One of the things I have always done was to incorporate a contingency fee to all out contracts. I explain to all our customers that because most of our work is scheduled 3 to sometimes 5 months down the calendar road, we cannot control events external to us. We add an extra 12% to our estimates for those contingencies and I've also explained that the 12% may or may not be subtracted from the estimate , depending on the circumstances at the time.
I learned my lesson when copper prices went nuts in very short order and since then the contingencies have saved our margin, - which is not razor thin, but enough to keep us in a reasonably profitable business margin and keep our journeymen around.
I lost about $20,000.00 when the copper prices suddenly went nuts and that taught me a big hurtful business lesson. Since then, I've found that the customers - once it's clearly explained - and just exactly this same way - understand and very infrequently tend to want to shop around to find a cheaper price. We have always prided ourselves on the quality of our work and our references, and I think 99% of folks understand that.
We have had to charge an extra 1% to 2% lately for the added cost of fuel for some of our customer contracts but our new, mostly homeowners, have already been briefed on the ongoing and increasing costs of getting their work done later. I'm expecting an increase in fuel costs alone to be about 6% additional in the next 6 months so we have quoted that as a worst case on top of the 10% contingency fee.
So far we are now booking into the middle of September and I wish I could get a few more guys around here in Alberta that want to do residential reno's for EC work so we didn't have to book so far ahead.
Wifey is going nuts just trying to keep everyone on schedule and handing out bonuses and raises.
There's nobody around Edmonton right now that wants (or needs?) the work? Crazy economy I guess. Sorry - end of wimpering rant.
Anyways, on a more reasonable thought, the only way to combat things like rising fuel costs and/or anything else is to carefully, might I add CAREFULLLY, and patiently, explain to our customers that we cannot control the future and we want to continue to be around in business if they need us to come back for anything later that we either did not satisfy them, or if they need new work done in the future.
Hope that helps.
