Upfront pricing/ Flat rate pricing. Need help getting started

Merry Christmas
I am wondering if someone could point me in the right direction or would be willing to consult with me for pay in setting up a flat rate pricing system for my residential service customers. This would be something along the lines of how a Mr. Sparky or similar would do. I understand that I could buy into a franchise and presumably get all the info I need but residential service is not my main form of electrical contracting and I only plan on having 1-2 service persons on staff. I have looked for pricing books and have founds some software that seems cheap or not user friendly and its not working for me.Would love any advice, direction or better yet someone who would be willing to consult with me on this project or at least share a few emails.
 

LarryFine

Master Electrician Electric Contractor Richmond VA
Location
Henrico County, VA
Occupation
Electrical Contractor
Pricing varies with area, but when I must charge hourly (troubleshooting), I charge $150 for the first hour, $100 per hour after that.

I base flat-priced work on those numbers, using the worst-case scenario for unknowns. It's easier to lower a price than raise it.
 

blueheels2

Senior Member
Location
Raleigh, NC
Occupation
Electrical contractor
That is based on an hourly rate of 149$ and 30% material markup on first task and 10% after. That’s not enough either. Here lately I’ve been doing a takeoff on material and doubling it, then using the hours to multiply by hourly rate. And sometimes I first task every job. Depends on how busy you are.
 

petersonra

Senior Member
Location
Northern illinois
Occupation
engineer
I think some of this stuff you're just going to have to work out as you go. I think you're going to find first service work that it's an expensive business to get into because a lot of your time is going to be spent basically doing sales work on relatively small jobs that even if you charge what you think is a lot you won't make a whole lot of money on. If you spend a couple hours of overhead on a job that only lasts an hour or two you going to have to find a way to recover that time that you spent that you can't charge for.

I think people worry way too much about the mechanism by which they price things. Those are really rules of thumb that I think you can only come by with experience.

For instance, I don't see how you can afford to come out to a job site for free. I think you have to charge some number just to show up and the number just goes up from there.

People do not like surprises, but until you get there it is very hard to know what you're going to have to actually do. I think you also have to be pretty mercenary about what you do when you get there. If you agreed to install a light fixture for $200, that is all you should do while you are there. If they need a replacement outlet, you need to charge them whatever your fee is for that. If you start working for free because you feel sorry for your customers you will go broke.
 

petersonra

Senior Member
Location
Northern illinois
Occupation
engineer
I sometimes fall into the trap of doing “1 little thing” and not billing for it. I recognize it and I am making a conscious effort to stop it. Happening a lot less.
My employer has a bad habit of having me quote jobs that require a lot of time upfront that can never be recovered no matter how much we charge them. I am working on such a quote right now. I probably spent five or six hours on it and I doubt we can charge more than a few thousand dollars. It would have been better to just turn down the RFQ. But nobody wants to do that.
 

brantmacga

Señor Member
Location
Georgia
Occupation
Electrical Monke


I found this one online. You have to adjust some things for sure (material) but it’s been a decent tool to use.

Some of those prices seems abnormally high. Like $700+ to change a ballast. I’m still trying to figure out the columns “their price”, “1st task”, and “2nd task”.

Is “their price” a competitors supposed price or the customer? Usually you just have a main task and then an additional task.

Most of the prices in there are almost double my book prices. Maybe it’s somewhere like NYC or another major metropolitan area. I’m not one to beat anyone up over price but man some of those are silly.


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Pricing varies with area, but when I must charge hourly (troubleshooting), I charge $150 for the first hour, $100 per hour after that.

I base flat-priced work on those numbers, using the worst-case scenario for unknowns. It's easier to lower a price than raise it.
Do you charge for drivetime and for a helper? How much do you upcharge on material?
 
Some of those prices seems abnormally high. Like $700+ to change a ballast. I’m still trying to figure out the columns “their price”, “1st task”, and “2nd task”.

Is “their price” a competitors supposed price or the customer? Usually you just have a main task and then an additional task.

Most of the prices in there are almost double my book prices. Maybe it’s somewhere like NYC or another major metropolitan area. I’m not one to beat anyone up over price but man some of those are silly.


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I would say those prices are on par with what a Franchise Electrical company would charge and I assume that would not be just a New York thing but a country wide price average. I think the "Their price" has to do with the price for a Tech to show up and do that one thing and leave. Maybe the other prices would be if multiple things are done?
 

brantmacga

Señor Member
Location
Georgia
Occupation
Electrical Monke
I would say those prices are on par with what a Franchise Electrical company would charge and I assume that would not be just a New York thing but a country wide price average. I think the "Their price" has to do with the price for a Tech to show up and do that one thing and leave. Maybe the other prices would be if multiple things are done?

I can tell you from being part of Mr Electric a few years ago, and in multiple territories, our prices were nowhere near those in that spreadsheet. Back then we were at $125/hr.


As for the tasks, we had 1st task and additional task. One line item would go as the first task, and everything else was billed at the single additional task price. I still use the MRE book, although I’ve edited it over the years. I scanned the whole thing and imported it to Microsoft Publisher to remove the MRE logos and be able to edit prices.


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LarryFine

Master Electrician Electric Contractor Richmond VA
Location
Henrico County, VA
Occupation
Electrical Contractor
Do you charge for drivetime and for a helper? How much do you upcharge on material?
The extra $50 "dispatch fee" for the first hour covers the drive, etc.

For a flat-priced job, the helper makes it quicker for the same money.

I generally include small stuff in my price, and 25-30% for big stuff.
 

Coppersmith

Senior Member
Location
Tampa, FL, USA
Occupation
Electrical Contractor
@petersonra makes some good points here. I'd like to address them based on my experience.

I think some of this stuff you're just going to have to work out as you go.
I agree. You need to calculate your own flat rate prices based on your costs and profit requirements. You can't just copy someone elses price book. The one thing someone's price book is good for is giving you a starting list of tasks.

I actually don't use a book. I calculate the price for every job. I'm familiar enough with the various costs to make an accurate estimate quickly. I also know from experience how long it takes to run various types of pipe and cables.

I think you're going to find first service work that it's an expensive business to get into because a lot of your time is going to be spent basically doing sales work on relatively small jobs that even if you charge what you think is a lot you won't make a whole lot of money on. If you spend a couple hours of overhead on a job that only lasts an hour or two you going to have to find a way to recover that time that you spent that you can't charge for. For instance, I don't see how you can afford to come out to a job site for free.
It's true that you can spend way too much "looking at" a job. It costs me between $100 and $300 to send an employee (or myself) out to look at a job considering labor and travel costs. This is why I do most quotes over the phone. For small jobs, generally you can get all the required information to make an accurate quote over the phone. It becomes worthwhile to go see a job when you expect to charge at least $1,500 and the drive isn't crazy. I usually go look at panel jobs. If the potential client can't adequately describe the job to you and you sense it's going to be less than $1,500, either just decline, or offer to do it T&M (but usually T&M is a mistake).

I think you have to charge some number just to show up and the number just goes up from there.
Unfortunately the "free estimate" is a fact of life. If you try to get paid just to look at a job, most potential clients will just hang up. Keep in mind that you recover the cost of time spent giving estimates (either on the phone or in person) by charging for them in your overhead. My only exception to this is for real estate agents. I charge them $50 for "go look at" estimates. Most times they have no intention of buying the job, they are just looking for a bargaining number for their client.

I think people worry way too much about the mechanism by which they price things. Those are really rules of thumb that I think you can only come by with experience.
Pricing is simple and there is an exact mechanism for doing it. Price = [manhours x labor rate] + [material x material markup] + [rentals x rental markup] + [travel charge x days] + [permits x permit markup]. The more experience you have, the better your guesses on each component cost will be. My experience is I'm usually very close on material, rentals, travel, and permits. I usually underbid on hours, but I'm trying to improve.

Using the above formula I am able to give fixed prices for jobs rather quickly over the phone, and after a few minutes thought on larger one and two day jobs. Big jobs that require a written proposal still require much careful thought to price correctly.

People do not like surprises, but until you get there it is very hard to know what you're going to have to actually do.
People definitely prefer no surprises. This is why flat rate pricing allows you to charge more than T&M pricing. I will give a flat rate price for any job were I understand and can control enough of the variables. This is true most of the time for residential and light commercial jobs. but sometimes I can't. In those cases I offer a flat rate troubleshoot charge (which is basically the first hour) after which I tell the client what the price is to continue the job. They can accept or decline. If they decline, they only owe me the troubleshooting charge.

I think you also have to be pretty mercenary about what you do when you get there. If you agreed to install a light fixture for $200, that is all you should do while you are there. If they need a replacement outlet, you need to charge them whatever your fee is for that. If you start working for free because you feel sorry for your customers you will go broke.
Never work for free. If the client brings up a "while you are here could you...." you must immediately say "I'm happy to do that for you. There will be an extra charge of $XXX." Rarely does a client react negatively. If they do, just decline to do the additional work. It bears repeating, never work for free.
 
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blueheels2

Senior Member
Location
Raleigh, NC
Occupation
Electrical contractor
Can you explain the "Their Price" and "1st and 2nd price"


So I found this on Reddit and it came with the explanation that a guy worked at a shop that had somehow gotten a hold of a price book for a company like Mr. Electric that was in town. But come to think of it that shop also did plumbing and HVAC. “Their price” would be Mr. Electrics price and he said they had very few repeat customers in town.

1st price and 2nd price were the prices for the company he was working at that had adjusted the price book for their rate of 149$/hr. 1st task is the 1st thing you do on the job bad 2nd task would be all of the tasks afterwards. Parts is just the parts for the job. Parts on 1st task got a 30% markup and parts on 2nd and beyond for a 10%. Parts part was accurate enough I didn’t change much in the beginning but now with pipe and wire the way it is I am back to having to price the materials. I’ve been using the labor units and applying whatever markup I feel like at the time.

There are definitely some spots where it is way too high and I scrap those.

It was/is a huge help because it streamlined my pricing. Half the time I don’t even need to see it to give a price and when I do see it 30 minutes of investigation and I can give an accurate price on the spot. And you guys know pricing all those small jobs is a time killer when running a single man shop.
 

Coppersmith

Senior Member
Location
Tampa, FL, USA
Occupation
Electrical Contractor
How many of you do diagnostic fees? Flirting with a 115$ fee
The troubleshooting charge I mention above is my diagnostic fee. The amount is the same as my minimum charge which is what I would charge to show up and do an hour or less job (plus material). I only charge this fee if I don't have enough information to give a fixed price for the job. I will spend no more than one hour troubleshooting. If I can't find the issue, I require an additional payment to continue. 95% of the time, one hour is enough. If I fix the issue during troubleshooting (such as a loose wire), there is no additional charge.
 

brantmacga

Señor Member
Location
Georgia
Occupation
Electrical Monke
So I found this on Reddit and it came with the explanation that a guy worked at a shop that had somehow gotten a hold of a price book for a company like Mr. Electric that was in town. But come to think of it that shop also did plumbing and HVAC. “Their price” would be Mr. Electrics price and he said they had very few repeat customers in town.

Ok, that’s sorta what I was thinking. But that’s also misleading because Mr Electric book has standard pricing and “member pricing”. The membership pricing is a discount plan sold to customers for a price set by the franchisee. My guess is that franchisee inflated their standard pricing to sell more memberships, but at those rates the discount would cover the cost of membership anyway, so maybe they were just hoping by handing out these memberships they were guaranteeing repeat business. Idk.


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gadfly56

Senior Member
Location
New Jersey
Occupation
Professional Engineer, Fire & Life Safety
Drive time is figured into my hourly rate calculated into the flat rate price.

Avg material markup for me is 40% on service work.


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My company's standard markup is 110%. A part that is $100 our cost, is $210 your cost. That's our "street" price. Customers who generate significant annual revenue get better pricing. Material pricing for installation work is lower because that's usually more competitive.
 
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