I am an electrical contractor in the Franklin, MA area. I get together with a few other contractors to discuss various topics, such as the topics on this site. We all complain about "handymen" and such, but when I bring up the question of hourly rate I receive five different rates, there are only five of us there. This shows me that the key is to educate newer contractors as to the cost of doing business and the difference between being an "employee" of yourself and a business owner. Does anyone have anything to add to this subject?
Only that you are on the right trail. There are also other pitfalls for contracting besides just the undercharging issue however. Many times I read postings where some think that just "properly charging for the work" is the answer to everything. I would add that careful bidding is also a large factor, as is knowing when to back away from a disaster job before you start.
"the key is to educate newer contractors as to the cost of doing business and the difference between being an "employee" of yourself and a business owner."
There is no fixed price to charge, every business will have it's own set of operating expenses, some of the differences may be type of business they are running, all construction , some small construction with service work, all service work and no construction, the overhead will vary for each type of operation, also the type of employees you are trying to attract, better paid employees with benies, will cost more, also do you intend to grow the business, if so, in what way, the best way to overcome all these questions, is to sit down and draw up a business plan, and insert the actual forcasted costs to reach the expected plan.
This shows me that the key is to educate newer contractors as to the cost of doing business and the difference between being an "employee" of yourself and a business owner. Does anyone have anything to add to this subject?
Everyone's cost will vary depending on their companies situation.
Here is a handy calculator to see just how much you should be charging:
I just lost a service upgrade job to another e.c. I was way high, he got the job by bidding $700.00 for a complete 150 amp service upgrade. From weatherhead to panel, a complete upgrade! Adding up the material, how much do you think he is getting per hour? No pipe, just SEU, but still, that's not much profit, if any. The toughest thing around here is trying to compete with price cutters and handymen, in other words, staying competitive in your own market area.
I like the little cost calculator. I also agree that it is necessary to educate the “new guys” who, because they don’t charge enough, eventually go broke. However, in the process, they take work away from those of us who to charge enough to cover costs and make at lease enough to feed the kids. More importantly, their low bids give customers a false impression of how much electrical services cost. As a result, we get an undeserved reputation for being “over priced.” I would like to know if anyone has any ideas re how to educate homeowners as to how much they should have to pay. It may be of interest for folks to check out http://www.contractors.com/cost_estimator/electrical.html which gives homeowners ballpark ideas about the cost of a few generic electrical services. I would be interested in knowing what everyone thinks of this data and if there are other sources of information for homeowners what they should expect to pay for electrical work. Thanks.
I would not necessarily say it is only the new guy that needs to be educated. When I started my business I decided to call other contractors in the phone book to find out what they were charging for work such as coming out and adding a receptacle in an existing residence. The companies I called have all been in business at least 10 years. Most have been in business 20 years or more. The results ranged from $35 per-hour to $55 per-hour. to come out and do this work. I set my price at $40 per-hour. I figured if these guys have been in business for this long these rates must be legitimate. I soon realized I was not making any money at this rate. I was trying to figure out how too charge more but I was already getting some complaints from people for charging $40 per-hour. Then I stumbled accross some information on flat rate pricing and deteriming you costs of doing business. I switched to flat rate pricing and doubled my hourly rate. The funny thing is although my hourly rate doubled I got fewer complaints. I have sinced increased my hourly rate even more. I think some of these contractors that have been in business for 10 years or more also haven't raised there rates in 10 years. In 1982 I was working for a contractor on T&M jobs. His hourly rate was $35 per-hour. I was shocked when I called these contractors in 1998 and some were still charging $35 per-hour. I saw some ads in the newspaper where they were advertising $29 per-hour. I was expecting rates to be between $60 and $100 per-hour. [This message has been edited by A-Line (edited 12-02-2005).]
[This message has been edited by A-Line (edited 12-02-2005).]
Recently I called some contractors about coming out and troubleshooting some lights in a house to see what the rates were. I called 6 contractors in the phone book with 1/2 page ads or larger. Here are the results.
Contractor 1: $49 to come out and determine the problem. If we do any work the $49 fee is waived.
Contractor 2: $24 service fee plus $49.50 every half hour for troubleshooting. So the 1st half hour would be $73.50 and each additional half hour would be $49.50
Contractor 3: Free to come out and determine the problem. Then we will give you a free estimate for the repairs.
Contractor 4: $120 per-hour plus parts.
Contractor 5: $60 per-hour
Contractor 6: $45 per-hour plus materials
As you can see the price varies alot. If I were a customer I would be quite confused as to why there is so much difference in the prices. As a customer I would expect prices to be more consistant from contractor to contractor.