New EC

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Dogg

Member
Location
Raphine, VA
Hey guys, new man on the block! I would appreciate any input to my question, good, or bad. I am just opening my new electrical contracting business as a sole prop., yep even in hard times! I have done all the steps necessary to aquire licenses, accountants, advertising, legal, etc.; however, I am still struggling with figuring out my hourly rates, and how to bid on jobs. I have a home based business, and I wanted to start out slow (i.e. keep my start-up costs low); therefore, I do not have the overhead costs most do, just a single van that is paid for and a home based office. According to my business plan, I wanted to take on service work and remodeling at first (residential), then gradually venture out in new construction and commercial jobs. I am from a relatively small town in Virginia (Harrisonburg, near Richmond) if anyone is familiar with that area. Also, it is worth noting that I am employed full-time and doing this in hopes to venture out fully on day.

Thanks for your input, Dogg
 

active1

Senior Member
Location
Las Vegas
Welcome to the forum.

Someone could write a book on starting out, calculating labor rates, mark up, dealing with customer issues, etc. just with all the information here. There are also a few books out there for the EC including for sale here.

Many have different tecneques to figure what to bill out for a job. There have been some long posts and disagreements about the matter. It can be hard road figuring it out. One one end you work for nothing and lose money, the other end it's hard to make a sale.

Without going into too much detail I will say this. Know your cost to do business. Most start-ups say the same thing they have no overhead. They are lieing to themselves. Some even have a hard time distingushing between personal and company money and costs.

An example of some costs for a part time start-up:

Insurance
local contractor registration fees
Business cards
Office stationary (paper, ink, envelopes, stamps, staples, lables, pens, etc.)
Fuel
Truck maintence
Truck registration
Cell phone
Busness phone line
Business fax line
Internet connection
New equipment (ladders, drills, cords, testers, etc)
Replacement tools (drill bits, lost, broken tools)
New inventory
Material not returnable (1/2 spools of wire, 1/2 boxes of fittinga, damaged parts, etc.)
Basic web site
Accountant

Before you know it you could be at $800 a month ($200 / week) with a nothing overhead and paying yourself $0. You miss a week of work and then you need to make up $400 the next week to cover a nothing overhead. Or only 1 job a month you need $800 to cover your OH. The above leaves nothing for advertising (besides cards), buying trucks, computers, desks, etc.

But the same plan if you worked and sold 20 days of labor would be $40/day.

I'm not tring to say what to charge, I don't have the real numbers. The point is OH cost per hour is relitive to the amount of hours billed. For a start-up you wont be working every day. For service calls efficency may be 4-6 hours billed in a 8 hour day in the truck. This does not even include office time when you get home.

To figure your costs you need to figure every expence for the year and then divide it down to the month, week, day, and billed hour. The reason you need to go by the year is there are many costs that happen once or a few times a year. Such as an accountant charging $500 for figuring you basic taxes, or $100 to do quarterly taxes. Truck registration for $75 once a year. City registration $50 onece per year. Etc.

It may seem like I'm listing small dollar items that don't matter to someone starting out. But that is where a combined portion of you money goes. Every month I would go to the office supply store and spend $50-$100 for a few small items. Every month there was an unexpected cost. Windshield broke, meter broke, had to pay an attorney for a small deal, material lost or stolen, too many minutes on cell phone, truck got stuck in snow and needed a tow, the list gos on.
 

bradleyelectric

Senior Member
Location
forest hill, md
learn all you can about salesmanship. It is as important as knowing how to do the wiring. People like working with people they like. If potential customers feel comfortable with you, you will get work even if you are more expensive than others.
 

growler

Senior Member
Location
Atlanta,GA
I am still struggling with figuring out my hourly rates, and how to bid on jobs. According to my business plan, I wanted to take on service work and remodeling at first (residential).


The first thing you need to do is seperate the service work from the remodeling. If you do service calls for the same rate as remodeling then you won't make any money. If you charge service rates for remodeling then you won't get any work.

Your rates for service calls will have to cover a minimum of a couple of hours labor, fuel and overhead.

Your remodeling rate will be somewhat lower but if a job has say 40 hours of labor involved then it works out to about the same because you are not wasting a lot of time in travel ( You bill for the full 8 hours).

The good thing about starting out part time is that you should start to see what yoou will need to charge in a short time. Start keeping track of all the time you spend just looking for and bidding work. Sart keeping track of all expenses for which you don't make a dime. These all need to be paid for once you go full time.

Have fun and good luck. :smile:
 

Rewire

Senior Member
I think the first question you should ask yourself is why are you not prepared to launch your business as a full time enterprise. A part time service business simply will not work,people want their problem taken care of now not when you get off your regular job.If you have written your business plan and you have researched the need for your service,aquired the needed capital then my advice is start working on building your business full time.
 

Dnkldorf

Senior Member
Dogg, I'll throw a couple nuggets out there for you to think about first.


1. Before you do anything, get your personal life in order. Find out what your personal credit is like, and make it better. Get rid of whatever personal debt you can, while your employed. You'll need this to start, and this may take awhile depending on your history.

2. Put together a Life Plan, before you even consider making a Business Plan. Figure out realisticly what you want out of life. Then you can figure out how your business will get you there. Again, this is very important. Some people want three houses, speed boats, vactations in the orient every year. Some are happy just living the dream, and helping others out. Your lifestyle will dictate the business you need. Take alot of time on this, and remember that the grass isn't allways green over there.
 
Last edited:

480sparky

Senior Member
Location
Iowegia
E.C. Business Cost List
Building
Building
Warehouse Space
Trash Removal
Lawn Care
Snow removal
Upkeep & Repairs
Office Expenses
Computers
Stationary
Copy machine
Fax machine
Forms
Printing
Software
Office Equipment
Computer maintenance
Files
Postage
Office Supplies
IT
Internet service
Email accounts
Web site
Initial creation
Updating
Maintenance
GPS services
Benefits
Vacation Pay
Holiday Pay
Uniforms
Uniform Maintenance
Unemployment
Bonuses
Incentives
Retirement Plan
Christmas Party
Taxes
Property Taxes
Tangible Taxes
Pay Roll Taxes
Income Taxes
Sales Tax
Training
Management Training
Office Training
In-House Training
Tech Training
Mfg. Training
Training Equipment
Safety Training
Update classes
License testing
Insurance
Building Insurance
Liability Insurance
Employee Insurance
Life Insurance
Business Insurance
Workers Comp.
Utilities
Gas
Electricity
Telephone / Fax lines
Internet Service
Toll Calls
Telephones
Pagers/Cell Phones
Radio Maintenance
Vehicles
Vehicle Maintenance
Ladder Racks
Interior bins
Fuel
Truck Signs / lettering / vinyl
Tires
Financial
Accounting
Loans
Tax Preparation
Interest
30+ Day Receivables
Bank Charges
Travel
Hotel
Meals
Airline / vehicle
Unique to the electrical trade
Licenses
Bonds
Inspections
Trade Association
Subscriptions
Memberships
Dues
Retainers
Safety PPE
Lock-out/Tag-out kits
Fall prevention harness
Arc-flash clothing
Hard hats
Safety glasses
Hearing protection
Tools
Company Tools
Safety Equipment
Ladders
2-way Radios
Test Equipment
Replacement Parts
Parts Storage
Damages
Tool Replacement
Job site storage
Misc.
Trips to Supply House
Theft
Uncollected Money
Collection fees
Unbillable Hours
Commissions
Call Backs / Warranty work
Shortages
Bad Checks
Delivery
Credit Card Sales
Drug Testing
Legal
Legal advice
Law Suits
Incorporation / LLC fees
Advertising
Marketing
Business cards
Signs
Radio / TV
Newspaper
Flyers / brochures
Material Purchases
Inventory
Labor
Wages
Salaries
Dispatcher
Answering Service
 

ohm

Senior Member
Location
Birmingham, AL
Welcome to the forum.

Someone could write a book on starting out, calculating labor rates, mark up, dealing with customer issues, etc. just with all the information here. There are also a few books out there for the EC including for sale here.

Many have different tecneques to figure what to bill out for a job. There have been some long posts and disagreements about the matter. It can be hard road figuring it out. One one end you work for nothing and lose money, the other end it's hard to make a sale.

Without going into too much detail I will say this. Know your cost to do business. Most start-ups say the same thing they have no overhead. They are lieing to themselves. Some even have a hard time distingushing between personal and company money and costs.

An example of some costs for a part time start-up:

Insurance
local contractor registration fees
Business cards
Office stationary (paper, ink, envelopes, stamps, staples, lables, pens, etc.)
Fuel
Truck maintence
Truck registration
Cell phone
Busness phone line
Business fax line
Internet connection
New equipment (ladders, drills, cords, testers, etc)
Replacement tools (drill bits, lost, broken tools)
New inventory
Material not returnable (1/2 spools of wire, 1/2 boxes of fittinga, damaged parts, etc.)
Basic web site
Accountant

Before you know it you could be at $800 a month ($200 / week) with a nothing overhead and paying yourself $0. You miss a week of work and then you need to make up $400 the next week to cover a nothing overhead. Or only 1 job a month you need $800 to cover your OH. The above leaves nothing for advertising (besides cards), buying trucks, computers, desks, etc.

But the same plan if you worked and sold 20 days of labor would be $40/day.

I'm not tring to say what to charge, I don't have the real numbers. The point is OH cost per hour is relitive to the amount of hours billed. For a start-up you wont be working every day. For service calls efficency may be 4-6 hours billed in a 8 hour day in the truck. This does not even include office time when you get home.

To figure your costs you need to figure every expence for the year and then divide it down to the month, week, day, and billed hour. The reason you need to go by the year is there are many costs that happen once or a few times a year. Such as an accountant charging $500 for figuring you basic taxes, or $100 to do quarterly taxes. Truck registration for $75 once a year. City registration $50 onece per year. Etc.

It may seem like I'm listing small dollar items that don't matter to someone starting out. But that is where a combined portion of you money goes. Every month I would go to the office supply store and spend $50-$100 for a few small items. Every month there was an unexpected cost. Windshield broke, meter broke, had to pay an attorney for a small deal, material lost or stolen, too many minutes on cell phone, truck got stuck in snow and needed a tow, the list gos on.

Great advice active, some people call your method LCD (least common denominator method). Each and every action should be figured in and show a profit. A start-up like this has no room for business lunches, new wrapped van, see snake, IR, etc. Lean & mean is the name of the game.
 

ohm

Senior Member
Location
Birmingham, AL
Here's an article you may want to read.
How Much Should A New Contractor Charge? by Frank Blau
http://www.pmmag.com/Articles/Column/12862c49e3fc7010VgnVCM100000f932a8c0____

Good article aline, thanks. I believe once a company is profitable with say 10 employees, adding another 10 may almost double the profit because much of the overhead is a constant. Just as some companies can stay open longer by adding an extra shift without incurring twice the overhead.

Becoming profitable for a start-up however requires capital and time...not something we all have. Lean & mean may be the short term answer.
 

active1

Senior Member
Location
Las Vegas
I think the first question you should ask yourself is why are you not prepared to launch your business as a full time enterprise. A part time service business simply will not work,people want their problem taken care of now not when you get off your regular job.If you have written your business plan and you have researched the need for your service,aquired the needed capital then my advice is start working on building your business full time.

What I seen happen with part time start-ups:

Unless they are a very good salesman, have personal relationships, or are desired for some special skills (almost never), they are at a big disadvantage to every other EC. Many full time EC is at an advantage because they:
-Have crews do the work, compleating faster
-Not relying on just 1 person for the work (a personal emergency or sickness can stop a job)
-Have more equipment and tools if needed
-Have a well stocked work truck
-Take credit cards
-Are established and have been known for years
-Have a system in place with paperwork, policies, and procedures
-Can perform work during business hours
-Can answer the phone every time during business hours and talk as long as needed

The only things a PT EC can beat the FT EC is with price, quality (don't count on that being enough), able to do the work when other EC are too busy (not the case now), and able to do it during nights and weekends (a plus for some). The PT EC manages to form a clientel of customers and contractors until they are too busy to handle the work on the off hours. Once they make the step to FT EC the game changes. Now your not as busy because you have all week available. You need to charge more money because you don't have your other job and maybe health insurance. But your clientel is based on a discount price at odd hours. The EC is stuck. Raise prices and loose customers or not charge enough.


Also I would like to add to anothers post that says to get your personl life in order. While you want as little personal debt as possable this may be your last chance to buy something on credit for a long time. Once you are a FT EC your self emploied. Many creditors want 2 years history of you being self emploied showing an income to meet their criteria. If it takes you a year or two before you make a reasonalble income it could be 4 years before you can get your next loan or maybe credit card. They way things are going it's only getting harder to get credit. So is your work truck, personal car, wifes car going to make it another 3, 4 or more years? Will you need a different home in the next few years? Have enough personal income in the bank for maybe 6 months on top of operating capital in another account for the business.
 

Rewire

Senior Member
Most start-ups will lose money their first year,what that means is you will spend more money than you make. That money must come from your capital that you start with if you don't have enough money to start at the end of the year you will be out of business.

To open and run a profitable business will require an investment of capital,the more you have to invest the better 75-100 thousand to start.

You have to spend money to make money is true but you can spend smarter. You need to advertise,you need to letter your truck, you need an add in the phone book all these things can be done within a budget. Radio is a good media that reaches a larger number of people ,don't wrap the whople truck just the door,get a quarter page add instead of a full page.

From the very first day operate as a successful business.
 

Dogg

Member
Location
Raphine, VA
New EC

Thanks to each and every one of you for your input. Some of you said to get my personal life in order first, guess I never really looked at it that way! Although I have no dept really, I had little focus on my family and focused primarily on the business aspect. This is a great forum! I will take each of your advice a re-evaluate my situation. I may have to work part-time for a while to raise working captial in efforts to go full-time. Whatever the case, I will accomplish my goal and try not to grow weary!

Thanks again, Dogg
 

dduffee260

Senior Member
Location
Texas
Hi Dogg, I was right where you are 15 years ago. I had $400 in my checking account. I got a small loan, built a small shop and went from there. Now we move about 4 mil a year. I don't know how many vehicles, trucks, trailers we have. I think close to 30 but quit counting a while back.

Here is my advice. Let your money be your best friend. I don't care how nice the sales people are you battle for the best qualified price. As for quotes on everything. Watch the invoices and make sure you are not getting overcharged. Insurance agents are to be the lowest on the pole. I don't care who I use as long as they are low.

Don't try to be the cheapest electrician, get you work up to par and ask a good fair price for it. If you are going to be a little higher make them feel like it was worth it.

Never cop an attitude with other contractors. It will only make you look the opposite. I always felt when another contractor talked another one down they were trying to boost themselves.

You did right starting here. Pay attention and make correct decisions. Have patience and things will never happen as fast as you want. Take care and be safe.
 

Rewire

Senior Member
Hi Dogg, I was right where you are 15 years ago. I had $400 in my checking account. I got a small loan, built a small shop and went from there. Now we move about 4 mil a year. I don't know how many vehicles, trucks, trailers we have. I think close to 30 but quit counting a while back.

Here is my advice. Let your money be your best friend. I don't care how nice the sales people are you battle for the best qualified price. As for quotes on everything. Watch the invoices and make sure you are not getting overcharged. Insurance agents are to be the lowest on the pole. I don't care who I use as long as they are low.

Don't try to be the cheapest electrician, get you work up to par and ask a good fair price for it. If you are going to be a little higher make them feel like it was worth it.

Never cop an attitude with other contractors. It will only make you look the opposite. I always felt when another contractor talked another one down they were trying to boost themselves.

You did right starting here. Pay attention and make correct decisions. Have patience and things will never happen as fast as you want. Take care and be safe.

After our first year we shoped our commercial truck insurance policy and found a company that gave us better coverage and were $2000.00 cheaper.

I teach my guys that we never look good when we try and make someone else look bad
 
wow! sparky, i think you listed everything that it takes to operate. nice.

dlnkdorf: a life plan and life goal is definately what made me achieve my business goals. less parties and more future oriented thinking. which eventually leads to the best party.. early retirement.
 

Dogg

Member
Location
Raphine, VA
Thanx, Ohm

dduffe260,

Good advice! Wow, just 15 years ago! I hope I get there one day and be able to pass the same advice to another newbie.

Dogg
 
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