Rate increase

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JES2727

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NJ
Just wondering how many contractors are raising their rates at the beginning of the new year, and by what percentage? It's been two years since I raised my rates, and I'm considering a 10% increase on Jan. 1
And while we're at it, how many have different rates for commercial and residential? My residential rate is about 7% lower than my commercial rate, just to stay competitive. Maybe that's wrong.
 
I think 10% is justified after 2 years on gas prices alone. What about instead of raising your rates add a "mobilzation" charge? Just something to consider. Everything is going up based on gas prices, add in copper prices and EC rates should be higher than 2 years ago.
 
JES2727 said:
It's been two years since I raised my rates..... Maybe that's wrong.
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Yea ..that's just wrong.

Has your overhead increased at all in the past 2 years?
 
JES2727 said:
Just wondering how many contractors are raising their rates at the beginning of the new year, and by what percentage? It's been two years since I raised my rates, and I'm considering a 10% increase on Jan. 1
And while we're at it, how many have different rates for commercial and residential? My residential rate is about 7% lower than my commercial rate, just to stay competitive. Maybe that's wrong.
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Your residential rate, should be higher then your comercial rates, how did you eatablish you rates, did you use good cost data from your operating, and overhead planning budget figures, this will give you as exact percent to increase your rates.
 
I have been toying with the idea of having a "trip charge". I am not a business man, and my business is fairly new, so I haven't done all the math with overhead and stuff, but it seems as though I should be making more money. All my previous companies have done the "service call/trip charge" thing, and that is what people mostly complained about when the bill comes, so I just charge for travel time.
 
brian john said:
In this area most residentials charge more than commercial contractors.
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satcom said:
Your residential rate, should be higher then your comercial rates
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Why??

satcom said:
how did you eatablish you rates, did you use good cost data from your operating, and overhead planning budget figures
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I have used the "business cost calculator" that's been linked to in this forum many times. According to that, my rates should be about 20 bucks lower. I think I must be missing something.
 
JES2727 said:
I have used the "business cost calculator" that's been linked to in this forum many times. According to that, my rates should be about 20 bucks lower. I think I must be missing something.
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The output is only as accurate as the input. :wink:
 
JES2727 said:
Just wondering how many contractors are raising their rates at the beginning of the new year, and by what percentage? It's been two years since I raised my rates, and I'm considering a 10% increase on Jan. 1
And while we're at it, how many have different rates for commercial and residential? My residential rate is about 7% lower than my commercial rate, just to stay competitive. Maybe that's wrong.
Click to expand...
Then I'll raise mine 9% :)
 
celtic said:
The output is only as accurate as the input. :wink:
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If he took his planning budget, and used those figures, oftem missed items are state taxes and workers comp funds, and workers comp insurance payments, both private, and state rates, in jersey, accounting fees alone can cost a bundle with a small business, our $500 min business tax is a real nut, and how about all the CEU's costs, plust the lost hours. Truck insurances and maint alone is a big yearly expense, and when you include the milage, it is way up there.
 
I would use greater margins on the materials and leave the more high profile rates alone if you are in a very competive area.
If you are charging by the hour for T&M work, and are doing short calls, 1/2 hour travel time could be the answer.
If you have regular customers and now charge $80 an hour or so, you are looking for an additional $64 per day. Seems like you could make that up with a small increase in the hourly, and a greater mark-up on materials.
 
the 2nd to last thing you want to do is residential service at T&M....the last thing you want to do is mark up your material a lot, when doing resi service at T&M...every item you will use in resi service, can be found, and sometimes at a lower price than your cost, at HD or Lowes. You open yourself up to a world of heartache and customers who just never call you back, because you charged then $12 for a circuit breaker that they see in HD of $3.95

when you do budget numbers, and pricing numbers, you need to not only include everything that you are truly paying (insurance, advertising, salary, trucks, etc), but you need to account for future growth...

for example...you are a 1 truck operation, with a 10 yr old van that is paid for, so obviously, you don't need to account for a truck payment in your pricing...you can offer a lower price, right? wrong. what happens when this truck dies, and you need a new one? where does the money come from?

or you are a 1 truck operation, but are very busy and need to hire someone and get another truck on the road. Did you account for that in your pricing? Are you charging enough to cover the additional costs?

When determining a selling price, and budgeting, you need to be a move ahead of where you are. Do you think that charging $50/hr (because you work out of your kitchen, have a 10 yr old van, no helper, no advertising-let's face it- it doesn't take much word of mouth to keep 1 man busy, etc) is going to allow you to grow your business when you feel the time is right? Just because you can eek by on that money now, will you find good help willing to work for minimum wage? will you be able to find 2 or 3 reliable used vans for $1000 each? will you get enough word of mouth work to keep 3-4 guys busy year round?

these are things you need to determine.

also, don't forget healthcare...you may be covered by your wife, and think you don't need it...but what if your wife loses her job, and you need to pick it up? My company pays $7/hr for every hour of my 40 hr week to cover healthcare for me and my family....That's an extra $1,120/month the company needs to bill out to cover it..granted, there are cheaper health plans, but quite frankly for the amount of work I put in, I deserve a good health care plan...

so, my guess is you are planning your rates based strictly on your current position, not where you want to go...
 
That's what I like about flat rate or upfront pricing instead of T&M.
I feel it's much easier to raise your rates when your not using T&M pricing.
For example if you're currently charging $85 hr. at T&M and you want to raise that to $95 hr. it's easy for the customer to see you've increased your rate $10 per hour.

Previous T&M Invoice For Dedicated Circuit (Same customer old hourly rate)

Install Dedicated Circuit
Labor 4hrs @ $85 = $340
Materials = $100
Total Amount $440


Next T&M Invoice For Installing Can Lights (Same customer new hourly rate)

Install Can Lights
Labor 4hrs @ $95 = $380
Materials = $200
Total Amount $580

It's easy for the customer to see you've raised your rates in the T&M invoice even though these are two different jobs.


Previous Flat Rate Invoice For Dedicated Circuit (Same customer old hourly rate)

Install Dedicated Circuit Qty. 1 @ $440
Total Amount $440


Next Flat Rate Invoice For Installing Can Lights (Same customer new hourly rate)

Install Can Lights Qty. 4 @ $145 ea.
Total Amount $580

Seldom do you go back and do the exact same job for the same customer. So since the jobs are different the customer doesn't know you've raise your rates with the flat rate invoice.

Even if you had installed 4 can lights 6 months ago at your old rate of $85 they would have been $135 ea. for a total of $540.

I think the customer would be far more likely to complain about the hourly rate increase of $10 than the $10 increase per can light.
 
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