Pulling numbers out of a hat

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macmikeman said:
I price my service work at just a tad under $200 an hour, based on a careful calculation of my overhead, my desire to live in the manner I set my goal to, and a bit of a hedge for inflation and underbidding hours required to complete some jobs. I have learned how to always flat rate quote this work no matter what the customer wants out of me. I bid my remodel and construction wiring at a tad over $100 an hour based on a more productive day. I get my share of rejections, and I have all the work I can do. I am a one man shop. I job cost everything afterwards just to compare it to the estimates to make sure I am getting what I expected to get from each job. When I don't I adjust. Now if I can do it, and I am just an average old ex stoner, not particularly brilliant like Mahlere or Mr. Haskins, why can't you? It's because you won't let yourself try thats why.
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Nah, Haskins has me beat...
 
peter d said:
OK, so here's where the rubber hits the road so to speak. Why do you think that so many contractors are just satisfied with half a loaf and fail miserably at making the amount of money that all this effort and risk is worth?

Note: the reasons "people are set in their ways" and "we are afraid to kill the sacred cow" don't count. ;) :D
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sacred cows are set in their ways:D

honestly, lack of education...most guys spend years learning the trade...they go through an apprenticeship, they go through continuing education, they take a technical proficiency test to get their license...yet they do nothing to learn how to run a business...they don't spend 1 hr in a business class...they don't know a P&L from a PB&J...credit...debit...expense....asset...means nothing...

somehow, we have absolutely no expectation of being a competent electrician without training...yet we fully expect to be a competent electrical contractor without any training...

so, to answer your question...lack of education...
 
emahler said:
Jay, that's all fine and good...but let me ask a few questions that are all related...what happens when you meet the girl of your dreams, wanna take her on a date without emptying all your tools, get married, have a kid or two, want to take a vacation, want to go out for the night and hire a baby sitter, want to pay for your kids college, want to pay for your daughters wedding, want to retire?

i understand that you don't have to worry about any of these right now...but what about your future? the word of the month is myopic...and it's an epidemic in our trade...

back to your question...if i am your customer and you do a job T&M and charge me $60/hr for the time you are there, then your rate is $60/hr...if the next time you do work for me, you charge me $400 to install a new circuit and it takes you 2 hrs, well now you raped me for $200/hr...I say raped because your hourly rate is only $60/hr, so why are you charging me $200?
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Well for your first question, I could try building up a savings account instead of spending the money (sometimes frivolously) as I earned it. But let's say you're right and the best way to save up that money is to charge according to the future.

Would it maybe more economical for me to come up with a price based on labor alone and add the cost of materials later? Usually when I give an estimate I find myself stuck between trying to give a conservative estimate that will most likely get me the job, but might end up making me lose money on materials that I didn't account for (due to lack of experience) and giving a high estimate, explaining to the customer that it is as high as I think it can be and that they probably won't have to spend that much. I do that second one sometimes and re-iterate that it is the highest I think it will be, but most customers have a basic mistrust of contractors and assume that I will do everything in my power to get that high estimate. The mistrust comes from a variety of sources including our fellow electricians.

I'm not a slow worker and I take pride in my work. I've been compromised a few times due to the expectations of others on the speed or inability to spend the right amount of money on a project. That is something I'm trying to get away from.


As for the second part of your question, that is the problem I am having. I did some recessed lights for a lady who was recently referred to by a family member. They were aghast at the price ($625 to remove flourescent light and add 5 recessed lights supplied by customer, old work on a basic sheetrock ceiling; change two simple light fixtures and replace two switches with dimmers also supplied by customer. I also patched the holes left by the wiring to the old light and kept her kitchen impeccably clean.) because they figured it out to about $125 an hour. That's why I'm asking...see the way I see it, if I was to go by the hour for the rest of my life, I would make less and less money because I would get better and faster at doing each job but unable to charge above a certain amount per hour.

I believe that if I have the knowledge, experience and legal qualifications to do a job quickly I shouldn't be penalized by getting paid by the hour. But if I choose to charge by the job and not by the hour, somebody always loses and people will always feel ripped off.

I don't know what else to say right now...it's getting late.

I'll check back tomorrow and see if there are any more thoughts on this.

Thanks again for all the replies.
 
emahler said:
so if you get $300/billable hour (or $150/billable man hour)...you are getting $2400 labor for the service. This gives you a rate of $2400 / 22 = $110/hr for every hour you spent on that project...
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You actually spent 14 hours so it would be closer to $160/hr unless your helper costs more than $25/hr.

emahler said:
if you figure a job at $90/hr billable, and it takes you 16 billable man hours and another 6 unbillable hours...then you earn $1440 labor / 22 man hours = $65/hr....
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You actually spent 14 hours so it would be closer to $90/hr unless your helper costs more than $25/hr.

That's still about $180,000 per year. Not as much as the $320,000 in the first example but it's not exactly chicken feed, either.
 
jaylectricity said:
As for the second part of your question, that is the problem I am having. I did some recessed lights for a lady who was recently referred to by a family member. They were aghast at the price ($625 to remove flourescent light and add 5 recessed lights supplied by customer, old work on a basic sheetrock ceiling; change two simple light fixtures and replace two switches with dimmers also supplied by customer. I also patched the holes left by the wiring to the old light and kept her kitchen impeccably clean.) because they figured it out to about $125 an hour. That's why I'm asking...see the way I see it, if I was to go by the hour for the rest of my life, I would make less and less money because I would get better and faster at doing each job but unable to charge above a certain amount per hour.

I believe that if I have the knowledge, experience and legal qualifications to do a job quickly I shouldn't be penalized by getting paid by the hour. But if I choose to charge by the job and not by the hour, somebody always loses and people will always feel ripped off.
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I try to only flat rate when ever possible, but for other types of jobs I will inform the customer that it is based on an hourly rate (e.g., troubleshooting) Your customer's reaction to the price for the lights is exactly the reason I would only bill and quote it as a flat rate price. I NEVER want the client to be able to calculate or try to argue about an hourly rate. The best defense to that is to educate the customer during the initial consultation/sales/estimate to the work being proposed and the total job price. I also prefer giving a unit price for each light, that way if they have a budget to meet, they can opt for as many or as little as they want.

To arrive at the price the first time, I figure my real rate, plus parts, plus incidentals to conservatively install (1) light in less than optimum conditions (think Monday morning after SuperBowl Sunday). That becomes my base price for one. Analyze your jobs afterwards and see where you came out. You may need to revise it for the next one, but eventually you'll have actual data to base your pricing on.

... and its OK to push back on pricing, too. Some folks are just cheap, but with some salesmanship they come around.;)

Thanks to all for the interesting and inspiring discussion.


- Greg
 
ashtrak said:
If I charged 2K for a standard 200Amp service and $165 for a remodel I'd need a lemonade stand to make it to make up for my lack of work. There would be ten guys behind me with proposals that would look a lot better than mine. Very competitive in this area.
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What part of MD are you in?
 
tonyou812 said:
Well guys the more learn the less I know. I am going to take a real serious hard look at my billing and pricing. Im stuck in the eightes and cant find my way out. HHHHHHEEEEEEEEEELLLLLLLLLLLLPPPPPPPPPP.
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People keep trying to say it is about selling yourself. You need to find out how much you need to charge to make the kind of living you want. Then you need to sell the jobs without regard to price. If you stress price in your sales technique, you will have your customers focussing on your price. If you do not stress price than you can get them to write a check for how much you want.
 
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aline said:
I've heard that with lawyers, when they bill by the hour, they charge for every minute they work on a case. From phone calls to discussing the case with other lawyers, research, etc. They would probably bill for time spent asking about advice for a case on a forum such as this one.

We spend half of our time running around giving free estimates, doing paperwork, research, ordering supplies etc. Time that we don't bill as hourly charges directly to the customer. The customer would have a fit if we sent them a time and material bill with 20 hours of time on it but only spent 10 hours at their place doing the work. This is not the case with Lawyers.

Here's a few articles about billing and Lawyers.

Hourly rates of Lawyers ariticle
http://www.law.com/jsp/article.jsp?id=1134122711101

Lawyers and billing by the hour articles
http://www.law.com/jsp/ihc/PubArticleIHC.jsp?id=1132653918886

http://www.abajournal.com/magazine/the_billable_hour_must_die/
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my lawer charges me over $200/hr for any minute he does anything involved with me, and $85/hr any minute his secretary does. Why do I put up with that?
 
jaylectricity said:
. I did some recessed lights for a lady who was recently referred to by a family member. They were aghast at the price .
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They will always be aghast at the price. Tough cookies. That is human nature. If you let the customer tell you what the job is going to cost you will NEVER get ahead. I spent hours yeaterday beating up everybody I could on pricing...bank fees, cable company and so on. At the end of the day I saved a bunch of money on stuff. Point being everybody wants to save money, even us guys that preach about charging as much as you possibly can. ;)


To be honest if you are satisfied with the way things are why even ask these questions. I think what you need is a real attitude change to start with.
Just my opinion.

Also...do you pay taxes, do you have health insurance, disability insurance, etc.

Does showing up in a Nissan pickup really put forth a proffesional image for your business?
 
jaylectricity said:
As for the second part of your question, that is the problem I am having. I did some recessed lights for a lady who was recently referred to by a family member. They were aghast at the price ($625 to remove flourescent light and add 5 recessed lights supplied by customer, old work on a basic sheetrock ceiling; change two simple light fixtures and replace two switches with dimmers also supplied by customer. I also patched the holes left by the wiring to the old light and kept her kitchen impeccably clean.) because they figured it out to about $125 an hour. That's why I'm asking...see the way I see it, if I was to go by the hour for the rest of my life, I would make less and less money because I would get better and faster at doing each job but unable to charge above a certain amount per hour.
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Everyone is always aghast at the price no matter what it is. It's an act. People don't live in a vaccuum. This is their only method of "negotiating." Attempting to make you think you're out of your mind.
 
wirebender said:
You actually spent 14 hours so it would be closer to $160/hr unless your helper costs more than $25/hr.



You actually spent 14 hours so it would be closer to $90/hr unless your helper costs more than $25/hr.

That's still about $180,000 per year. Not as much as the $320,000 in the first example but it's not exactly chicken feed, either.
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no, i'm calculating man hours...2 men 8 hrs to do the work, 1 man 6 hrs to do the legwork...22 man hours....in both cases...so my numbers are correct...

you don't think that the big companies charging $60/hr aren't sending out a mechanic and an $8/hr apprentice so they can bill $120/hr? it's all a numbers game...

and honestly $180,000/yr gross is close to chicken feed in these parts...after all your OH is paid for (limited OH, not including a paycheck for yourself, i will add), you are lucky if you have $30k after taxes to take for yourself
 
bradleyelectric said:
my lawer charges me over $200/hr for any minute he does anything involved with me, and $85/hr any minute his secretary does. Why do I put up with that?
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The real question is why don't we charge like that? :)
 
aline said:
The real question is why don't we charge like that? :)
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heck, i just had to deal with a lawyer who handles a specific industry...i was referred by my normal attorney....this one hour meeting cost me $400....and that was a discounted rate:D
 
emahler said:
heck, i just had to deal with a lawyer who handles a specific industry...i was referred by my normal attorney....this one hour meeting cost me $400....and that was a discounted rate:D
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You couldn't find an unlicensed attorney that does side work for $50?
 
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aline said:
You couldn't find an unlicensed attorney that does side work for $50?
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My attorney charged me $25.00 to send a collection letter.First consultation was free and $100.00 after.Bills at $250.00/hr or flate rate for many things like wills and such.
 
I have a $200 invoice on my desk for 1.0 hours on a state annual report. Now, there isn't much that I'm qualified to do in accounting and legal matters, but I could fill out an annual report in 5 minutes.

Dave
 
electricmanscott said:
To be honest if you are satisfied with the way things are why even ask these questions. I think what you need is a real attitude change to start with.
Just my opinion.

Also...do you pay taxes, do you have health insurance, disability insurance, etc.

Does showing up in a Nissan pickup really put forth a proffesional image for your business?
Click to expand...

Some good points there. I don't have health insurance or disability insurance. The Nissan looks nice (it's a small SUV), but it's not the same as having a van, I guess.

Thanks all for the replies, now back to your regularly scheduled lawyer talk.
 
Speaking of hourly rates...

Speaking of hourly rates...

In our county, some building permit fees are based on an hourly rate of the inspector. The county charges the "productive rate" of an inspector at $131.00 per hour. That was based on FY2006, so I'm sure that has gone up some since then.

We should at least try to keep up with the county on billing rates, right?:confused:


- Greg
 
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