mivey said:
A slower tech should not get paid as much unless they posses skills that the others do not have. The customer will either pay a lower rate because the person is slower or will pay a higher rate because, while being slower, the tech has the high skill level that some jobs require.
Minimum times are another way to recover some prep time for a job (remember cost allocation?). You could also charge a service call fee and then a separate hourly rate. There are many ways to skin that cat.
You need to decide which story you are going to stick with. One story is that an EC really needs to look at ALL costs to determine the appropriate hourly rate (this story I whole-heartedly agree with as many forget to include some of the costs).
Another story you tell is the reverse side of that coin where you say you can determine that someone is losing money because they are not charging a number that you like, BUT YOU HAVE NOT looked at all of the costs for the particular EC. You can't have it both ways: either you have to look at the cost details or you don't.
The latest story is that it doesn't matter what the hourly rate is because most companies can't charge t&m and be successful.
Mivey,
I have had the opportunity to see dozens of service companies P&L's...I've seen dozen's more of things that they tried to call a P&L, but were far from it. I've had the opportunity to meet and work with hundreds of contractors from NYC to California and everywhere in between...
I've had the opportunity to meet some of the greatest business minds in our industry, and just learn from others.
For the record, you need to know all your costs if you want to be profitable.
Resi service is an industry all to itself, you can not operate it like an electrical construction company...
I know that the majority of contractors use service as a loss leader in hopes of getting the bigger jobs...i know that a good portion of contractors who do this, don't even know they do this.
I know that they most successful resi service contractors in the country all follow the same basic system. These are guys who specialize in resi service, not just service their construction customers because they have to.
So, I am confident enough in my knowledge to say with a fair bit of accuracy that no one operating a full fledged resi service company can be profitable anywhere in the country, while paying living wages, for $65/hr, without pulling shenanigans...
shenanigans include:
sending an apprentice on every call and billing at full mechanic rate
billing travel time to and from the job site
minimum billing hours
I'm not saying these items shouldn't be billed...i'm saying that I don't believe that they should be broken out and tacked on to an artificially low hourly rate.
I don't think that it's ethical to somehow make people believe that you are only $65/hr (or whatever that number is) then somehow bill them 3 hrs when you were only there 1, and had a total of 30 mins travel time....
I personally believe that the fairest way to perform residential service, for everyone, is to give the a solid price before we do any work...this price includes everything...labor, material, travel, permits, etc...
Then, once they know the final cost, the customer can decide if they want to pay it or not...If it's more than they want to spend, we've only invested 30-60 mins of our time and no material.
I don't believe in telling them $65/hr....But not being able to give them a final price until we are done. Then adding on truck charges, fuel charges, material, etc...
In addition, if you had done residential service, you would know that this puts you into an incredibly bad position. Again, we are talking the general public, not your regular customers...This is a bad position because, I've quoted them an hourly rate, they said OK...I do the job, install the material...I finish, I calculate the bill (or worse yet, I tell them that the office will send a bill)...and they balk. Too much money. Now what do I do?
I've already invested my labor, my material, my time....they got what they wanted...and in many states, if the total bill is over a certain amount, they don't have to pay, because I didn't give them a written estimate before hand.
I have no leverage. I can take them to small claims court. Heck the bill is only $500. It will cost me that much to collect it. Do I just negotiate with them and accept $400?
In my opinion, and the opinion of some of the best minds in this part of the industry, trying to operate a resi service business T&M is not a smart idea.
