I have gone from Journeyman to Electrical Contractor. I am having a problem underchargeing people. Not so much commercial, but residential is killing me. It's difficult to charge some of the rates that seem to high but I have to past it and charge accordingly. Has anyone else experienced this problem before? If so what did you do. I feel like I'm taking advantage of people but to stay in business I'll have to charge more.

It's simple then....you have to charge more. You are not taking advantage of people. You are charging them for a skill and service that has taken years of training and investement. By all means, charge more!! Don't leave money on the table.

Peter

I agree with both of you. If I could somehow not charge people anything I would be very happy because I would not have to deal with my conscience or people complaining about prices. But that's not reality. I have bills to pay and there are very few of us who can work for nothing.

Part of being in business for yourself is learning to deal with these issues. You have to "grow a thicker skin" and believe that you have to charge what you do in order to stay in business, support your family, pay your bills and maybe put a little away for retirement.

Now, there is nothing wrong with doing "pro bono" work every once in a while for worthwhile customers, that can be good for business. But you can't do that all the time. At some point you will have to draw the line and refuse to work for those that can't or are unwilling to pay the going rate. You have to focus your efforts where you will make a decent profit.

It's either them or you, and you are entitled to make a living.

-Hal

[This message has been edited by hbiss (edited 06-05-2004).]

It's tough sometimes - especially when it's a little old lady who needs a GFI replaced, and it only takes you 10 minutes.

I charge different rates - one for co-workers I might call on to assist at a job (painters, drywallers, or just "grunts" ), one rate for "friends & family" and one for "cold" calls to strangers. It's a litle unusual, but it works for me. You might just need to find a method that you're comfortable with.

Remember, though, before I sound like we're all doing this to [soapbox]"selflessly better the world's electrical distribution (puke)"[/soapbox] ie for charity - some of the biggest complaints I've had, or have heard of, have come from "charity" cases, who seem to insist on looking in the gift horse's mouth, and complaining about the condition of the teeth.

In addition, we are a skilled trade. How many years did it take you to get where you are now? Not to sound superior, but most customers I've encountered are primarily of the "flip switch, light works" mindset - they have no knowledge of electricity, and no real desire to know how it works - they just want to know why is doesn't, and how much it'll cost to fix. The fact that you can install and service something they have no clue on isn't a license to rape 'em, but it should remind you that we are pros, and you can't buy our knowledge and experience for minimum wage!

In addition, your insurance, vehicle, and other overhead need to be taken care first of in order for you to be "charitable" with your time...

Good luck!

It is so easy to under bid nothing jobs. You really have to have 2 sets of numbers in your head. The store price and the customers price. Example a GFI I think is X much. Wait, they just went up in price. They don't come with trim plates. Half the time I resplice the box so I'll need a few wire nuts. I need to pay sales tax. Can't for get mark up to pay overhead and material pick-up and loss. Then I have a much biger number

How long will it take to perform the labor operation and how long will you be at the place are different. You need to figure time to clean up, show the customer what you have done collect the money, and drive time.

Figure all your expences. Don't forget things like truck repair, replacement tools, replacing general inventory, payrole, vacation time, taxes, saveing some for slow times, and proffit.

Break it down to how much you need average each day. Add some and that is what you need to make in a day. Even if it's only a 6 hour job remember that number as a minimum.

Tom

Delectric,

I'd like to recommend the Wed nite Business Chat here. It begins at 9pm EST and goes on for at least a few hours.

This is just the kind of thing that gets talked about there. Give it a shot, there's a lot of people willing to help and share their experiences here.


Bill

I had this same problem, I think we all do when we first start out. When it was just me I could "afford" to go reset a GFI and sometimes not charge or charge very little, but now that I have employees I have to charge the same rate no matter how simple the job is. When I look back on it, I left way too much money on the table. Most of my customers seemed way too happy with my prices and I can now see why, the only good thing is that it gave me a good reputation in the community and the phone rings without advertising. So Maybe I'll make up that lost money in the long run.

In order to be strong you need to charge for your service.
We charge a flat 75.60 per hour +travel+load unload time.min 75.60 service call.also .30 a mile if over 10 miles.
We get the calls to reset circuit breakers all the time. Does your doctor cut you a brake when he says take 2 aspirin and you`ll feel better,no way. You are a trained professional!!

Deelectric hare is a good way to look at it. When your computer breaks down , get a load of how much the genius charges to repair it. He doesn't care if it is a home computer or a business computer.

i to have the s.ame problem,Im learning that we all have familys to feed.Hang in there,your not alone

Thanks guys, I really appreciate it. I think I started low hoping to get the jobs and a good reputation. I like the idea of how much I need to make per day, it puts it in perspective. Nobody cuts us any slack and yes, thinking back, all that schooling and remember the apprentice days? Well I am going to look at a book on estimating which may help also. I have a freind who is a general and he calculates what he thinks it should be and then doubles it. Thanks again you guys were great help.

I dunno... the oil companies don't seem to find it too difficult to raising the price of gas. The government has no problem raising taxes in our area. The local mechanics garage doesn't mind billing me an exorbitant charge per hour to repair my vehicle, and think, I have to bring it to him! When we do calls, we have to spend (waste?) our time driving to the call and performing the service, whether a big job or small. Business is business.

... I'm in the same boat,... (tho' I'm too stupid to buy a paddle).. I still give customers a break,now and then,..(more now than then)..but I manage to break even.It's not easy,by no means..I've developed a decent client base,built on referrals,and word of mouth..Still I yield to the sob stories,the heartbreaking saga's of the elderly people,and pressures of charging a decent buck..Sometimes I make out,sometimes I lose..They must see me coming...maybe one day I'll grow a spine and tell everyone where to go,..but that'll be after I'm retired,..I guess..Delectric,you're far from being alone in this quagmire..Trust me.. Follow your gut instinct and charge accordingly..thats all I try to do.. My rant is complete..Good Luck,man...
Russ



[This message has been edited by Attic Rat (edited 06-05-2004).]

Operating costs for a one man operation. Note, these are "real" costs:
1. A good family medical program - $700 per month minimum.
2. Vehicle, gas, ins., payments, depreciation, tires, tune up, repairs, etc. - $670
3. Office supplies including stamps - $30
4. Acct and attorney, if and when needed - $50
5. Magzines and books $40
6. Business taxes - $100
7. Telephone - $50
8. Cellular phone - $100
9. Travel & entertainment - $50
10. Seminars and Trade Shows - $125
11. Uniforms - even just jeans and shirts - $45
12. Small tools - $15
13. Software and upgrades - $30
14. Marketing & Advertising - $200
15. Office Equipment depreciation - $75
16. Liability Insurance - $300
17. Workers Comp OR Disability insurance - $125
18. Bad Debt - $100
19. Guarantee work $100
20. Future Capital Expenditures - $100
21. Owners draw ($1000 weekly) - $4333.00
22. Bookkeeping - ($150 per week) $650
With no provisions for retirement, no vacation pay, no sick time, no other perks and benefits a real job gets you, it comes to about $7950 per month. Anything less and you're kidding yourself. Divide that by about an average of 32 "production" hours per week at 46 weeks for a total of 1472 man hours per year, or about 122 man hours per month. Divide that $7950 by the 122 hours and you get $65 per hour - COST of doing business. Add the profit you want.

The overhead cost items listed above are far from being excessive, but are realistic as to the true cost of operating, it you wnat to treat yourself as a legimate business owner. I do't see how anyone can operate without charging anything less than a minimum of $70 per hour. Notice, I've not included the many hours spent on sales calls, estimating, typing contracts, etc. Nor do I include a reward just for being in this very difficult business and the inherent many and varied liabilities assumed.

It doesn't matter if the profit is taxed directly to you as a sole prop. You're also taxed at twice the rate of everyone with just a job. As a minimum, you are writing a quarterly check to the IRS for 1/3 of your income

Being a nice guy, it feels better to do your customers a favor on price. But the result is always poor quality work,hurrying to get done to get to the next job to get the next check, substituting the best materials for less expensive ones, and nothing left over in the bank to honor warranty work if you get a call back. The customer suffers. Charging prices that let you do the job right and be in business the next time they need you is good for you and the customer.

Quality is remembered (or lack of it) long after price is forgotten. If you want referral businesses, provide the absolute best qualiy in product AND SERVICE. And charge accordingly.

Well there it is guys. Not alot more to say. You either want to make money or you don't. If you do you have to charge accordingly. It is that simple.

I have to say Thanks very much. I have been stuggling with my over head costs for far too long.This really has put it in perspective.

To resurrect a thread I'll add some 'costs' that maintenanceguy didn't mention but alluded to:
- the firsthand cost on your mental and physical condition when there's too much month left at the end of the money,
- the secondary cost on you when your adoring and supportive spouse accepts the predicament as a shared burden to be overcome when there's not much, if any, paycheck after your monthly obligations are met,
- the 7-day a week schedule you keep just to ensure your business runs as smoothly as possible and you're not behind schedule when you arrive (earlier than anyone else) on Monday morning,
- the dental appointments you or your family schedule every 5 to 10 years with the dental school because they're free or really, really inexpensive,
- the haircuts you allow your significant other to give even though they aren't the best and you say "thanks" and put on your hat,
- the six-pack of beer or soda you feel guilty over because it's truly almost a luxury...
- and so on...

My dad owned his own business (non-electric) and for years, as did my brother-in-law and I know it takes a lot to make them successful - but charging appropriately is a good place to start.