Since the percentage of hours an installer’s hours that can be billed is a critical factor in determining profitability I would be interested anyone’s thoughts about it. Does anyone else adjust bids based on the percentage of billable and non billable hours for the job in question. For example if we have a job that will keep a crew busy full time for 3 days, our hourly bill rate will be lower than for a one hour service call which really ties up a crew or tech for 2 hours (drive time, talking to the customer, etc.) Second, is anyone willing to share information about what the industry average is for “percent billable hours” for different types of shops. My supplier says he saw a study once that claimed that the average time an electrician spent actually installing parts was about 40%. We are a service shop and we net out at about 60% and are always looking for ways to improve it. Is there any way I can get an idea of how we compare to others? Many Thanks.

We simply charge for travel time, any time spent on any particular customer is billed to that customer.

We have no such thing as "non-billable" hours. We charge for travel and every hour on the job. We don't do this as a hobby, we try to make a living at it. We do not offer free quotes or free materials either.

I looked at a job the other Day . Service upgrade is straight forward. The DIY previous owner had wire the whole basement in BX and then finished the ceilings and walls. All i could do was estimate how much time it would take to repair. I can only do the extra work with T&M.I dont have to discribe the DIY work but its bad wrong connectors and no anti shorts any where

LK,
I'm in NJ as well, it is surprising how few contractors know the law (anything over $25=written quote)

However, the easy way around that is to quote T&M prices and get a signature. That, I believe does make it legal.

That being said, on the residential side, everything we do is flat rate. saves a bunch of head aches.

vincer,

if you are getting 60% efficiency on service work, that is above average. We set our flat rate pricing at a 45% efficiency. we are lucky to get 4 out 8 hrs in a given day.

just saw an article that claimed that the average among all trades for the construction end is 6.5 hrs. They worked out the numbers and a 10 man shop was paying approx $136,500 per year for downtime (based on total package of $35/hr)

here is the link www.pmmag.com/CDA/ArticleInformation/features/BNP__Features__Item/0,2379,163135,00.html

we've been doing flat rate on residential for about 8 yrs. and that is exactly how it is done. Unfortunately, a few too many companies see flat rate as a way to R&R (Rape and Run) a customer. They have incredibly too much overhead, advertise like mad, and come in with billable hourly rates of $300+ (that being said, they are only productive 3 hrs per day, so they are only making $900) But they are hurting our industry and giving us all a black eye.

Mahlere,
What is giving our industry a BLACK EYE is a lack of education. There are newbee"s out there working out of the back of a pickup charging $20 an hour. There are other established EC's out there charging $900 for a comlplete 100 amp service change using SE cable.
So let me ask you what is wrong with charging $300 an hour for a residental service call? I've put in my time and effort to build my business to a reputable, award winning structure.
Electricians are not slugs and should be paid for the professionals they are.
By your figures of $900 a day per man x 25 techs = close to $6 million per year.
Education is what's needed so that all EC's will be on the same wave length.
Lets not sell ourselves short we are professional and should be proud of it.
Put a name on the side of your truck and let the public know who and what you are.

All, Thanks for the comments. Let me clarify:
1) With us this is a business not a hobby – Like the rest of you; we are in this for the money. At the end of the day, ALL costs – labor, materials, overhead must be paid and what we must charge the customer must cover those costs plus our profit targets or our kids don’t eat and our wives get annoyed with us.
2) We base our bidding on the estimate the total cost of the job plus profit targets.
3) The question of hourly rate is really one of presenting the customer with an image that we are a professional shop that will not compromise on codes, safety, materials, workmanship or quality. However within that framework, we will do everything in our power to save the customer money.
4) When a homeowner asks, “What is your hourly rate?”, we currently them we charge for materials plus $xx for the first hour and $yy for all hours after the first hour. This seems better than telling them that we charge for travel, set up, etc. If asked why, we explain that the first hour has to be hire is because it includes travel, set- up, etc.
5) When an R&R contractor wants us to do a job T&M and asks our rate, our response is that we charge less for less for full day jobs than for short service calls.
I think this is consistent with what I am hearing you guys say, if not please let me know.
I think the more important question is what are realistic targets for keeping your electricians productive. If your guys are less productive than average, you have to charge too much and eventually get an R&R reputation. Thanks to mahlere for the link.

big venture,

sorry, i wasn't really clear. there is nothing wrong with charging that much. so long as you provide that level of service. For the record, we are in the $180-200 range (but I serve a small area) and we are around $3000 for a 200A service. I am comfortable with our rates and the service we provide.

The key to my entire post was th R&R philosphy. Bang the people for as much as you can. I do have an issue when a company charges $3000+ for a service, then uses AL SER cable and a homeline panel.

I preach to my techs all the time, charge a million $, but give them $1,000,001 worth of service. It's not a novel concept.

My issue is with the companies that bill out at $300+/hr. but run in and run out of the customers homes. They don't provide the level of customer service they should. Their techs throw prices against the wall and see what sticks. They have the techs running 5-7-10 calls per day. You can't provide customer service when you are pushing your men on that many calls.

They charge a ton of money and leave the customer feeling like they just got out of a prison gang rape. (sorry to get so graphic, but I've seen the results)

I am not saying that we are perfect, I am saying that we have about a 60% repeat customer rate in the 1st 18 months.

I do agree with you whole heartedly about the $20/hr guys. I've said for the longest time, you can charge $20/hr and rip someone off, or you can charge $200/hr and give them the biggest bargain of their life. It's not about the money, it's about what you do for the money.

My point was that, too many guys see flat rate as a way to bloat their overhead and jack up their prices with impunity. If used correctly, flat rate can create a great business. If it falls into the wrong hands, it leaves the customer feeling cheated.

Does that make sense?

Mahlere,
Thank you for clarifing your post. We also do flat rate pricing and have for years however in a slightly different form. We strive for a 63% gross profit on every job.
As has been said job management is essential.
Our rate for a 200 amp service change is $3400 and nothing but quality materials are used.
I've also seen the results of those run-in run-out contractors. We work in the state of Mass. and they have an excelent system for weeding out those ilicit contractors see www.state.ma.us/reg/boards/el and go to the diciplinary site and pay close attention to Electricman, they were one of those bad contractors that the State closed down

Given all this talk about charging folks for professional service I just have to throw in two fun comments: 1) When Larger-than-life oilfield firefighter, Red Adare was asked by a Senator “Why do you charge such high prices to put out the oil fires in Kuwait, his response was: “We charge these prices because we are professionals. If you think it is expensive to use professionals, try using armatures.” 2) I just read on NewsMax that Donald Trump gets paid $1.5 million per hour.

vince,

incredible isn't it. my father taught me a saying years ago, he learned it from an old timer in NYC,

"we don't get paid for what we do, we get paid for what we know"

Truer words have never been spoken in my mind. Anyone can do electrical work, hell a trained monkey can be taught to sling romex. But a true, educated professional that knows when, where, why and how to pull that romex is worth every penny and then some.

mahlere,
I agree completely. For a service shop like ours, knowledge and professionalism enable us to provide value. Providing value is the key to word-of-mouth referrals that, in turn are the key to profitable growth. Yesterday I got two calls (unsolicited) from customers telling how the lighting we had installed really enhances their homes. They thanked our estimator for his suggestions which saved them $$ while helping them translate their ideas into reality. I am sure we will hear from their neighbors over the next few months.
The issue for me as a manager is to develop our electricians so they get better and better at professionally providing value by helping customers get what they want at a fair price. Right now, we have not gone to a “flat rate” book. Our guys want take each job individually. Of course 60+% of the jobs that are simple and we just “add a circuit where they want it” and charge our hourly rate. However, for the other 40% they get the opportunity to really add value that leads to future business.

We have actually had a couple of retail customers who told our electrician that "they don't get paid to drive to work and feel we shouldn't either." We tell them that we actually drive to work several times a day and if we didn't charge for travel we would pay out 8 hrs and bill out only 4. Won't stay in business too long that way.

LearJet9 -- good point!

learjet,

no offense, but that is why i personnaly hate T&M. We found that once we started to flat rate everything, it made our life easier. Now instead of earning 4 and billing 8 (we've been there -still are on occasion -getting rare though) we found that we can flat rate the call and cover our travel.

in regards to commercial, it took a while, but we just started by billing 2 hr min, then we got them used to a min charge, then we just switched over to flat tcall charge. once we got there, if there was work beyond the scope, we would just let them know what it would be and do it.

it wasn't easy, but we had a lot of good customers going back 20 yrs that trusted us. also it helped that we were growing and I could sell them on the fact that not all of my men worked at the same speed as I did, so it would be better for the customer.

it's been pretty successful. A couple of T&M holdouts, but they pay travel w/o complaint and we make it up on their new projects.

good luck.

Hi Eric
Welcome to ECN and thankyou for your input

mahlere - I agree. We are trying to get to that point but at this time remain on the journey. Our retail customers are very slow to come around. Currently we do have a min 2hr charge and we have a strict policy of "0" non-billable hours. Every hour paid must be billed to a job.

I had carpel tunnel surgery this summer.
The costs are listed below.
Pharmacy $196
Medical/Surgical Supplies $659
Operating Room Services $805
Anesthesia $589
Recovery Room $261
Total $2,510
This does not include the doctor's fee for the surgery. I was talking with the doctor before the surgery and he said it would take him 45 minutes or less to complete the surgery. I went into surgery at 3:30 pm woke up in the recovery room at 4:30 pm and left the hospital at 5:00 pm.
I received the bill from the doctor the other day and it was for $4,128. So from what I can see he made two incisions in my wrists and stitched them up and it took him no more than 45 minutes and charged $4,128.

Charging $300 per hour is starting to look more and more like a bargain to me.

The hospital charges were $2,510
The charges from the doctor were $4,128
Total amount for the surgery $6,638
This doesn't include the charges for the office visits before and after the surgery.

Electricians are cheap.

And the Doctor has no inspection to worry about, and you go to him, he will not come to you.
You should have said, you have your own sutures, can he give you a better price.

Very true, Les.



[This message has been edited by Trumpy (edited 11-26-2005).]

For those shops who have a minimum service charge, what does a customer get for the charge. How many hours does the minimum provide ? Is travel charged on top of that ?

I have a $200.00 minimum charge. This gets the customer up to three hours of my time. Material is on top of that.

Sparky - We charge for travel then 1hr min. If we are there for 15 minutes it's 1hr, if we are there for 50 minutes it's 1 hr. Then we charge in 30 minutes increments after that. We are trying to get our retail cutomers to accept 1 hour increments but it is a slow process. We are at that point with our commercial customers. We do very little residential at flat rate only.

With flat rate pricing do you still have a minimum that you show up for? do you flat rate labor and materials or just labor.
And my biggest problem with flat rate is how do you figure it out?