Ok guys here is my problem, i use a lump sum price for residential, but when it comes to troubleshooting idont know what to tell the customer on the phone about pricing. I don't give out my hourly rate that i use to find the cost to do my jobs.I know some calls could be short and some calls you could be there all day depending on the problem.What do you think i should do? Thanks .

When people call me I give them my hourly rate and inform them of my service fee. I also assure them that I will be able to find and fix the problem in a timely manner versus a cheaper less experienced handyman. If they don't want to pay then thats too bad, they don't get my services. Don't give your work for free, also you may want to charge something like a service fee or hourly minimum for the service call that took you 45 minutes to drive to just to find a light bulb not screwed in all the way.

Contract pricing can kill you too on troubleshooting.

You have be real good at knowing the cause up front. If you figure in 2 hours and a trip, and it take you 6 hours you lose also.

A couple more options for T&M pricing would be:

1. Charge a 2hr minummum.(or 3)
2. Charge a higher 1st hr rate, then reduce it to standard rate. (ie, first hr at $125hr, then $75 hr thereafter.)

i'll let y'all slug this one out

Les, how long have you been doing service calls flat rate?

[This message has been edited by mahlere (edited 09-05-2006).]

I don't think we are slugging? Are we?

I thought the OP asked for suggestions, and we gave him different options to think and play with.

It's up to him to decide what works best for his business..

Someday I'll tell you about the $6,000 GFI...

So why couldn't you have simply taken the amount of non-billable hours into account when working out your hourly rate for service work.

That's why I have a minimum service call charge that covers the average amount of travelling time plus 1 hour labour. The guy that is fast and organised will make more than someone slow.

Les, most (90%) of what I do is T&M, as you guys know. How am I losing money?

If I get a call, while I am at one job, and have to leave to take care of someone one else. I bill T&M, point to point. You have to bill from the time you get the call, until you get back to the job and start working again. Otherwise,(this is where we agree) you will lose billable hrs.

Being fast or slow?

Both have some drawbacks. Being quick may decrease billable hrs, but it builds customer confidence, and then the most important, word of mouth advertising. That customer tells his/hers friends. Even if I lost 1/2hr of billable time, from here to there, I gained it in advertising.

Being slow, could lead to customer dissatisfaction, and scheduling headaches. But can increase biillable hrs.

This is where knowing your customer base is vitally important.

My customer base wants their problems fixed quick. Downtime is expensive. It can be $1000's/hr to them. They don't care (to an extent) what I charge. They look at lost time and production.

Same can be said about residential customers. Some may be at home all day, and really don't care how long things take. They are there all day. On the flip side, some may have to schedule themselves there, and want it fixed as quickly as possible.

So let's agree on this. T&M run wrong can lead to loses. Contract pricing run wrong can lead to loses.
Both run right, can be prosperous....

"So let's agree on this. T&M run wrong can lead to loses. Contract pricing run wrong can lead to loses.
Both run right, can be prosperous...."

Dnk, i actually agree with you on most of this. The big caveat comes in when you have employees. Different employees = different speeds = different prices to the same customer for the same work.

As a one man shop, it's much easier to justify your time charges and build customer confidence.

Start adding employees to the mix and T&M can erode customer confidence. We've learned this from personal experience over the years.

And yes, employees can lose you money on contract work. However, here is the difference- I can monitor employees on contract work and either correct any problems or fire an employees that habitually misses the mark. But in the process, I can still keep the customer happy and not put my companies incompetence on their shoulders (slow work = higher T&M)

T&M with multiple employees can work when your customer has multiple facilities run by different managers who have no stake in what's paid for maintenance. And the bills are paid by a single person who never goes onsite.

It also makes a big difference whether it's commercial or residential.

Commercial customers expect some level of T&M (what's your hourly rate?)They are typically more willing and amenible to paying travel time or portal-to-portal.

Residential customers do not understand the cost of doing business. They don't care about the cost of doing business. In addition, every dime paid (typically) is their money. They care about their money. Try billing Mrs. Homeowner for portal-to-portal and see how well that flies. "I know we were only here for 30 mins Mrs. Jones, but we had 45 mins travel each way, sot that is why your bill is for 3 hrs" Think that would get you repeat work or referrals?

As for raising you hourly to compensate- I think it's already been determined that if you are doing primarily resi/lt comm service work, you are only productive around 50% of the day. So if you determine your hourly rate at $70/hr for an 8 hr day, you now need to charge $140/hr for the 4 productive hours (actual hours on site that the customer will actually pay for)

If you can get Mrs. Homeowner, who typically won't pay travel, to agree to $140/hr with no predetermined end, than you deserve credit.

Another big difference is in getting paid. For a residential customer, "Mrs. Jones, the total cost will be $450. Mr. Electrician, that is fine. Please proceed"

Now, Mrs. Jones knows what the job will cost and is expected to pay me when I am done. vs.

"Mrs. Jones, we are all done. It took a little longer that we had hoped, but here is the bill - 3 hrs labor x $70, etc, etc."

Mrs. Jones response "it shouldn't have take 3 hrs to change that ceiling fan. It should only have take 1.5 hrs. That bill is too high, i'm not paying for 3 hrs. I'll pay you for 1.5 hrs, etc)

What do you do? You weren't there, your employee was. Did he move really slow? Did he have problem? Now you have do an effective case of selling your problems to a customer to get them to pay you for work that was already done. So you spend another 30-60 mins explaining to Mrs. Jones why it took you 3 hrs instead of 1.5. She tells you about the 4 cigarette breaks the installer took, etc.

So you have already installed the light. Already put in your time and provided whatever material. You still have to pay your employee for all of the time it took (that's the labor laws in most areas) and now you are haggling with Mrs. Jones about paying you your full rate. Now imagine also trying to add on an extra hour for travel time?

Now, this information comes from my experiences in my area (NJ) I've discovered that there may be areas in the country where a residential customer would rather pay a T&M rate and get billed 3 hrs for a 0.5 hr call (instead of just knowing up front that the job will cost $400)

I've gone to a flat rate system a couple of months ago and charge $40.00 service call plus a $65 troubleshooting fee. Once the problem is found, the employees either look up the fix in the book or make a call to the office for a price.

We've only had one case where the problem could not be found in an hour. A homeowner had changed out a switch with a motion sensor and miswired the power such that walking by it would turn on several receptacles on the other side of the house, and then they'd time out and go off.

Anyhow, $65 is a little light for my employees and I'm thinking about some kind of graduated scale but not too sure about how to set it up.

Flat rate is the only way to go.

"Now, Mrs. Jones knows what the job will cost and is expected to pay me when I am done. vs.

"Mrs. Jones, we are all done. It took a little longer that we had hoped, but here is the bill - 3 hrs labor x $70, etc, etc."

Mrs. Jones response "it shouldn't have take 3 hrs to change that ceiling fan. It should only have take 1.5 hrs. That bill is too high, i'm not paying for 3 hrs. I'll pay you for 1.5 hrs, etc)
"
That is the main reason we do contract, to avoid the hourly fear factor.

I thought we were talking about trouble shooting, not installing cieling fans.

I have recently switched to flatrate . I found an inexpensive spreadsheet for pricing that I have been well pleased with . The big advantage for me is consistency . I,m a one-man op , mostly residential . I have been concerned in the past that in subdivisions people compare prices . If you charge one person 200 for what they percieve as the same work you charged someone else 150 , then they may feel cheated . I think for my business flat rate is going to work well . For troubleshooting , I have a base charge . On the phone I tell customer this normally covers diagnosis , If more troubleshooting is required I can let them know once I am there . That being said it is very rare for tshoot on residence to take more than an hour .

If you are going to simply provide service to existing customers as a convenience for them, then go T&M. If you want to focus on service work and make a profit at it, go flat rate.


Once you give your hourly rate to a residential customer, you set yourself up for grief. They compare your hourly rate to their hourly pay. They think that you keep all that money (no salaries, taxes, overhead, etc) and the worst is that they have anxiety and will watch the clock every second until you are done.


Again, T&M will work in some commercial applications and primarily with a sole proprietor. Add employees and residential T&M is a losing proposition.

Doesn't matter if it's troubleshoot or small installs.




[This message has been edited by mahlere (edited 09-06-2006).]

Care to disclose what your flat rates are? I have been considering using that format but am still doint T&M at 60/hr, 3 hour minimum

If anyone would like a copy of an hourly rate calculator in excel format, send me an email.

Hey guys. I have a way that works great for me, tell me what ya think. Better terminology input would be helpful if given.

I have whats called diagnostic fees (usually under $100) This includes show-up gas and a plug tester (not meter) and visual inspection of breakers to see if they are in trip mode. This covers nothing else.

Then I have what I call pre-troubleshooting tasks that range from $185-$333.15. This option tests both ends of the circuit with meter and total visual inspection of circuit. This visual inspection only counts for accessable locations, this means no opening of anything other than beginning or end of circuit (sometimes I use the plug that was used at the time as "the end"). Attics are only visually checked from hatch and same with crawlspaces.This sometimes just tells me what I am getting into. And alot of the times finds the problem.This and all other troubleshooting does not fix problem and the customer is told this prior to the signing of pre-troubleshooting tasks.

Finally there is Major Troubleshooting which involves finding the problem no matter what it takes. and since I now know the circuit so well I can give a good up front price to Mrs. Jones which usually ranges from $680- $1484. Sounds like alot of stuff to go through but I make a good amount of money this way and the break down makes for no arguments with customers.

Oh and I almost forgot when going from one task to another the previous task amount is waived (they dont pay for pre task and major)they only pay one fee and diagnostic is waived depending on location and time of call.

[This message has been edited by electrictim510 (edited 10-27-2006).]

electrictim510, your customers must be in Hollywood...

This business forum always amazes me.

Each person is so certain that there way is the only way, the right way, the way to fame and fortune.

Anyone doing it another way is heading toward bankruptcy.

Can't even agree that there is more than one successful business plan.

Quote"This business forum always amazes me.

Each person is so certain that there way is the only way, the right way, the way to fame and fortune.

Anyone doing it another way is heading toward bankruptcy.

Can't even agree that there is more than one successful business plan."

Its true Bob, there is only one correct and proper business plan. And today I will be practicing it as I am going surfing out at Diamond Head all day instead of work.

Is this Bob stirring the pot?

I think it's Bob being amazed.

You don't agree?

LOL.

Hear Hear....

One thing that I have noticed watching all these posts over the past year or so.

My way is the best, for me, for my type of client, and for my type of business model.

But, these forums have really opened my eyes as to the vastly different approaches that everyone takes to bid their projects or invoice their projects as the case may be.

The trick to it all, to be truely successful, is to understand your true costs, and then model the system that makes the most sense for your business.

"The trick to it all, to be truely successful, is to understand your true costs, and then model the system that makes the most sense for your business."

That about sums it up, cover your overhead, and if your doing that and making a profit , then, whatever your doing is working.

I am glad you all took my post in the spirit it was given.

As I try to always make clear I have never run a business so take what every I say here with the appropriate skepticism.


Cool.

Bob

bob,

glenn and les hit it on the head. That really is the essence of every successful business plan. How you reach that target is up for debate. It also varies by your target market.

For example, if you are a residential service company, who's break even point is $125/hr for an 8 hr day. But you are only able to bill 4 hrs in an average day (the rest is travel, supply house, waiting, etc - that's just the nature of residential service) then you need to bill $250/hr for those four hours. I've yet to meet a residential customer who will agree to a $250 hourly rate, (or a $125/hr including travel rate) However, they do agree to fixed prices (contract, flat rate, estimates, etc) that will cover that $250 hourly rate.

Now, if you are a large commercial company, like the one you work for, you make the bulk of your money on the projects. The fitouts, the groundups, the remodels. So a company will usually do the service for cost, so that they can make it up on the larger projects. In addition, the customers like this will keep men busy year round.

Residential is typically a one shot deal. They won't need you again for 4 yrs on average. You won't get the opportunity to make the money back on the next project.

Commercial/industrial is different. You can be in a facility 10 times/month easily. Then do 2-3 larger projects a year.

But to use the same pricing structure and business model for each is bad. You won't have much luck keeping large commercial/industrial customers if you try to squeeze every penny out of them on every trip. Likewise, you won't make much money in residential if you try to cut them a deal so that you can make it up on the big one. By the time they do the 'big one', 4 yrs have passed and they forgot your name.

does that make sense?

AHHHHHHH!!!!!!

(Bob bangs head against wall repeatedly)

make sure you miss the studs. they hurt....a lot

California Bay area (San Francisco, Oakland, San Rafael) But my prices are usable in alot of places. I used them in Las Vegas, San Diego, Bay area, Los Angeles. Its not the price but how you serve it.