management/processes/systems

[mtfallsmikey]

http://www.hvacprofitboosters.com/

evolve or die

I'm surprised that no one in the EC biz, or industry, has come out and spoken up about how to really make money, especially in service work, like there has been in the HVAC/plumbing arena. Frank Blau was the first to do this more than 20 yrs. ago. Many others are doing it today, some good, some bad.

 

[flyboy]

I'm surprised that no one in the EC biz, or industry, has come out and spoken up about how to really make money, especially in service work, like there has been in the HVAC/plumbing arena. Frank Blau was the first to do this more than 20 yrs. ago. Many others are doing it today, some good, some bad.

Nexstar, a better practices group, founded by Frank Blau, has many EC's as members. They are some of the most profitable well run companies you'll find.

 

[CDELECT]

Nexstar, a better practices group, founded by Frank Blau, has many EC's as members. They are some of the most profitable well run companies you'll find.

Yes they are the most profitable, the comment made that if they charged those rates they would have zero work, is not the way it is, he does not understand service work where hourly rates are not used and they don't work by the hour they work flat rate, you would never be able to sell any job if you used an high hourly rate, that is why they stay away from T&M and hourly rates. Almost every service company in my area has an hourly cost (not rate) from $250 to $350 an hour which they charge as a flat rate, they are the guys that have been making it thru these past down years, they know their costs of operating, and what they need to cover the cost of doing business.

 

[flyboy]

Yes they are the most profitable, the comment made that if they charged those rates they would have zero work, is not the way it is, he does not understand service work where hourly rates are not used and they don't work by the hour they work flat rate, you would never be able to sell any job if you used an high hourly rate, that is why they stay away from T&M and hourly rates. Almost every service company in my area has an hourly cost (not rate) from $250 to $350 an hour which they charge as a flat rate, they are the guys that have been making it thru these past down years, they know their costs of operating, and what they need to cover the cost of doing business.

Bingo! Well said.

24 employees (The most important asset and responsibility any company has)

3-5 million a year (I don't why, but it seems more appropriate to put a range rather than the
actual amount)
15,000 customers served over the last 3 years, 25,000 total in customer base, 4,000
agreement customers.
A+ BBB Rating

7 to 11% net profit (I hope everyone understands that profit is not a bad or evil thing. Profit is a responsibility of business owners (or the people running the business). It's where return on investment for owners come from, fuels business growth and is where bonuses and profit sharing comes from. It's also where charitable donations come from.

Hopefully, this post will not generate negative comments by those that think this is bragging. I am not bragging. I'm just offering up proof that what I suggest or recommend really works.

My only intent is to help by sharing valuable information that may help someone. It's about giving back to those coming up in the industry that want to be successful in this business.

Cheers!

 

[CDELECT]

Bingo! Well said.

24 employees (The most important asset and responsibility any company has)

3-5 million a year (I don't why, but it seems more appropriate to put a range rather than the
actual amount)
15,000 customers served over the last 3 years, 25,000 total in customer base, 4,000
agreement customers.
A+ BBB Rating

7 to 11% net profit (I hope everyone understands that profit is not a bad or evil thing. Profit is a responsibility of business owners (or the people running the business). It's where return on investment for owners come from, fuels business growth and is where bonuses and profit sharing comes from. It's also where charitable donations come from.

Hopefully, this post will not generate negative comments by those that think this is bragging. I am not bragging. I'm just offering up proof that what I suggest or recommend really works.

My only intent is to help by sharing valuable information that may help someone. It's about giving back to those coming up in the industry that want to be successful in this business.

Cheers!

In my small town and the areas around me, the only shops making it thru these bad times have been the ones operating flat rate, it may be fine to work T&M or low hourly rates if you are doing electrical work part time and you have a good paying job with bnefits or you are do it as a hobby, but if you need to provide for a family, and build a business that will supply more then just getting by then you may want to change your thinking, and start operating it as a business.

 

[wirenuter]

Flat Rate, Explain it

Flat Rate, Explain it

Ok,
Sounds great. But nobody has yet explained it.

Also what I am having a hard time with understanding is this claim of what = 300 ph.. How are you deriving this number?

Lets say a customer calls me and says he needs a ceiling fan replaced, and wants to know how much. And I tell him that if its a direct replacement, and the existing box and wiring are in adequate condition for the replacement, it shouldnt be more than a couple of hours, and that our rates are 150 for the first hour and 110 for each additional hour.
Now if I were a flat rate shop how would I handle this call?

Also If whats different is simply the amount a flat rate shop would charge this customer (all qualifications being equal) why would this customer be willing to pay more?

Dont take me wrong, Im not trying to be a wise ass, just trying to learn a better way if it exists.

 

[electricguy]

Most of my service work is from customers that have called an electrician for the first time,usually they have waited or procrastinated on a repair issue,

They want it fixed now or need something installed as the dept store didn't tell them that the new over the range mirco/range hood needs its own circuit or there was just a 30 amp outlet for a washer/dryer combo but the new units need a separate outlet for the washer .

More often than not they have already dealt with Sears, or some other HAVC or plumbing shop using flat rate. I do not quote T&M ,I use a price book I look at the job and give a contract price. Usually they sign and they can get on with their busy day leaving us with the task at hand

A price Book is only one of the tools to run a flat rate price system, maybe someone else can chime in here as to what we need to do to run a successful EC company for home electrical service repair work. butt crack while hooking up that dishwasher or disposal wont get ya very far serving customers especially in the higher end neighbourhoods. .

We all know how to be electricians but putting some sizzle into the presentation helps too. shoe covers ,well dressed , floor coverings, cleaning up the work area as you work etc .

I try and remember to read this

http://nspg-software.com/ads/Blau-Oath.htm

 

[rgiraldo]

Mark up your material at 1.75 and use a labor rate of (if neca use neca hard or #2, if Conest labor 2). You have to add 100 for trip charge. that will kinda give you where you want to be. I am also trying to do the same thing that you are doing. Give me a call 321-356-3503 I can share what I have to try to best guide you.

Now if you use an estimating program you will still be low. I have two different flat rate books that I use and I alwAys question myself and double check the estimating program and ask myself is that right.


Good luck finding what you need but remember that two heads work better then one.

Also for you nextstar guys out there, how much was your investment and is it paying off? And how long were you in business when you started nextstar.

 

[wirenuter]

and use a labor rate of (if neca use neca hard or #2, if Conest labor 2). You have to add 100 for trip charge. that will kinda give you where you want to be. I am also trying to do the same thing that you are doing. Give me a call 321-356-3503 I can share what I have to try to best guide you.

Now if you use an estimating program you will still be low. I have two different flat rate books that I use and I alwAys question myself and double check the estimating program and ask myself is that right.


Good luck finding what you need but remember that two heads work better then one.

Also for you nextstar guys out there, how much was your investment and is it paying off? And how long were you in business when you started nextstar.[/QUOTE]

 

[stevebea]

All of our non account service calls are flat rate with a trip charge during off hours with payment expected at time of service. If they are an existing customer with a maintanence agreement the trip charge is about 50% off and about 20% off the flat rate.

 

[wirenuter]

The first reply was a mistake, sorry

The first reply was a mistake, sorry

Mark up your material at 1.75?
rgiraldo,
Why would you only mark up material 1.75%? Maybe I'm dense, I just dont get it.
My understanding (and if I'm wrong please correct me) is that flat rate is simply quoting a price for everything and anything and never offering T&M as the theory is that people feel uneasy about T&M, they want to know a fixed cost.
We already do this for most of our resi work. It doesnt prevent someone else from underpricing you. Not all your competitors are working T&M, in fact most are out there quoting well under what they should just to pick up a days work. How does flat rating overcome that? It seems to me at the end of the day customers are just taking the lowest price. Yes we have some dedicated customers that care about quality and are willing to pay for it, but it is seeming the majority do not.
Am I missing the marketing end of it? Is flat rate only practicle for a company that can have someone there in an hour and secure the job because the customer has no time to think it over?
Again I am just searching for answers, and dont mean to offend anyone with my query.

 

[jmsbrush]

Mark up your material at 1.75?
rgiraldo,
Why would you only mark up material 1.75%? Maybe I'm dense, I just dont get it.
My understanding (and if I'm wrong please correct me) is that flat rate is simply quoting a price for everything and anything and never offering T&M as the theory is that people feel uneasy about T&M, they want to know a fixed cost.
We already do this for most of our resi work. It doesnt prevent someone else from underpricing you. Not all your competitors are working T&M, in fact most are out there quoting well under what they should just to pick up a days work. How does flat rating overcome that? It seems to me at the end of the day customers are just taking the lowest price. Yes we have some dedicated customers that care about quality and are willing to pay for it, but it is seeming the majority do not.
Am I missing the marketing end of it? Is flat rate only practicle for a company that can have someone there in an hour and secure the job because the customer has no time to think it over?
Again I am just searching for answers, and dont mean to offend anyone with my query.

I posted this on another forum, I hope this helps
Flat rate pricing is used for residential service work and light commercial service work. Billable hours are one of the biggest differences. The Estimating software out on the market is for new construction.
This will help clarify the differences of T&M, flat rate and electrical estimating. It will also give some insight why flat rate is good.

Flatrate doesn't mean rip-off. It simply means that the field technicians have a guide with them to price the job correctly.
This guide is based off your company?s expenses.

If you are against flatrate for service work, here are a couple of things that you will need to conquer if you run any employees on T&M


1. Pricing in front of your customers. The idea is not to look at the job with your customer, and then say I?ll be right back and go to your truck and figure a price. The idea is, is to take out your customized pricing manual right in front of your customer so they can see that you are pricing from a standardized book. They will have a peace of mind knowing that you are giving them fair prices and you are not just making them up based off of, who they are, where they live and ect.


2- Billing, for all paid hours (if the tech is only on the jobsites for 4-5 hrs a day, how do you cover the other 3 hrs that he is getting paid?) Regular estimating software does not do this. T&M does not do this.


3- Getting Paid - how can you fully expect a customer to write you a check on the spot if they didn't know what the total would be? They figured the job would be $300. You quoted them $70/hr, but it took you 6 hrs +mat. You give them a bill for $600. They don't have the money right now. They'll send you the check. With flat rate, they know up front how much. If they don't have the money, they wait.

4- Employee motivation ?As an employee, if I work for a T&M contractor, I know exactly how much money I?m going to make today, tomorrow, this week, next week, etc. I also know that everyone else is making the same rate. What's my motivation to work harder or faster? If I bust my hump and get jobs done quicker, who wins? The customer, because they get a lower price. I get punished by getting sent to another job.
But if I take my time and go slow, who wins? I do. I get the same pay, but for less work. Who loses? The customer, they pay more for the same job.

With flat rate, I give the customer a price. I get done faster and we both win. The customer gets back to their normal lives faster and I get better pay. I get to move to another job and make more money. The customer knew they were paying $X whether I was there 2 hrs or 2 days. The longer I was there, the more of a nuisance I became to the customer.

5- Quality of work - how can you really say that quality is you main goal when T&M is all about fast and cheap. Give a cheap hourly rate (that's what the customers have been taught by contractors) and get it done fast. The entire time the customer is watching the clock and seeing their bill rise higher and higher. They don't know the final outcome. The longer it takes, the more worried they get.
6. Your Expenses - Good Flat rate software will help determine your selling price based off of all your indirect and direct expenses to run your company. Electrical Estimating software does not.

Customers always undervalue what something will actually cost (wonder where they learned that?) How many times has someone called for a problem and you come to find out they figured it would cost about $50 to fix? (that is total charge for travel, repair, parts, etc)

How you expect them to really understand that the 4 recessed lights they wanted in the upstairs bedroom (that they thought would take you about 2 hrs to do -at your $70/hrly rate- and should cost about $250-$300 with the parts) actually took you about 5 hrs(because their attic was full of junk, floor boards were nailed down, there were cross braces in between the beams, etc) Now you give them a bill of $500 - after you busted you tail in their attic- and they think you ripped them off for $200.

And they say "I won't pay more than $300. You worked too slow" And to top it off, it's an employee of yours that was there (so you don't even know what actually happened) But you already invested your material and labor. What do you do? You don't have a signed contract for any total amount. You have no legal leg to stand on.




7. Employee?s now can price jobs correctly, the idea is to send every tech out with the flat rate manual so that they can do the estimates. You personally can probably do 5 estimates on a good day. Now imagine have 5 techs in the field (each doing 2 estimates/day)



Flat rate books are a way for you to put your knowledge in a book form to send with them. If it's just you in the field, you should know your material costs well enough and be able to judge your install time well enough to give a total price for just about anything you do. Your techs will not. So the book is a way for you to give them your knowledge.


Flat rate manuals are based on your business and cost As a matter of fact, one of the things that needs to be done in order to create your flat rate manual is that you need to actually figure out your costs. Unlike T&M where most guys call around and get everyone else's rate and charge around the same price.

You will almost never get a customer to agree to $125/hr plus material. However, every day our customers agree to $400 for a job that takes us 2 hrs and had $50 in material. Simply because they know the total cost. I tell them $125/hr and they get scared. I tell them $400, no matter how long it takes, and they can either deal with it or not. But at least there is no fear.

 

[wirenuter]

Flat rate

Flat rate

I can see merrit to the idea of having set rates for repeatative work. And dealing with averages at the end I do think you would win, and when you consider the time you wouldnt be spending looking at every job that you may not get, it makes some sense. Provided they mostley accept your price at what sounds like 2-300 per hour?
But......You would have to have a hell of a lot of small jobs (service work) to look at each week to make the averages work in your favor.

What is your ratio for jobs priced to prices accepted?

Lets say you send a tech out to look at 4 a day and not 1 signs on? How is he making you money?

It seems that your therory or MO assumes every job priced is accepted. If you are doing this successfully.....
I'd be curious about what you are doing for advertising in order to get the phone to ring that much.

 

[jmsbrush]

I can see merrit to the idea of having set rates for repeatative work. And dealing with averages at the end I do think you would win, and when you consider the time you wouldnt be spending looking at every job that you may not get, it makes some sense. Provided they mostley accept your price at what sounds like 2-300 per hour?
But......You would have to have a hell of a lot of small jobs (service work) to look at each week to make the averages work in your favor.

What is your ratio for jobs priced to prices accepted?

Lets say you send a tech out to look at 4 a day and not 1 signs on? How is he making you money?

It seems that your therory or MO assumes every job priced is accepted. If you are doing this successfully.....
I'd be curious about what you are doing for advertising in order to get the phone to ring that much.

We have a dispatch fee or response fee to cover the cost of sending an electrician out. This response fee is discussed with the client first, we let the customer know, that this fee is just for sending the tech out.
The tech will qoute an up front price for what needs to be done once he gets there.
Some might tell you that trip charges won't work. Most that say that, are one man shops. As soon as you have journeyman's on payroll, you will see how long you go without having a trip charge.
Do you close every call, of course not. With sales training, the ratio will be higher.
To find what your closing ratio is, take total calls for the week and divide by the number you closed.
We do advertise to generate calls.

 

[wirenuter]

We have a dispatch fee or response fee to cover the cost of sending an electrician out. This response fee is discussed with the client first, we let the customer know, that this fee is just for sending the tech out.
The tech will qoute an up front price for what needs to be done once he gets there.
Some might tell you that trip charges won't work. Most that say that, are one man shops. As soon as you have journeyman's on payroll, you will see how long you go without having a trip charge.
Do you close every call, of course not. With sales training, the ratio will be higher.
To find what your closing ratio is, take total calls for the week and divide by the number you closed.
We do advertise to generate calls.

Interesting. Without prying to much... is this trip charge over or under $100?
Do many balk at this or? It kinda does away with "free estimates", which kinda seems like an American standard for lack of a better term.
Again I assume you are a large shop? Or do you just receive so many calls that the trip charge could pay a man at "break even" even if the day were a bust?
And lets say your tech quotes a price and the buyer says go, what if the tech doesnt have the parts? Or is the tech just acting as an estimator and the job gets scheduled for another day?
I appreciate the response, thank you.

 

[jmsbrush]

Interesting. Without prying to much... is this trip charge over or under $100?
Do many balk at this or? It kinda does away with "free estimates", which kinda seems like an American standard for lack of a better term.
Again I assume you are a large shop? Or do you just receive so many calls that the trip charge could pay a man at "break even" even if the day were a bust?
And lets say your tech quotes a price and the buyer says go, what if the tech doesn't have the parts? Or is the tech just acting as an estimator and the job gets scheduled for another day?
I appreciate the response, thank you.

Trip Charge is under $100.00
Large shop, no.
The vans are fully stocked to do the job today, going back to jobs can put you in the whole, always be ready to capitalize on an opportunity.
2 to 3 calls a day can keep one tech busy.
The tech is an electrician, he has a flat rate book with him, which is like having the owner or estimator by his side at all times. He will be taught how to sell.