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#157891 - 02/06/06 06:18 PM Thoughts about pricing  
Jim M  Offline
Member
Joined: Aug 2001
Posts: 457
Chestertown, MD, USA
For those struggling with setting their prices, here are some thoughts.
http://journals.iranscience.net:800/www.pmmag.com/www.pmmag.com/CDA/ArticleInformation/features/BNP__Features__Item/0,2379,3743,00.html


Business, Office, Estimating, Legal:

#157892 - 02/06/06 08:16 PM Re: Thoughts about pricing  
LK  Offline
Member
Joined: Jan 2003
Posts: 1,429
New Jersey
"There will always be good plumbers who are poor businessmen, charging less than they can afford."
___________________________________________

There will always be good customers, who are looking for good work, and willing to pay, they also expect your business, to be in good condition, should they need your services in the future.


#157893 - 02/09/06 11:57 AM Re: Thoughts about pricing  
VinceR  Offline
Member
Joined: Apr 2005
Posts: 35
Edgewood, WA, USA
Thanks and questions.

First the thanks. I enjoyed the article and agree with its basic points – you should take the risk & headaches of running a business only if you are rewarded with higher pay than working for someone else; to do this, you have to charge enough to cover ALL costs – depreciation, office help, taxes, etc., etc, etc.; if you want to make money in service work, you need to build a reputation for quality, not low prices.

Here is the question #1: Something does NOT compute in the article. Is the going rate really $35 per hr for service work and a ONE-MAN-SHOP has to charge $83.99 to make the trip worthwhile? What is going on here? I think part of the answer is that overhead & profit costs per job decrease with number of crews. For example, if Ron hires a crew or two, PART of his overhead and his profit target don’t increase but the number of jobs increase. This means he can charge less per hour and still put the kids through college. However, I find it impossible to believe that even with 10 crews, he can get them even close to $35 per hour. Perhaps someone can enlighten me. Is the $35 per hr just plain wrong?

Here is Question #2: What is the approach used by the “Flat Rate Book” folks to arrive at their prices? I am NOT looking for specific prices here only an understanding of the concepts and logic they use to develop them.

Again thanks

Vince R


#157894 - 02/09/06 01:01 PM Re: Thoughts about pricing  
macmikeman  Offline
Member
Joined: Jul 2002
Posts: 717
Honolulu, Hawaii
Vince, get your hands on a copy of a book called " How much should I charge" by Ellen Rohr. It is really good mind opening stuff in there. The whole flat rate system is also included in the book.


#157895 - 02/09/06 09:17 PM Re: Thoughts about pricing  
Active 1  Offline
Member
Joined: Feb 2003
Posts: 687
Grayslake IL, USA
I also found this good to read. I must say I thought I remember reading this a few years ago. Someting to keep in mind is it does not have dates so it could have been a long time ago. But the point is still good.

Tom


#157896 - 02/09/06 09:22 PM Re: Thoughts about pricing  
mahlere  Offline
Member
Joined: Nov 2005
Posts: 507
New Jersey
LK, not all overhead. for example, you have 2 people in the office, rent, phones, office equipment, computers, etc and are running 4 men. if you add 2 men, none of that will change. so the cost per man to cover these items will decrease.

you will increase, in some cases, other OH items like trucks, fuel, benefits, etc. But these should be directly covered by the new hires.


#157897 - 02/10/06 11:45 AM Re: Thoughts about pricing  
VinceR  Offline
Member
Joined: Apr 2005
Posts: 35
Edgewood, WA, USA
Thanks, for the book suggestion, I just ordered a copy.

I take it from mahliere's comments there are no MAJOR advantages to being big from an operations point of view. This brings back to my question re the "going rate of $35 per hour" If this it really is $35, most of the folks competing with Ron should be going out of business soon AND those in business for more than a year or 2 are 3 times more expensive than the start ups. Next time I need a plumber, I will ask him how much experience he has a plumber and how long he has been in business. I will hire the guy who knows his trade, but does not yet know how much he has to charge to stay in business.
VinceR


#157898 - 02/13/06 09:20 AM Re: Thoughts about pricing  
kd  Offline
Member
Joined: Dec 2004
Posts: 52
I could not get the article to load, but I assume that it was written in the 1970s and needs to have the per hour rate doubled.


#157899 - 02/13/06 06:20 PM Re: Thoughts about pricing  
TNSunny  Offline
Member
Joined: Dec 2005
Posts: 44
Tennessee
The article first ran in 1989. It was re-published in June of 2000, and this is what is currently listed at the top of the article:

"The following feature story ran in the June 1989 issue of Plumbing & Mechanical. While the prices have changed since the late 1980s, this article remains as useful now as it was then."

Note that the publisher freely acknowledges that rates have changed since that time. The $35.00/hr rate ONLY applied to the going rates in the Tulsa, Oklahoma area for 1989. Even back then I'm sure the rates varied from one part of the country to another, but they definitely have changed in the past 17 years.

Kevin


Kevin

#157900 - 02/14/06 08:32 AM Re: Thoughts about pricing  
wilkie  Offline
Member
Joined: Apr 2005
Posts: 39
South Carolina
Can't view the link. Can someone email me a copy of the article? jamie@electricservicetech.com. Thanks


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