Hi Jim,
I work with contractors for a living and assist them in better understanding their true cost of doing business and in turn, what they need to charge to make a decent profit. The number one issue I see with most new customers is UNDER CHARGING! Most of them will have a low hourly rate and mark up materials. However, the vast majority do not account for the overhead which includes insurance, bank charges, tool replacement, equipment purchases and also, the biggy, unproductive time (driving, chatting, supply house, callback labor to name a few). The average breakeven per productive hour (pure task time only) is between $175 and $225 (based on a 4 hour productive day). The reason that we break it down to productive time only is to allow Flat Rate Pricing which provides the same price for a chatty customer who lives across town or the near mute customer who lives accross the streets. By breaking down to a 4 hour day (the average productive time for a service contractor), we rely and bill based on task time only allowing us to charge the same price for a certain job regardless of geographical area or customer "chattiness".
Getting charged $303.00 for an after hours call with a $45 part is in many situations, par for the course. This contractor probably accounts for all overhead costs from credit card charges to loan interest, from uniforms to sick days, callback labor and warranty, and I could go on and on. Most contractors that originally call us complain that they work long hours, weekends, etc. but by year's end, that have very little to show for it. Most of them have an eye opening experience when they see just how many incurred expenses they fail to account for. By the time we are done with them, they are charging a higher rate based on a 4 productive hour day. Being in a flat rate environment, the hourly rate is not shared with the customer, instead, a price for the job is provided. In the event the customer wants a breakdown, they send a letter that breaks down the total amount of every expense incurred for that specific call, educating the customer on the expenses required to provide such a professional service and basing it on task time only, so although they were on site for 2 hours, the rate applied is for 1 hour only.
Many of our customer's compete with other contractors that charge sometimes less than half of what they do and to do combat this, I suggest they provide the customer with more than just a price when quoting them. This way, they can compare apples with apples and although the other guy may be cheaper, he may not carry insurance, may not provide fast turnaround or a multitude of other advantages that someone that charges near to nothing cannot provide.
So take it from me, if you choose to trust this particular "stranger", odds are you are selling yourself short as opposed to that plumber ripping you off.
I hope this helped!
Marc
