Reasons For Not Giving Free Estimates

[emahler]

Maybe he charges separate for travel time, or has an overhead adder or admin charge on his bill, or maybe $65 is just for a one-man crew, or he starts charging when he cranks the truck

then he's not really charging $65/hr...is he? but i think anyone who perpeuates the artificially low 'going rate' should caveat it with their circumstances...i.e "i can live comfortably on $10k/yr" or "i have 1 van that is 15 yrs old and $500 worth of beater tools" or " i have so many additional charges (travel, service call, truck, fuel, tools, etc) that i could charge $10/hr and make a mint"...

but in lieu of those, in order to have a discussion, we must assume certain things..

 

[mivey]

That in this instance Sparks was the one to be pointed out as an example is completely incidental to the intent.

And for me to be clear also, I think you are on working on an honorable task: covering your TRUE costs.

The problem is that when a specific rate is pointed out as being an example of a bad rate, it hurts your argument because the hourly rate is only a small piece of the story.

Suppose someone said they were charging $130/hr. You might applaud that rate, but without knowing how the EC actually books his time, his crews, and what his real expenses are, you may be applauding someone who is losing money.

An electrician in one part of the country may make 50% or more in salary & benefits than one in another part of the country because of the cost of living difference alone.

 

[emahler]

for the record mivey, my original comment was necessarily about the rate, but rather the general tone of the rest of the post. the cavelier attitude towards something that many contractors are struggling to grasp (proper pricing) then backing up that attitude with the proclemation of a rate that will bankrupt contractors in most parts of the country....

as a thought, if the post was a goof...well played...

 

[petersonra]

there is no place in the country that a contractor paying a living wage, benefits, and the other items that professionals want and require...can be profitable doing resi service at $65/hr....it's a financial impossibility to do it without being dishonest..

I don't see how it can be impossible since he is doing it. Unless you are saying he is a liar.

Maybe you can't do it. That does not mean it can't be done.

If you paid someone $20 an hour, even if benefits, FICA, workman's comp, etc, ate up another $20 an hour, you'd still have $25 an hour for overhead and profit.

$20 an hour is a living wage most anywhere.

 

[emahler]

I don't see how it can be impossible since he is doing it. Unless you are saying he is a liar.

Maybe you can't do it. That does not mean it can't be done.

If you paid someone $20 an hour, even if benefits, FICA, workman's comp, etc, ate up another $20 an hour, you'd still have $25 an hour for overhead and profit.

$20 an hour is a living wage most anywhere.

please reread my post

 

[BryanMD]

And for me to be clear also, I think you are on working on an honorable task: covering your TRUE costs.

Hey! How did *I* get in the line of fire?
Erik is the one who started this!!

An electrician in one part of the country may make 50% or more in salary & benefits than one in another part of the country because of the cost of living difference alone.

Not long ago I spent three years traveling around the country and had the opportunity to work and live or at least spend time in every region of the US. Wanna know what I found out?

In short, with the exception of real estate the overall cost of living* is just about the same everywhere; and the variables in real estate (absent the CA coast and the Northeast) are not so much. The build quality and size of the houses and lots are a greater factor than is the locale itself.

As to wage rates, in the various areas this has more to do with proximity to cities with the volume of work and licensing issues there than it does to geographic region.

No question there are differences and by comparing extremes it can be dramatic. But when comparing eg: Northern IL to the Quad cities or to Denver it is negligible.

*A sack of groceries for the week, a Ford truck, electrical materials, etc.

 

[weressl]

for the record mivey, my original comment was necessarily about the rate, but rather the general tone of the rest of the post. the cavelier attitude towards something that many contractors are struggling to grasp (proper pricing) then backing up that attitude with the proclemation of a rate that will bankrupt contractors in most parts of the country....

as a thought, if the post was a goof...well played...

Not necessarily a goof, but I would not expect any reasonable businessman to disclose how they make their money. So a lot of this maybe misleading posturing and I do not mean this a negative way, just people protecting their business interest. On this level of conducting business that would be consdiered their 'trade secret' and would be a fool to disclose it.

Just my opinion, and like .....'s everybody got one

 

[Sparky555]

Hmmm....If i didn't have a clue about what a job should cost, i wouldn't get much business. It's fairly cut and dried....set rates for everday projects (i.e. changing devices and fixtures, adding circuits, hot tubs, etc.), or $65 an hour for troubleshooting and repairs.

At 8 posts I took the $65/hour as pot-stir BS.

$65/hour X 2k hrs = $130k...just about right for owner salary & benefits, but not much else.

Dave

 

[petersonra]

please reread my post

I did.

I can understand why you might think the rate is too low (especially compared to your own rates perhaps) but thats no reason to berate him.

Just maybe he has some wisdom on running a more efficient operation that you would be wise to grab.

 

[mivey]

then he's not really charging $65/hr...is he?

In his case, I don't know. Maybe the $65/hr is covering his costs. Suppose he is paying a one man crew salaries and benefits of $70,000 per year. Suppose he bills 1500 hours per year for this employee. This is $46.67/hr for salary and benefits. This leaves you $27,500 for this employees' share of profit and overhead.

Probably not where you want to be but who knows what the overhead is? In this example, I would think this salary would require around somewhere around $100/hr but his costs may be different.

You could also arrive at a lower rate with more hours billed. I would also expect more than 1500 hours per year to be billed, but that is just me.

 

[BryanMD]

On this level of conducting business that would be considered their 'trade secret' and would be a fool to disclose it.

If there are "trade secrets" related to this discussion they will be found with the EC's who manage to bill at the higher rates and manage to grow rather than the EC's who bill at what at best can be considered a modest rate for 2008*.

There really is no secret to the costs involved anyway. The various expenses of conducting business are easily found out (if not intimately known) by anyone reading here.

*Direct JM labor (wages & taxes) and modest benefits plus direct vehicle expenses (purchase/maintain/fuel) with tool/material inventory **alone** will add up to over $40/hour ANYWHERE in the country.

 

[emahler]

I did.

I can understand why you might think the rate is too low (especially compared to your own rates perhaps) but thats no reason to berate him.

Just maybe he has some wisdom on running a more efficient operation that you would be wise to grab.

please reread my whole post

 

[emahler]

If there are "trade secrets" related to this discussion they will be found with the EC's who manage to bill at the higher rates and manage to grow rather than the EC's who bill at what at best can be considered a modest rate for 2008*.

There really is no secret to the costs involved anyway. The various expenses of conducting business are easily found out (if not intimately known) by anyone reading here.

*Direct JM labor (wages & taxes) and modest benefits plus direct vehicle expenses (purchase/maintain/fuel) with tool/material inventory **alone** will add up to over $40/hour ANYWHERE in the country.

exactly...figuring out your necessary rate is far from a trade secret....

 

[emahler]

the secret is learning how to get people to pay it

 

[aline]

Below is a paragraph from an article written by Frank Blau.

"I have long maintained that it is impossible to make a fair profit at the going rate for PHC services in any city in America. I have continually offered a challenge to any service company to prove to me they can make a fair profit at the quoted hourly rate. No takers so far. The offer still stands."

This is a link to the article.
http://www.accessmylibrary.com/coms2/summary_0286-5900981_ITM

 

[emahler]

Below is a paragraph from an article written by Frank Blau.

"I have long maintained that it is impossible to make a fair profit at the going rate for PHC services in any city in America. I have continually offered a challenge to any service company to prove to me they can make a fair profit at the quoted hourly rate. No takers so far. The offer still stands."

This is a link to the article.
http://www.accessmylibrary.com/coms2/summary_0286-5900981_ITM

there is a reason that no one has stepped up...it can't be done...

btw- this is a great article...i read it first when he wrote it in P&M...and many times since then. Much of what I know, can be attributed to people like Frank Blau...

 

[aline]

there is a reason that no one has stepped up...it can't be done...

btw- this is a great article...i read it first when he wrote it in P&M...and many times since then. Much of what I know, can be attributed to people like Frank Blau...

I cut every article by Frank Blau out of P&M magazine I could get my hands on, put them in sheet protectors and in 3 ring binders. I still go back and read these articles from time to time. Great stuff.

 

[bradleyelectric]

I just really like these discussions where engineers and inspectors take the side of contractors that probably aren't paying for their own benefits and have wives working outside of the business trying to tell others that $65/ hr is probably a profitable rate. I hate it when they start to lose interest.

 

[emahler]

I just really like these discussions where engineers and inspectors take the side of contractors that probably aren't paying for their own benefits and have wives working outside of the business trying to tell others that $65/ hr is probably a profitable rate. I hate it when they start to lose interest.

ditto......

 

[growler]

I just really like these discussions where engineers and inspectors take the side of contractors that probably aren't paying for their own benefits and have wives working outside of the business trying to tell others that $65/ hr is probably a profitable rate.

It's easy for me to see where some people may think that $65 an hour is profitable. That's because it can be for certain types of work but not for electrical service.

Example #1 : Send one journeyman ($20 an hour ) and two helpers ($14 ea.) out to rewire old house or business ( three men on job) 24 billable hour each day. 24 X $65 = $1560 day X 5 days a Week = $7800. This job takes four weeks for a total of $31,200.00 labor plus materials mark-up. At the end of the month there is profit.

Example #2 : Send one journeyman ( $20 an hour ) out to do service calls for the same period. Average 20 hrs billable pr. week 20 X $65 = $1300 week, $1300 X 4 = $5200.00 for the month plus mark-up for any materials used. At the end of the month the contractor is in the hole ( no profit, does not meet expenses ).

The overhead for the man doing service calls is actually going to be higher because of fuel, wear and tear on vehicle and dispatching cost and he hasn't really brought in any money.

If anyone is going to compare rates then compare apples to apples and not apples to oranges. Service work for construction rates is a money loser from the start.