Reasons For Not Giving Free Estimates

[BryanMD]

It's easy for me to see where some people may think that $65 an hour is profitable...

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.

I remember seeing $65 as a construction rate in 2001...

 

[growler]

I remember seeing $65 as a construction rate in 2001...

Again you really can't compare apples and oranges.

A construction rate of $65 may have been cheap in 2001. It depends on the project, the tools and equipment needed and the skill level of the empolyees.

A small residential project does not command the same levels of pay as large industrial project. Construction rates may range from $50 to $150 in the same area for different kinds of work.

When I started I used $65 and hour to calculate labor cost on small commercial projects in 1995. At that time in this area I think that was about average but not on the high end. Today to make the same money I would need to charge over a $100 but it is getting harder to get it.

Many contractors cut cost in other areas and do not raise rates ( just like the airlines ). They cut cost in the one area the customer doesn't give a darn about and that's labor cost. Electricians should be making about $30 an hour in this area but that's not happening and that's just to keep up with inflation. People with lower skill levels are being used to keep cost down.

 

[satcom]

Again you really can't compare apples and oranges.

A construction rate of $65 may have been cheap in 2001. It depends on the project, the tools and equipment needed and the skill level of the empolyees.

A small residential project does not command the same levels of pay as large industrial project. Construction rates may range from $50 to $150 in the same area for different kinds of work.

When I started I used $65 and hour to calculate labor cost on small commercial projects in 1995. At that time in this area I think that was about average but not on the high end. Today to make the same money I would need to charge over a $100 but it is getting harder to get it.

Many contractors cut cost in other areas and do not raise rates ( just like the airlines ). They cut cost in the one area the customer doesn't give a darn about and that's labor cost. Electricians should be making about $30 an hour in this area but that's not happening and that's just to keep up with inflation. People with lower skill levels are being used to keep cost down.

Good Post!

 

[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.

I should have qualified this as a troubleshooting rate as was stated.

 

[emahler]

and i still hate when they lose interest..not nearly as much fun...

 

[tonyou812]

I think they should have a new forum in here for finance and make Emaler the moderator.. He seems like a real numbers guy...

 

[peter d]

for the record....that plumbing contractor has a billable rate in excess of $325/ hr and a $70 trip charge...average invoice is about $750....

Amazing...just amazing, but in a good way. I know that to charge that much you must provide way, way more than the average guy and look much better too, but it just proves that it can be done.

 

[emahler]

I think they should have a new forum in here for finance and make Emaler the moderator.. He seems like a real numbers guy...

appreciate the vote...but that sounds too much like work....plus, i know of guys here who are way more knowledgable than me...they are just smart enough to stay out of the mud

 

[BryanMD]

Amazing...just amazing, but in a good way. I know that to charge that much you must provide way, way more than the average guy and look much better too, but it just proves that it can be done.

But you aren't providing **anything** that the customer isn't paying for.
"The customer pays for everything" but in that case they actually do.

The biggest single thing being sold (and being paid for) is peace of mind.
That translates into things like a known price from the outset, a clean work site, prompt attention, communication about the process, and what appears to be a company substantial enough to stand behind the included warranty.

 

[peter d]

But you aren't providing **anything** that the customer isn't paying for.
"The customer pays for everything" but in that case they actually do.

True, but what I was driving at is that you must give the impression of value to the customer when quoting those kinds of numbers to the customer. (I'm sure they don't give away their hourly rate since they are flat rate.) It takes more to give that impression than most deliver.

 

[petersonra]

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 ).

I agree that you will be in the hole if you pay your employees 40 hours to do 20 hours worth of work.

However, if you bill 40 hours and pay 40 hours, you will do quite well.

 

[emahler]

depends on how many people in the field...$40-$60/ hr is not enough to cover a 2-3 man resi service shops overhead..however $200/hr will probably barely cover a 10 man resi shop OH....and I'm pretty certain $2000/hr will cover a 100 man resi shop OH w/ profit....

edit to add....try billing travel as a separate line for resi service....on top of a t&m invoice....talk about less than happy customers...

 

[petersonra]

depends on how many people in the field...$40-$60/ hr is not enough to cover a 2-3 man resi service shops overhead..however $200/hr will probably barely cover a 10 man resi shop OH....and I'm pretty certain $2000/hr will cover a 100 man resi shop OH w/ profit....

edit to add....try billing travel as a separate line for resi service....on top of a t&m invoice....talk about less than happy customers...

around here most of the time there is a truck charge just for showing up on top of the t&m charges.

 

[emahler]

around here most of the time there is a truck charge just for showing up on top of the t&m charges.

of course there is...instead of being honest and billing the right amount...we keep an artificially low hourly, and then add extra hoyrs and fees, under the misguided perception that we are doing good...both financialy and for our customers....

 

[petersonra]

of course there is...instead of being honest and billing the right amount...we keep an artificially low hourly, and then add extra hoyrs and fees, under the misguided perception that we are doing good...both financialy and for our customers....

I don't see it as dishonest.

Are you saying you are only charging for actual on site time? If so, I can't see any way you can even break even at $65/hour.

 

[emahler]

I don't see it as dishonest.

Are you saying you are only charging for actual on site time? If so, I can't see any way you can even break even at $65/hour.

ding ding ding....we have a winner..many guys do this and thin they are making money.....

 

[mivey]

of course there is...instead of being honest and billing the right amount...we keep an artificially low hourly, and then add extra hoyrs and fees, under the misguided perception that we are doing good...both financialy and for our customers....

What? How is that being dishonest? The most honest way would be to charge separately based on the actual cost allocations.

If you only have an hourly rate, you have rolled all of your costs, fixed, direct, AND variable into a variable rate, which we could claim is dishonest as well.

Since it is not practical for most people to separate a bill into its actual component costs, we can try to simulate those cost allocations by using other methods. Minimum fees/hours, starting the clock when you head to a location, travel expenses for remote locations, added costs for sites with no amenities, special needs adders, etc. are some of the methods used to try to better match the actual bill with the actual cost allocation.

There is no perfect solution, and one solution does not fit everybody.

I do not think that charging for on site time only is necessarily the best choice. But, you could factor the actual on site time into your hourly rate, which also includes your overhead costs. This would mean you should take all of your costs and margins and divide by the on-site time, which should be less than 2080 hours. Some ECs may have 1700 hours of on-site time, some may have 1200 or less.

Again, there is no perfect solution, and one solution does not fit everybody.

 

[emahler]

for a true resi service company, i disagree...t&m punishes customers if a slower tech is sent...min times are simply saying we don't bill enough, and this is how we pay our bills...

i'm gonna go out on a limb and say you've never run a true resi service company...not an electrical construction company that also does service....

there is a reason that almost all successful resi service companies don't run t&m...

 

[Sparky555]

A few years ago I did a breakeven calc & did a T&M job for an existing client (a couple) at my new rate. I got fired the next day. I think she said something like "My husband doesn't make that much" (college professor). They haven't called since. I've never quoted an hourly rate since & every day I bid jobs 20% higher than that job.

Dave

 

[satcom]

A few years ago I did a breakeven calc & did a T&M job for an existing client (a couple) at my new rate. I got fired the next day. I think she said something like "My husband doesn't make that much" (college professor). They haven't called since. I've never quoted an hourly rate since & every day I bid jobs 20% higher than that job.

Dave

The average working stiff thinks you keep the entire amount of your hourly rate, if they only knew how little of it you do keep, we are lucky to keep $7 out of every hundred if all goes well, customers relate all prices to their pay check, they have little understanduing of the cost of operating a business.