask them. Like I said, most of us are over there too so ask away, it's the same bunch!
-Hal
Re: Flate Rate vs T&M vs Cost Plus
Aline
I have to disagree with you and well wishes to the company you are speaking of.
Flate Rate is just what I said it was- a gimmick
How can you justify what the book says to change a single pole switch. These are approx. to any market
Diag. fee $42.50 (ok I figured out the problem)
Perform Repair: $45.00 (now I have to change a sw)
Total repair: $87.00 It took only 30min min.
How about $45.00 now thats fair.
Aline
I have to disagree with you and well wishes to the company you are speaking of.
Flate Rate is just what I said it was- a gimmick
How can you justify what the book says to change a single pole switch. These are approx. to any market
Diag. fee $42.50 (ok I figured out the problem)
Perform Repair: $45.00 (now I have to change a sw)
Total repair: $87.00 It took only 30min min.
How about $45.00 now thats fair.
Re: Flate Rate vs T&M vs Cost Plus
I could do it for $45 dollars if they would bring their house to my shop.
I thought that $45 dollars was fair when I first started my business but quickly learned I was headed for the poor house.
What is your dollar per hour overhead?
Can you break this down so I can see where this $45 goes.
How much does the tech cost you?
Workman's comp?
Liability insurance?
Vehicle costs?
Owners salary?
Utilities?
Advertising?
Depreciation?
License fees?
Tech training?
Office personel?
Health Insurance?
Retirement Plan?
Etc.
$87 is a bargain to have someone drive out diagnose the problem and replace the switch.
Also I might add that if I wanted to I could make the price in my book $45 for this job.
There is nothing that dictates the prices in my book. I set the prices based on my overhead costs and my desired profit. I crunch the numbers and calculate my dollar per hour overhead then add the desired profit. Right now I'm shooting for around 10% net profit.
So out of the $87 the company would make a net profit of $8.70
What is wrong with that?
[ March 10, 2005, 07:48 PM: Message edited by: aline ]
I could do it for $45 dollars if they would bring their house to my shop.
I thought that $45 dollars was fair when I first started my business but quickly learned I was headed for the poor house.
What is your dollar per hour overhead?
Can you break this down so I can see where this $45 goes.
How much does the tech cost you?
Workman's comp?
Liability insurance?
Vehicle costs?
Owners salary?
Utilities?
Advertising?
Depreciation?
License fees?
Tech training?
Office personel?
Health Insurance?
Retirement Plan?
Etc.
$87 is a bargain to have someone drive out diagnose the problem and replace the switch.
Also I might add that if I wanted to I could make the price in my book $45 for this job.
There is nothing that dictates the prices in my book. I set the prices based on my overhead costs and my desired profit. I crunch the numbers and calculate my dollar per hour overhead then add the desired profit. Right now I'm shooting for around 10% net profit.
So out of the $87 the company would make a net profit of $8.70
What is wrong with that?
[ March 10, 2005, 07:48 PM: Message edited by: aline ]
Re: Flate Rate vs T&M vs Cost Plus
Here's an article about calculating your dollar per hour overhead.
http://www.pmmag.com/CDA/ArticleInformation/features/BNP__Features__Item/0,2379,4147,00.html
Here's an article about calculating your dollar per hour overhead.
http://www.pmmag.com/CDA/ArticleInformation/features/BNP__Features__Item/0,2379,4147,00.html
Re: Flate Rate vs T&M vs Cost Plus
This is a subject which is close to my heart. We as electricians were given instruction in electrical and not business, just as lawyers and doctors wern't given business courses also.
This is only one of a very few sites where we get together and discuss pricing unlike plumbers who get together once a week and talk price.
I've been doing this for 30 years and have seen prices go all over the board.
You start out small have one truck and maybe a helper and have your wife work somewhere else to get health insurance to cover you and then you charge $45 an hour and then one thinks one is living high off the hog.
I run a business similar to the one in Atlanta and I use flat line pricing although we call it undercarridge pricing. If we went time and material we would have to charge over $200 an hour with all the insurance, vehicles, office staff and other overhead.
I recently called a plumber to my home for a clogged drain. He charged me $185 per hour and believe me I was happy to pay it and get that drain cleared.
Point is you charge what your situition dictates and some of us will stay small and others will grow but prices should be steady with others in your area
This is a subject which is close to my heart. We as electricians were given instruction in electrical and not business, just as lawyers and doctors wern't given business courses also.
This is only one of a very few sites where we get together and discuss pricing unlike plumbers who get together once a week and talk price.
I've been doing this for 30 years and have seen prices go all over the board.
You start out small have one truck and maybe a helper and have your wife work somewhere else to get health insurance to cover you and then you charge $45 an hour and then one thinks one is living high off the hog.
I run a business similar to the one in Atlanta and I use flat line pricing although we call it undercarridge pricing. If we went time and material we would have to charge over $200 an hour with all the insurance, vehicles, office staff and other overhead.
I recently called a plumber to my home for a clogged drain. He charged me $185 per hour and believe me I was happy to pay it and get that drain cleared.
Point is you charge what your situition dictates and some of us will stay small and others will grow but prices should be steady with others in your area
charlie tuna
Senior Member
- Location
- Florida
Re: Flate Rate vs T&M vs Cost Plus
t&m--flat rate--bid--not to exceed--cost plus--
the electrical trade has many little facits and nitches of different types of work. residential--custom residential--multi family--condominium high rise--thats just housing!!! and there is more!!! each of these is different and to which one you work in, you will have to be knowledgable in the billing process to remain in business. the relationship between you and your customer is a thing of trust --- any of the above methods can be used and will work. the whole idea is for the customer to pay a fair price for the job at hand. this price needs to cover all the costs to complete the job and also profit and overhead. two type contractors make this process rough on everybody! those who have too big an overhead and those that are crooks!!! before i went in business, i worked for a group of brothers who specialized in high rise condo buildings. many of the buildings were never bid! the developer would call them to pick up the plans and start the building---"send me the bill" they would say!!! they had a reputation! this reputation was earned by years of relationships with these developers!
there are many jobs that should not be "bid" or can't be "bid" properly because of unforseen possible problems. if all the "possible" problems are figured into the "bid" and these problems surface on the job and are answered, everybody is happy. customer gets the job done and the contractor makes a proper profit. but again, if the job goes along without any problems arising, the customer may think he got ripped off and the contractor walks away with a large profit! then you have the contractor who doesn't see the problems and as they surface he's asking for more and more money!!! i just retired, and was in business for over twenty five years. the last ten or so years i did "no"- "bid" type work. i had a few customers ask for a price not to exceed -- and i never took advantage of them. i took mike holt's recommendation to "shed" those custormers that were problems and/or "slow pay" --- sent them to my competitors and it worked like a charm!!! soon we had a group of customers who trusted our costs, appreciated our service and payed their bills on time! it is a pleasure to work under these conditions --- zero pressure!!!
when a customer tells you they never questioned or looked at the total cost on my bill ---just signed off on payment --because they knew they could call at any time and get their work done for a reasonable price and "on time" ---it means something! but it takes time! the sooner you gain their trust, the sooner you can enjoy being in business!
t&m--flat rate--bid--not to exceed--cost plus--
the electrical trade has many little facits and nitches of different types of work. residential--custom residential--multi family--condominium high rise--thats just housing!!! and there is more!!! each of these is different and to which one you work in, you will have to be knowledgable in the billing process to remain in business. the relationship between you and your customer is a thing of trust --- any of the above methods can be used and will work. the whole idea is for the customer to pay a fair price for the job at hand. this price needs to cover all the costs to complete the job and also profit and overhead. two type contractors make this process rough on everybody! those who have too big an overhead and those that are crooks!!! before i went in business, i worked for a group of brothers who specialized in high rise condo buildings. many of the buildings were never bid! the developer would call them to pick up the plans and start the building---"send me the bill" they would say!!! they had a reputation! this reputation was earned by years of relationships with these developers!
there are many jobs that should not be "bid" or can't be "bid" properly because of unforseen possible problems. if all the "possible" problems are figured into the "bid" and these problems surface on the job and are answered, everybody is happy. customer gets the job done and the contractor makes a proper profit. but again, if the job goes along without any problems arising, the customer may think he got ripped off and the contractor walks away with a large profit! then you have the contractor who doesn't see the problems and as they surface he's asking for more and more money!!! i just retired, and was in business for over twenty five years. the last ten or so years i did "no"- "bid" type work. i had a few customers ask for a price not to exceed -- and i never took advantage of them. i took mike holt's recommendation to "shed" those custormers that were problems and/or "slow pay" --- sent them to my competitors and it worked like a charm!!! soon we had a group of customers who trusted our costs, appreciated our service and payed their bills on time! it is a pleasure to work under these conditions --- zero pressure!!!
when a customer tells you they never questioned or looked at the total cost on my bill ---just signed off on payment --because they knew they could call at any time and get their work done for a reasonable price and "on time" ---it means something! but it takes time! the sooner you gain their trust, the sooner you can enjoy being in business!
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