pricing

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Thanks everyone all the advice has been great and I really appreciate it. I spent the last 7 years learning my craft, I know that I still have alot to learn about running a buisness. I feel my price was fair but, Eric made a good point about time acually spent on the job as far as going to town hall, collecting material and I didnt really think about it. At the time I really wasnt that busy but I can see where not factoring that time in on other jobs in the future can cause me to lose money. So thanks
 
nakulak said:
there will always be good times and lean times, in any business. the only guys that survive the lean times are the ones that can either adjust, or have saved their nuts for the lean times.
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The funny thing is during the good times I hear contractors talking about how they're so busy they don't know how they're going to get all the work done but yet don't increase their prices and still work for little or no profit. They just work longer days and more hours. You see them out wiring these houses on the weekends trying to keep up. Then when the lean times come they don't have any nuts saved because they didn't collect any extra nuts during the good times.

I've bid on jobs during the good times and have seen some of the other bids and can't believe how low some of these guys are. They're also so busy that they have a hard time finding time to do the job. Doesn't make any sense to me. Are they afraid they're going to lose market share or something? Why not charge more, work less and make more money during the good times?

A lot of guys can't adjust during the lean times because they weren't even charging enough during the good times. When you're making less than 5% profit or no profit at all during the good times it's kind of hard to lower your prices to adjust for the lean times. This is when you go belly up.
 
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tonyou812 said:
Thanks everyone all the advice has been great and I really appreciate it. I spent the last 7 years learning my craft, I know that I still have alot to learn about running a buisness. I feel my price was fair but, Eric made a good point about time acually spent on the job as far as going to town hall, collecting material and I didnt really think about it. At the time I really wasnt that busy but I can see where not factoring that time in on other jobs in the future can cause me to lose money. So thanks
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Tony, a lot of guys are doing services as side jobs, so any money they make, can look like a lot to them, they don't have to carry all the overhead and operating expenses, that a full time business does.

So of the prices would not look so large, it these leaches, paid their fair share of taxes, insurances, and supported, the cost of other business expenses.
 
emahler said:
that's fine if you are actually making a profit at $1500....but what if $1700 is actuall your breakeven....now you are starting in a whole and digging deeper..until you get above $1700....but before you start making a profit, you have to recoup your earlier losses.....but the key is knowing your costs...then you at least determine whether you want to price at a loss or not....
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You missed the last sentence were I pointed out these were not real world #s. Nobody wants to have a negative profit margin but when you are first starting out this is often the case.This is not because of pricing but because of startup costs.Knowing costs will set your profit margin knowing your market and pricing to it sets your profit.
 
aline said:
You may want to watch what this guy does.
Sounds like he's getting around 5k for service upgrades.
How does Mister Sparky do it?

http://www.thesuccessfulcontractor.com/W08_startup.html
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What will be of interest is the failure rate of the franchises this will only be known after a few years.I was offered a Mistr Sparkit franchise but thought 30 grand was better invested in my business in the form of tools ,trucks,advertising.
Starting out with massive debt does not seem a formula for success.
 
During the California Gold Rush of 1849, thousands of people toiled as miners hoping to strike it rich. Very few did. Levi Strauss came out west, but not to mine gold, his intention was to "mine the miners". Levi Strauss was not alone, the makers of shovels and other equipment also found their fortune in such a fashion.

There's money to be made exploiting people's dreams...

lab_0001_0002_0_img0129.jpg
 
Rewire said:
What will be of interest is the failure rate of the franchises this will only be known after a few years.I was offered a Mistr Sparkit franchise but thought 30 grand was better invested in my business in the form of tools ,trucks,advertising.
Starting out with massive debt does not seem a formula for success.
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I would also assume that it would only be fair to compare the failure rate of businesses that invested 30 grand in their own business without buying into a franchise.

Also with this new franchise he's starting in Florida does he have a lot of money in the bank for working capital or is he borrowing all or most of the money needed to start this, as most contractors would probably have to do.

I would assume that a lot of contractors don't have the money sitting in the bank to invest in a franchise and would need to borrow the money.
 
Rewire said:
You missed the last sentence were I pointed out these were not real world #s. Nobody wants to have a negative profit margin but when you are first starting out this is often the case.This is not because of pricing but because of startup costs.Knowing costs will set your profit margin knowing your market and pricing to it sets your profit.
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i didn't miss that sentence...i just used that price for my example...start up costs are factored into your pricing....losing $100 everytime you do a servive change usually isn't factored into most guys pricing:D
 
HaskinsElectric said:
During the California Gold Rush of 1849, thousands of people toiled as miners hoping to strike it rich. Very few did. Levi Strauss came out west, but not to mine gold, his intention was to "mine the miners". Levi Strauss was not alone, the makers of shovels and other equipment also found their fortune in such a fashion.

There's money to be made exploiting people's dreams...

lab_0001_0002_0_img0129.jpg
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Very true. Some of the most successful people used to be contractors but found there was more money in selling things to contractors. Things like consulting services, software, educational books, videos, clothing, franchises, etc.
 
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Electrical systems last too long. I need to find something to sell that only lasts a month and people are calling back wanting more like shampoo or something. Oh yeah, make sure you follow the directions and wash, rinse and repeat so you'll use it up faster and buy more.
 
emahler said:
apples and oranges ito....100 man shop doing $10 mil / yr at 2percent Net in coomerical installs is a world away from a 1 man shop doing $200k / yr at 2 percent net and no consistant payroll....
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Its all relative you have to take whatever advantage you have and work it to build yourself up, or if you are already one of the big boys, you still use whatever advantage you can to keep it all going.

My overhead is lower than most, and I use that to my advantage and to get work.
 
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contractors sell time....time is limited and we can only sell a finite amount.....now, sell an idea and/or a thing....there is no limit to how much you can sell....
 
Am I twisted or is Mr. Kennedy opening an electrical contracting business as a hobby? It makes me want to cry. 50 calls per month is pretty sweet, but I'd love to see the startup costs. I'd also love to see some of the dirty little details like...did he borrow the money at current interest rates? Is he leasing or buying the 2000 sq' with a loan at current interest rates? Is he paying all the franchise fees?

...and most of all...is he paying his wife what she's worth?

In all honesty I'm having trouble imagining the cost of 4.5 employees, two new trucks full of tools and materials as well as the prime paint job, YP advertising, other marketing, training, 2000 sq' building, taxes, insurance & other overhead.

But WOW!!! They sold 5 service/panel changeouts at $5-6k each! Talk about investing a large fortune to make a small one!

Dave
 
satcom said:
Tony, a lot of guys are doing services as side jobs, so any money they make, can look like a lot to them, they don't have to carry all the overhead and operating expenses, that a full time business does.

So of the prices would not look so large, it these leaches, paid their fair share of taxes, insurances, and supported, the cost of other business expenses.
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Leaches? I prefer to think of them as "value engineered upgrades." Service upgrades are typically cookie cutter. Require little skill, about 4 hours labor, and don't even require a truck. Nobody needs a licensed, bonded, insured contractor and all that overhead to get a freaking chandelier hung. When just about any schmo can do it, your "skill" and labor has little value, no matter what your overhead is. If I'm changing out all of my devices for the latest in colorful decora, I'm shopping price, and going with the lowest bidder no matter what Mr. Electric taught or sold you.

A lot of good advice has been given out here, but I see much of it is opinion oriented or wishful thinking. Nobody's addressed the obvious - that there's just too darn many electrical contractors in this country. Ever consider that your market is simply saturated? There's a difference between marketing and BS marketing schemes. If you're looking to the latter for success, consider yourself already a failure, find something else to make money with and move on.

Think of it as a very large taco. What do your tacos cost? You can hype them all you want, I'm not paying more than 2 for a dollar. If there's a glut of established taco huts in town, don't be suprised when you open another that someone else has already cornered the market.
 
Tiger Electrical said:
Am I twisted or is Mr. Kennedy opening an electrical contracting business as a hobby? It makes me want to cry. 50 calls per month is pretty sweet, but I'd love to see the startup costs. I'd also love to see some of the dirty little details like...did he borrow the money at current interest rates? Is he leasing or buying the 2000 sq' with a loan at current interest rates? Is he paying all the franchise fees?

...and most of all...is he paying his wife what she's worth?

In all honesty I'm having trouble imagining the cost of 4.5 employees, two new trucks full of tools and materials as well as the prime paint job, YP advertising, other marketing, training, 2000 sq' building, taxes, insurance & other overhead.

But WOW!!! They sold 5 service/panel changeouts at $5-6k each! Talk about investing a large fortune to make a small one!

Dave
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And when the Sarasota area runs out of suckers, he'll go belly up.
 
Random thoughts..........



Companys like Mr Sparky have taught me that, if you have the guts, you can charge whatever you like and people will pay it. Companys like that have actually helped me raise my pricing and feel good about it.

Have I ever brought in $300 per hour? Occaisionally.

Would I like to? Absolutely.

Could I quote and collect $300 to replace a 20 amp breaker or GFCI outlet? Not yet.

Could I quote and collect 4-5K for a service change? Sure, and I have.

If I do a complicated job and use all my skills and resources and pull $300 per hour, I feel its a win/win situation. If I do some no brainer stuff I feel bad about charging them anything over a minimum amount.

I KNOW that an hour is an hour no matter WHAT type of work I am doing but I still have trouble charging high dollars for simple service work. My interim solution is to avoid that kind of work ;)



And when the Sarasota area runs out of suckers, he'll go belly up.
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Not if PT Barnum is right.

Time will tell.
 
LawnGuyLandSparky said:
Nobody's addressed the obvious - that there's just too darn many electrical contractors in this country.
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Not to worry. As the economy worsens it will become apparent to the 30%? of EC's that the world will get along just fine without them.

The new work pie is getting smaller and will remain that way for a while.
Sales skills won't make the number of failed gizmo's increase.

Tight money however, will make more willing to live with a failed gizmo or to just not do that renovation until they feel better about things.

But all those guys still need to feed their families. Don't they?
The gizmo fixing that really must be done will be done by someone.
 
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