Greetings everyone:
Normally I don't take the time to post to Mike's forums. But when I got the e-mail showing the questioning about what is the "right" price, I thought I'd see what was going on. And, I actually took the time to read each and every post before I responded.
I am sorry to say, but for the most part a lot of folks don't get it. Even the ones that sort-of get it, still don't really get it. And that's said. But some do get it. And if you want to get it, you'll read on. If you don't, you'll just hack some post together against me. Whatever. But too many of you have too much time on your hands.
For those of you that are really interested, start by thinking about this question. Is there some moral responsibility for electricians to fail to plan and pay for their retirement and/or their kid's education and/or for their kid's Wal-Mart fall-aparts shoes and clothes so the soccer moms and dads can have two SUV's and a 21' ski boat and designer clothes for their kids? I don't think so. Yes, some potential customers don't have that much money. But if you are going to lower your price for them, then your name is Salvation Army Electric. And that's ok, as long as you're honest about it with yourself and your family.
For the one truck companies and for the one hundred truck companies alike, here is what you need to think about:
1. Do the job right. PERIOD! Yes that takes longer. Some jobs take a couple of days and others slam in a couple of hours. But you do the job right. If you are installing a service upgrade, then you bring the entire service up to current code. And some of you do better than that. For those of you that think the code is the standard you work towards, remember that the NEC is NOT to be used a design manual or an instruction manual for untrained persons. If you take issue with that, then you can take issue with NEC art. 90.1.C. Then keep this thought in your head, "Don't Suck!" And based upon the posts that I have read on this topic, I see the full range from hacks to craftsmen and those in-between.
2. Change the price based upon what has to be done. If the service needs a disconnect installed outside, then you have an adder. We charge a separate fee for ground rods, a fee for water pipe grounding, a fee for the meter, a fee for the mast, etc. Why would we charge the same price if the service is overhead and you're cutting holes in a roof vs. having the utility bring power to a underground meter base. Some jobs are not "cookie cutter" and some are. If the AHJ requires GFCI upgrading or whatever, then additional charges should happen. If the AHJ does not require things that the customer would be safer if they happened, you do have a MORAL responsibility to point them out along with a price for the solution. And no, if they won't pay you to do it, you don't do it. But this "crap" about raising the flat price for a service upgrade until "enough" of your customers complain is just as wrong as anything else.
3. Charge the "right" price. And just what is the "right" price? The "right" price is the price you can hire someone else to do the job AND pay for all of the materials and waste AND pay for all over head AND profit. The "right" price is the fair price.
4. Just what is overhead? Let me start out a list - some you have and some you don't.
a. Insurance. Ours is$8k/yr for everything including 5mil umbrella for a one-tech company.
b. Annualized cost of truck replacement. Figure about 10k/yr if you use cube vans. Cube vans do cost more, but allow me to finish more service calls without making a special trip to the supply house for one thing. Yes, that saves me money, but more importantly it saves my customers time and frustration.
c. Truck maintenance and gas and oil and wiper blades and etc. and etc. and etc. Yes, these do go down once in while just long enough to get you to be "thankful" for the pause in the ever-upward movement.
d. RETIREMENT. If you worked for someone else, you'd DEMAND it from them. Guess what, you work for someone else, demand it from your customers in the form of a fair price. If you don't, you'll be a burden upon your family and society in your latter unproductive years.
e. Sick time and personal days and vacation (that is not a four-letter word)
f. Yellow page ads.
g. Other advertisements and promotions.
h. Education. You don't know it all and things just keep on changing. I spend between 100 and 200 hours in classes studying PER YEAR to make me better. Remember item #1 that ended with "Don't Suck!"
i. Shop rent and/or purchase.
Want a better list, try this one:
a. Owner's salary
b. Advertising - Yellow pages
c. Advertising - Other
d. Answering service
e. Bad Debt
f. Bank Charges
g. CPA
h. Call Backs
i. Cellular phone
j. Computer Expense
k. Credit card fees
l. Customer chiseler fund
m. Donations/Charity
n. Dues / Subscriptions
o. Education expenses
p. Gasoline expenses
q. Health insurance - family coverage
r. Insurance-auto/truck
s. Insurance-contractors liability
t. Insurance-umbrella
u. Insurance-workmen's comp
v. Legal expenses
w. Office supplies
x. Pager expense
y. Payroll company
z. Payroll burden
a1. Postage
b1. Rent/taxes
c1. Utilities
d1. Retirement/401K
e1. Telephone-local
f1. Telephone-long distance
g1. Tool repair/replace
h1. Travel and entertainment
i1. Truck expense
j1. Truck maintenance
k1. Unforeseen items
l1. Uniforms
5. Add all of that overhead and the labor you would have earned working for someone else (I am assuming that you that you know what you are doing and could get paid for that) and you'll top 300K for a year without trying. Now take that 300K and divide it in 50 weeks and you'll have $6k per week and we still haven't talked about the "P" word - profit. And yea, don?t forget that material costs are over and above all of that. Last time I checked, since you are taking more risk than working for someone else, then you should get more AFTER all expenses have been paid working for yourself. And don't be surprised if that $300K figure ends up being more like $500K.
6. The biggest thing that everyone forgets about is efficiency. It is an industry standard that an electrical SERVICE technician will only be 40 to 50% over the course of a year. So now you have to bill that $300K to $500K in just about 800 hours of task time in a year. Larger commercial jobs, new construction, track home etc. have very high labor efficiencies and lower per man-hour overhead expenses. You can't compare service work to job work and stay in business.
And now you may see how some companies come up with a $5K service replacement bid. They are not "screwing" the customer. They pay their technicians a good wage and pay all of their benefits. And then they pay people to answer the phones and to dispatch the technicians to their next customer. It all adds up.
Pat Kennedy, Frank Blau, Geogre Brazil, John Ward, Jude Raspino, Floyd Furr, Wendell Presgrave, Mike Enright, Tab Hunter, Gregg Attile, Paula Quarles, Bob Hamilton, Barry Brasington, Don Clark, John Pankraz, William Raymond, Tammy Ferris, Kelly Herrmann, John Hucker, Steve Lowry, Michael Pann, Kenny Chapman, Sanford Kramer, Brad Martin, Larry Sinn and many others each have thousands of very happy customers. Yes, each and every one of these contractors complete MILLIONS of dollars in residential service work each and every year. And year each of them charge higher prices than maybe any of your groups. But their employees are happy, well paid, and work for companies that profitable and staying in business. And their customers are happy too.
If you would like to have an honest conversation on this subject, I'd be happy that spend a little time with you. If not, have a nice life. It?s ok. I will not be monitoring this thread that closely so you may need to e-mail directly for a continuing conversation.
God Bless all of you.
Matthew Hermanson
