I was re-reading an article today online and while its from Reeves Journal a Plumbing Heating and Cooling trade magazine I think it’s apropos to any contractor regardless of the trade. The article is What Should and Should Not Determine Your Hourly Rates. You can click to read the whole article but to summarize and comment on what the writer Tom Grandy wrote:
Things that SHOULD NOT determine your hourly rate:
- Competition – You shouldn’t set your rate on what your competition is charging.
- What you “think” the customer will pay -You should charge based on what you think or feel you customer is willing and/or able to pay
- What you “feel” like charging – Charging that way ignores what your real costs of doing business are
- What would you like to charge? – Charging what you would like to charge once again ignores what you NEED to charge to stay in business
Things that SHOULD determine your hourly rate:
- Your “real” cost of doing business –
- What salary do you want/need to earn?
- Benefits you want or need to offer your employees
- Desired Profit Margins
Any thoughts on that article?
Replies
Wow, that's one-sided. Say I want a $30/hour salary, major medical, life insurance, and 2-weeks paid. Then I add up all my costs, tack on my desired profit (10%?, 15%?) and make up my rate sheet?
What if it is way over market, and the clients react? What if it is way under market and 1) the clients don't trust me because I'm too cheap and 2) I'm leaving money on the table.
If I'm too busy, I should raise my rates. Or focus on the nicest projects. If I'm too slow, I should figure out why and consider that it might be my pricing. If I find I'm earning "enough" or working enough, then I should improve my skill and productive. Or find a different line of work.
I don't so how or why one would ignore the realities of a competetive marketplace.
David Thomas - "Wow, that's one-sided. Say I want a $30/hour salary, major medical, life insurance, and 2-weeks paid. Then I add up all my costs, tack on my desired profit (10%?, 15%?) and make up my rate sheet?
What if it is way over market, and the clients react? What if it is way under market and 1) the clients don't trust me because I'm too cheap and 2) I'm leaving money on the table."
If it is way over market (and who says what the market is anyway?) and the client react poorly to our price then we don't take those jobs. If we did take them at a lower price then we are paying them for the "privilege" to work on their project.
"What if it is way under market"
How often does that happen in real life? When you think about it homeowners have no real valid basis for knowing what kinds of rates we should be charging are. All they really know is what their perception of the value of our service is. Most of the time (maybe 98%) isn't it more than they expected anyway? I know I am even guilty of that at times when dealing with other trades and I am in the business.
"If I'm too busy, I should raise my rates. Or focus on the nicest projects. If I'm too slow, I should figure out why and consider that it might be my pricing."
That's true but I have a problem with thinking it a problem with your pricing without first considering other things. I think slowness is a marketing problem and rarely a pricing problem. The only prices that are wrong are the ones that you lose money on so if you are pricing the projects correctly and are slow then the problem is in marketing and you need to be generating more leads.
And David I'm not sure I understand what you mean by Grandy's position (and mine too since I do agree with him) being one-sided? If the "other side" isn't willing to pay the price that you set based upon #1. Your "real" cost of doing business, #2 What you want to make, #3 What you want in benefits for you and your employees, and # 4 your desired profit margins how are you morally obligated to do it for less? You either:
move on to find another client who is willing to pay
(like you alluded to) find another line of work or
work for less or for nothing.
Options 1 and 2 are acceptable to me. #3 on that list is not. That takes money out of my family's pocket.
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Oh, I very much agree you should understand your true costs. And yet a lot of contractors don't. They make money or lose money but seem to be surprised by it.
By "one-sided", I meant looking only at the needs and desires of the contractor and not about the customer's perspective.
I have less emphasis on construction and more on design-and-build, but I've been caught selling some jobs too cheap.
And I've hired a GC who came in so low, I'd have worried except I'd seen his work and talked to previous customers. He's a big, strong guy who hires people who can keep up with him. But he definitely left money on the table. I'd have happily hired him at 20% more.
I didn't get into the whole marketing question, but it is an intergal part of any discussion of rates and pricing. If you hate marketing and want to win on every bid, then price it low and accept a low standard of living. If you are willing to market a lot and good at it, you'll find some that accept a high price. Then life is good.David Thomas Overlooking Cook Inlet in Kenai, Alaska
perhaps the problem is how the "rate " will be applied
if you are working T&M then your rate is your rate and anyone who hires yu will know what it is..
however, if you are doing bid work, then your rate only gets entered into your estimate to become part of the final price.. in this case.. your rate is no one's business but yourself
so.. which are we talking about ? the hidden rate... or the stated rate..
and.. another thing to consider...
a T&M job will not have a factor in it for risk.. so the "stated" rate can be less than a rate used to build a price for a fixed-price ProposalMike Smith Rhode Island : Design / Build / Repair / Restore
"Wow, that's one-sided."
That's life in the big city.
You can't argue facts or numbers.
If you can't charge what you really need ...
get out and get a real job.
btw ... I say the same thing to myself every morning!
It should be one sided.
This isn't a group hug session ... this is running a business.
Who else is gonna feed my kid?
Jeff Buck Construction
Artistry in Carpentry
Pgh, PA
Maybe instead of "one-sided" I should have said "incomplete information" Everything I'm talking about is how to make MORE money. Charge as MUCH as you can. So you can feed your kid way way too much. That's all the American way, right?"One-sided" as in introducing cherry coke without figuring out if anyone would drink it. "One-sided" as in flying a very skinny, very fast plane across the Atlantic and losing money on every flight (Concorde). Or flying normal planes around, half-full of discount fares (United, Delta, Anerican).Yes, you have to know your business' costs. Clearly. But if you don't also know the customer and the competition, you are at risk of charging more or less than you ideally would. Ideally from your perspective. As in the most money in the least hours.David Thomas Overlooking Cook Inlet in Kenai, Alaska
David-----
Jerrald and Jeff are covering it pretty good
but
You mentioned something I think is important to cover.
I think you said something about dealing with the realities of a competitive marketplace.
Now----I don't know about you----but I am not really interested in operating in a competitive marketplace.---It's bad for business.
what I AM interested in---- is selling myself, my services and the products I deliver in such a way that the customer can't imagine dealing with ANYBODY else---at any price. I may be less( doubtfull) I may be more( almost certainly)---but the important thing is to get them to want me, Me, ME.
I can only produce a limmited amount of work in a year. Soooo the customer must be made to want MY work---and be required to pay MY price.
Now---the customer in a "competitive" marketplace may well be able to acquire "similar" products from" competitors"
If the customer chooses to do so---then I (and only I )have failed.
It's MY responsibility to develope the prospective customer to the point where he wants me,Me, ME---and nobody else---even if PLENTY of other people might be able to produce a comparable product----possible at a lower price.
produce less work, charge MORE money, stay at home if you don't get your price. That's my responsibility.
don't think of yourself as a factory changeing your output to meet the demands of the marketplace
think of yourself as an artist----creating demand for your one of a kind works of art----there is only so much of YOU to go around---the supply is limmited---charge accordingly and make the effort to create the demand----the market place won't do it for you.
BTW---I didn't quite realize it untill just now----but I must of subconsciously learned that attitude from my dad and his pals----my dad was the sole support of 6 kids and kept us in a middle class lifestyle as a working artist and landscape painter---private schools ,long vacations etc.
Best wishes, Stephen
Stephen,
First off, your dad was doing a lot of things right to support himself and a family as an artist. That's rarely achieved.
I very much agree with you on the idea of selling yourself. Far, far better to be in a situation where other prices are never even solicted by the customer because they are so thrilled that you are working with them.
In a competitive situation, where the clients are scrutinizing the rate sheet, you have to pretty close to the competition. When you've sold yourself well, and there's no competition, then it's "How much money you got?". And was one of my points about the article being one-sided. Looking only at your costs and needs, ignores those times when you can get a higher rate.
For me, my work is a mix. There are some things that lots people can do and I have to be in the ballpark to get and keep the work. A lot of my projects go on for 3 or 5 years so I have to keep the clients happy over the long term.
In certain narrow tasks, I'm vastly better than other engineers. I can bump my billing rate up a bit (clients still refuse to pay lawyer-like rates even though there's no shortage of lawyers!). Mostly, the value gets captured in more hours. Filling out the paperwork, driving/flying to the site, thinking the problem about it while hiking through the forest - those areas that I usually subsidize by under-reporting hours. They go full-bore in my most skilled tasks. In those cases where, as you say where the client wants me,Me, ME---and nobody else.
Personally, I hate marketing, especially cold calls. My approach is to under-promise and over-delivery so there's lots of repeat business. One of the lovely things about having too much work is the ability to cherry pick the fun and most profitable work. But it's been 2 years in coming after a house-buiding, child-care haitus.David Thomas Overlooking Cook Inlet in Kenai, Alaska
"In a competitive situation, where the clients are scrutinizing the rate sheet, you have to pretty close to the competition."
Not really. All depends on your mindset and sales ability.
Case in point. In Houston TX I worked for a carpet cleaning company. In out area code ... there were no less than 200 other carpet cleaning companies.
Most doing the same tetemarketing and mailers that we were.
My boss taught me one thing ... being the highest bidder can set you apart and above. Just takes a certain confidence and attitude to pull it off.
A common line of his .... when the customer would say upon hearing the price quote ... "well, I'll have to think about it .... You are higher than Company B ...
So he's say ... "Oh really, how much higher" ...
Customer "Well, for the same work, you're $500 higher" ....
Him ... "Well that can't be right, I know their work well, we're usually close to twice as much ... let me go over this again and see if I missed something" ....
the carpet cleaning competition at that time was a close as any inductry in any city anywhere ... and he instantly set himself above all competitors with that "logic" ...
He'd come back with .... "No, Im pretty sure we've included everything .... they must be starting to raise their rates closer to professional level..."
He'd land 90% of those jobs.
He didn't back down ... he didn't flinch ... he didn't justify.
He stated his price and promised then delivered the best carpet cleaning job that'd ever had.
a phrase he drilled into my head ....
"don't be afraid of the money" ....
to this day I tell myself that before handing over each and every proposal.
BTW .... is it OK if instead of over feeding my american kid I fund his 529 colege plan?
Or ain't carpenters supposed to know of such things as investing in the future?
Lose the condencending attitude.
Jeff
Buck Construction
Artistry in Carpentry
Pgh, PA
David,
I am lucky in that I NEVER have to make cold calls-------- Prospective customers call me---and people ONLY call for a roofer if they have already realized on some level that they have a roofing problem.
I HATE marketing and sales also. In real life and in person---I am painfully shy. I HATE meeting new people---I HATE meeting prospective customers---I hate it I hate it I hate it.
BUT------- I have to do it. So I study it and look for ways to get the MAXIMUM return from each sales call----so I can make as FEW as possible.
Stephen
"people ONLY call for a roofer if they have already realized on some level that they have a roofing problem."
I can relate. People rarely clean-up their toxic waste sites for the fun of it.David Thomas Overlooking Cook Inlet in Kenai, Alaska
I just bid on a project a 30000 sq ft. roof. I came in 3 times higher than the low bidder. I don't know if I should be worried or not most of the time I get these projects, so to miss this all of a sudden by so much. I don't know. Usually If I'm high it's only be 5 grand. This time I'm 130000 dollars off. I think the other guy must be overlooking something major. Oh well if he does a good job I'll get him to build for me.
In real life and in person---I am painfully shy. I HATE meeting new people---I HATE meeting prospective customers---I hate it I hate it I hate it
Stephen, your online personna hides those traits. I'm very surprised.
blueJust because you can, doesn't mean you should!
Warning! Be cautious when taking any framing advice from me. There are some in here who think I'm a hackmeister...they might be right! Of course, they might be wrong too!
blue,
I can maintain that " online persona" with crew and customer for about 2 days max.
After that---well somebody may end up dead.
I have customers that I have worked for many times---and they think I am the greatest thing since sliced bread--------but that's 'cause they haven't dealt with me more than 2 or 3 consecutive days at a time! LOL
I don't mind being around people at all----I just don't want to interact with them in person----I much prefer to sit in a corner and observe------
which is why I faced up to my character defects about 2 years ago-----eliminated my last payroll employees---and I am so much happier.
I stroke a couple of sub crews as needed----and then when that project is done I am a free man once again untill the next big project.
I love working alone---and not having to listen to co-workers or employees drone on and on about how billy bob did in yesterdays NASCAR race---or other equivalent inanities.
among other things---I am a little claustraphobic---and a little ADD, was a little hyperactive as a kid,---and my wife says I have a very poor "filter"----that is if I talk---I tend to say the things a lot of people around me are thinking---but THEY had the common sense to keep their mouth shut. LOL ( I can't tell you how many times somebody will burst out laughing---turn to me and say ' I was JUST thinking that---but I was afraid to say it"
So---in person ---in the interests of harmony and civility----I generally try to remain silent---preferring to have those around me think I am a moody, rude, prick. LOL
Stephen
Steven ...
still making the move to door and such?
Just wonder how the transition is going.
Jeff Buck Construction
Artistry in Carpentry
Pgh, PA
Jeff,
thanks for asking.
the "transistion" is entirely on track---but slow-----since I have planned to do it over 6 years or so. ( I will be done paying high school and college tuition for my kids in about 6 years---at which time I will go into semi-retirement)
Basically at this time---I am simply accepting door & window projects, carpentry and siding projects----and suprisingly ---small plaster and drywall repair projects------from existing customers and their referalls--------all of which I generally turned down in the past.
I am STILL doing just as much roofing as always
for several years I have been tracking exactly how my professional time is spent under 2 main categories---- Production & Overhead
Production was basically roofing---either hands on---or on site management of subs or employees-----overhead was estimating, bookkeeping, tax work, payroll---basically everything else
total work time---about 1000 hours
starting this year I will track 3 categories----1) roofing, 2) carpentry, 3) overhead
Last year my total hours were 905.75 hours
this year I would like to get my total hours to about 1200. I am trying to keep overhead hours to the same ( 328.25) or even less---------and add some carpentry hours---while cutting actuall roofing hours
and since the stress level for this type of carpentry is so much LESS than roofing----I bill out at a bit of a lower rate for the carpentry
Over the next 5-6 years I will slowly tweak those numbers---hopefully doing over time less and less roofing---untill my tuition paying years are complete and I can go into semi retirement---maybe 500 hours a year " carpentry" and 200 hours a year overhead
If I had to guess---out of last years 577.5 hours of production---120 were in the " carpentry" category.
Stephen
Stephen, you remind me a lot of an ex partner Forest. Forest is an extremely intelligent person and has an excellent work ethic. Unfortunatly he had very poor people skills. We couldn't keep one employee for any extended period of time. Eventually, I got tired of working alone on customs when Forest took extended winter vacations in the Carribean.
Even if you never have another employee, I'd recommend two books, one of which you've probably already read/listened to.
How to Influence People and Win Friends (thats the one I'm thinking you've read/heard) and First, Break all the Rules.
The second book, First, Break all the Rules explains how/why the excellent managers get results. You might be surprised to see that you actually would fit into a good manager category if you'd simply embrace the common sense managing skills that you know are needed. You're actually playing to your strengths by eliminating distractions and that is something that the good managers recommend, when necessary.
Everyone is not cut out to be a "normal" manager...everyone has to find their niche. I commend you for facing up to who you really are.
blueJust because you can, doesn't mean you should!
Warning! Be cautious when taking any framing advice from me. There are some in here who think I'm a hackmeister...they might be right! Of course, they might be wrong too!
blue,
I have heard insanity defined as " repeating the same actions over and over---but expecting different results"
and---that's what I did--for years.
always expecting that I would find that "diamond in the rough"-----
and as my wife points out " your PROBLEM is , Stephen---that you always try to save these guys----get them started in life---buy them tools, help 'em get their drivers license back---whatever"
Which---is true-----( but funny--coming from her---since she is a catholic school 4th grade teacher and wants to adopt every 9-10 year old she meets with a sad life story)
But , really blue------
the happiest day of my life was getting rid of my last employees----that day ranks up there with my wedding day---the birth of my sons---tops 'em all.
sometimes you will hear that there are 2 kinds of people---leaders--and followers.
Well---there is at least a 3rd kind---people like me that don't want to either lead or to follow---just want to be left alone to do our own thing.
So---for me---no more employees EVER. I have no financial need---or phsychological need for employees-----in fact I can make MORE money WITHOUT employees---and with a lot less headaches.
Stephen
Stephen,
if and when U wanna get more carp type work ...
spread the word about your "patching" sideline.
but my plumber and electrician have asked me in the past ...
the plumber asked if I had the time to make it more substantial ... which doesn't work for me being mostly a one man band .... if I had a helper that was great with a trowel filled with both joint compaound and plaster ... I bet I could sub him out for half the week doing repairs.
And my plumber .. since he charges top dollar and ain't afraid of money ... was/is willing to pay top dollar for the small patch repairs.
So ... if and when for U ... let the local top notch plumbers and such know of your services .... bet there's more than enough work around your area for a good patch man.
Jeff Buck Construction
Artistry in Carpentry
Pgh, PA
BTW---blue,
thanks for the book recommendations----I will look into both of those TODAY.
I will tell ya----
working less than a 1000 hours a year----gives ya a lot of time for introspection----and a lot of time to think things through-----
for about 3 years I have spent a lot of time thinking about " what exactly am I doing? Why am I doing it? why am I doing it THIS way?"
Sooo---when I start thinking things through----the psychology of everyday actions becomes interesting-----you work to make money----so why clutter up your work life with extraneous clutter---quasi social obligations that interfere with the money making process.
So ya begin to weed out non productive things that served a mentaL need---but make no logical sense----ever keep on an employee that wasn't pulling his weight----that was actually costing ya money---in effect taking money from your family----WHY?
then---it occured to me---if these non-logical motivations apply to me----maybe everybody around me does things illogically to serve similar mental needs
For example----- I work with a sub " Bill"----who formerly worked for an other sub I did a lot of business with in the past " Tom"
"Bill" has about 10-12 employees---he has a problem keeping them all fully busy---it makes no sense for him to have 10-12 guys. I have talked with him many times about how he could make MORE money if he just kept his best 4-5 guys---he could sell less work, do better work, have less stress, better tools, more money etc.
But then I realized that " Tom"---( Bills " former employer) had 6-7 employees.
I now think in " Bills" mind he feels more successfull if he maintains more employees than " Tom " had----even if it is to his financial detriment.
Once I realized that----I stopped trying to "save" Bill----because I realized that " Bills" mindset works to my advantage----he needs to keep these 10-12 guys busy.
and----I realized that customers will have the same opportunities for me
what are they REALLY trying to buy. Chances are it's not a roof. Chances are it's a solution to a problem, or it's a sense of security----the roof is just the instument--it's not the tune.
So---I will look in those books for clues to all this-----
thanks again,
Stephen
Admirable strategic thinking!
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
Hi Blue- I've seen your notes around a bit and admire someone who reads books, understands them and tries to help other people stay out of trouble. I also understand "it's official"... Good luck. I do hope you stay around to help out those of us that need it. I'm kind of in the middle of a similiar journey, retiring from a full time office job to go into construction and residential real estate. It's taken a long time to get to this point.
What is the name of the author of "First, Break All the Rules"? It sounds like I might learn something from that one. As an aside, have you ever dealt with a fellow by the name of "Edward Hamilton, Bookseller"? He's up in Conn. and has some good prices on stuff - coincidentally including a bunch of Taunton books.
Don
Thnks for the encouragement Hammerlaw.
Here's a link to that book at amazon. http://www.amazon.com/exec/obidos/tg/detail/-/0684852861/qid=1108689439/sr=
the author is Buckningham.
It is a great book, I learned a lot from it. Basically, I just spotted all my mistakes that I've made and continue to make! It truly did open my eyes to some different realities. I was one of those guys that belived that everyone had the same inner drive as me and I would treat all employees as if they were going to become Ace framers and foremen. I learned from that book that some people are content in life to simply be good nailers and that if I tried to move them beyond that, they would actually get worse.
When I started looking around at the people around me, I started understanding a lot more of why they do the things that they do. I found myself being a lot less resentful simply because I knew that they were doing what they were capable of....nothing less, nothing more. I also started saving a ton of time onsite...knowing that it was pointless to teach some of the fellers some of the stuff I know.
blueJust because you can, doesn't mean you should!
Warning! Be cautious when taking any framing advice from me. There are some in here who think I'm a hackmeister...they might be right! Of course, they might be wrong too!
"...why one would ignore the realities of a competetive marketplace."because by bowing to the competition, we allow the cheapo marts of the world to set the standards for pricing and quality
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
Piffen,
your last post is excellent-----
It shows how we end up living in a vinyl sided Mc World
Stephen
Gee, sometimes I go off half-cocked and come out with pearls of wizdum
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
There is one point where I would disagree wit6h the summary you provide. I do think all the objective basics should be included in opricing, but there are times when "fellings" should also be adhered to. I have a fairly decent intuitive or instinctive set of feelings based on thirty five years of experience. There are some customers who send out signals below ( or above) the objectiove level that they will cause your costs to rise once commited. That has to be allowed for, IF one gets the job, with an increased price tag.
Better yet, walk away from the job, but by adding to the price, you can let them make that decision but by acceting the job at a higher price you are rewarded for putting up with the added difficulties.
Welcome to the
Taunton University of Knowledge FHB Campus at Breaktime.
where ...
Excellence is its own reward!
At a minimum I should make 50% more than the highest paid union carpenter. Add to that my overhead. I call that a base hit
Then I try to hit one out of the park now and then.
I never sacrifice bunt (do a job for cost because there's a bigger one on deck)
Man, I cant wait for spring training!
OK if we're gonna use baseball metaphors....
Under paying your help is like taking steroids...
short term power, long term impotence!!
Mr T
I can't afford to be affordable anymore
Check out the "Contactor's Pricing Guide 2005" (http://www.rsmeans.com).
These guides provide national average prices for most building contractor tasks, usually by the s.f., l.f., etc. They also index prices for the most common zip codes. The markets I work in vary from 94% to 108% of the national average. I try to work more in the 108% market. That 14% difference is real, and obviously effects the bottom line. This being said I often bid higher than the "book rate." I use the guide as a starting point. If I can't make what I want per hour with bids close to the price guide, I don't bid that project, or don't expect to get it.
Most of my clients expect to pay more for my work. I never try to be the low bid. I also find that I can make more per hour with bids than T&M projects. Find work you can do better and faster, with less call backs, than your competition by the piece, s.f., or lineal foot and you have found your niche and will make more per hour than you thought possible.
Do high quality, custom work, with a production mentality. For example, I do framing for architectural details (arches, tray ceilings, curved walls, barrel vaults, etc. I have enough experience with these tasks that I can frame a wall shaped like a question mark almost as fast as a straight stud wall...well ok, it takes twice as long, but I can charge 4x's as much for it. Actually, I digress...you won't find "framing curved walls" in the price guide. I find most of the work I do in the price guide--and figure out my own unit prices for most of the custom work not covered in "the book." If you say, "I only frame arches by the hour and it will probably take an hour per arch framed...it might cost you $50 to $75 each." Most customers will say, "skip the arches." They imagine that a $50 to $75 estimate by the hour could end up costing $100. They could be right. My experience has been that quoting a unit price of $100 per arch, up front, is more palatable to the customer than a cheaper T&M price. Most people would rather pay more for a fixed price than live with the uncertainty of a T&M estimate. I assume the risk of uncertainty when I provide a fixed price. What if I am wrong? If it takes longer than I thought, then I "eat it." But I am the pro, I should know how long it will take, and I should be willing to take the risk, not the homeowner. If you get burned, either bid higher next time, get faster at it (or a combination of both)...or decline to bid on that kind of work in the future.
Even though I bid most work, I do usually know when to say, "that will be by the hour." This should be a rare occurance though, usually in remodeling, when you don't know what gremlins might lurk behind that paneling, etc.
Basswood while I do recommend keep and use the data from R.S. Means I was actully going to add my own line to Tom Grandy's Things that SHOULD NOT determine your hourly rate list of"
Do not set your charge rate based on a value derived from a data book
Other than that I am pretty much in total agreement with you on what you wrote and the ideas you brought up.
The problem with the rates in those books is that they are there to tell you what the Average rate for the particular trades are that they in computing the line item data that's in the books. The term "Average" is the problem in using those rates for your own purposes. Unless you are sure you are precisely "Average" the rates they quote wont work for your staff and company. Better to set your own rate based on your own real costs of doing business and then substitute the rates you've come up with theirs and compute out the line items possibly using their productivity rates for the tasks as a guide. Eventually you should build your own database of productivity rates that fit your own staffs rate of production but the productivity rates they are in some of the other data books makeup a good framework to start with. I actually like the productivity rates found in the Craftsman National Renovation & Insurance Repair Estimator but I keep a library of different data books around for research.
I've been recommending to people to read Ellen Rohrs books How Much Should I Charge?: Pricing Basics for Making Money Doing What You Love and Where Did The Money Go?- Easy Accounting Basics for the Business Owner Who Hates Numbers along with using my freeware Excel spreadsheet (360 Capacity/PROOF/Indexed/Labor Allocated Markup spreadsheet) to set their rates. I think my spreadsheet helps in that it ties in the rate to your "real" costs of doing business as Tom Grandy recommended in his Things that SHOULD determine your hourly rate list.
You make a great point regarding "you won't find "framing curved walls" in the price guide. " Have you complied you own data regarding work like that? What have you found? Curved work is a niche we embrace so we've now have data for many curved works as well as a feel for general rules of thumb that can be applied to modify straight work data.
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"My experience has been that quoting a unit price of $100 per arch, up front, is more palatable to the customer than a cheaper T&M price. Most people would rather pay more for a fixed price than live with the uncertainty of a T&M estimate."
That's been our observation and experience too. The $100 per arch is tangible and something they can grasp and make a decision on where the T&M offer is vague and uncertain.
Great post though. Checking your profile I see you're a newcomer. Hope to see you around posting more in the future.
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I think I had too much caffeine in my system as I wrote that last post.I was reacting to the "hourly wage" emphasis in your source article.In my community, it seems that the trades that tend to charge by the hour have more credibility problems, even when the work is done well and on time, the perception people have is that they are being overcharged. Fixed price bidding really does put the pro's butt on the line. I know I can charge $35/hr. and be under suspiscion or by bidding the same work make $50/hr and face little scrutiny. I hate to admit it but, I also like the pressure of fixed price bids--I know it is motivational, it is human nature (at least for me) to work a bit faster doing bid work. Sometimes it is even fun to see how much you can make per hour (without sacrificing safety or quality), by working fast. The same tendency to crank out the work is not always there when working by the hour. I think the by the hour approach really hurts some trades and markets. I know many people disagree (mostly overly comfortable, by the hour workers). I do know some people that always work in high gear, I also know low gear people that I would never pay by the hour.Anyway, the Means data or similar resources you referenced are a good starting point or model. They should be consulted more often, if only to make sure you are not way out of line (high or low) or to help you make sure you didn't forget to include a step or a charge. I have also copied pages out of it for people to help them identify the bids that are clearly too low. As you point out, your own adaptation or entirely new models are good ideas.My point is that contractors should have a unit price to quote most of the work they do. You noticed I have a thing for curves. The other post I made is on curving or "coving" inside corners on drywall. You might like to read that one. I am also a Mac contractor so I'm glad to find out about your site. I have some pictures of curved work on my new website (I have been too busy working to do much in cyberspace, lately I decided to see if I couldn't take advantage of the internet to get more good work and good ideas). It is a lame website at this stage in the game (just started it last weekend), but check out the photos on the resouces page link, my site is basswoodhomes.com. I think framing curved walls should go for around $40 per lin.ft., 4x's the straight wall rate for labor and materials.
Years back I made a ton more money in another profession, then I make now.
However I am a lot happier now as self employed pounding nails, then I ever was
maybe some of you have a bigger client base, I am in a town of 50k people, the next closest town is under 3k people.
But for us our morket is tighter, we constantly have to look at jobs we dont want or charge a little less sometimes or we cant "feed the family"
It has been a very long time since I paid someone for the "privalage" to work on their home ( meaning lost money)
but I learned that I cant always stick to my hourly or markup, because Ill just wait for the next job,,,can be weeks
I use to stick to my guns on money, but couldnt keep emplyees, because they could not afford missing a week or two or three of work while waiting for the next job.
I knew guys that siad I wouldnt work for that little, and would sit at home and collect unemployement, or live on their wifes income, I guess Id rather work then get unemployment, its a pride thing, but maybe not a smart thing
kind of related to the other thread about father working wiht his kids, ( woodshed tavern) I guess I have a different work ethic, I want to work rather then get handouts.
but with being a little more flexible, we havent missed a unscheduled week in over two years. we are not the cheepest in town, probabally middle to lower end of high.
so wiht what can work for one person in a city of 200k people, just wont work here.
Isamemon,
You mentioned 2 things that really caught my eye
city of 200,000----that describes my situation almost exactly LOL
But more importantly you used the word "privilege"
that caught my eye----because for a couple of years I have been sending a hand written thank-you note to my customers upon completion of the job----and also a had written note in a Thanksgiving card in autum-------and I make a specific point of using the word "privilege" in BOTH of those notes.
Usually something like " once again, I would like to thank you for the privilege of working on your home"---blah ,blah , blah-------
I always referr to it as a privilege----and I always refer to the project as their home ( not their house---their home)
Now---that said---in the first 15 years of " contracting"--- I would NEVER have bent over to kiss a customers butt like that--------
however
I have the paperwork for 2 completed projects sitting on my desk this morning requiring thank you notes----both repeat customers---one I have worked for 3 times
and---literally as I type this---my answering machine rings with yet another referall from an insurance company who has been sending me a nice amount of business over the last year or so----both the insurance agents office---and the resulting customer get thank-you notes after each job.
I would never, Ever, EVER have thought such a little adjustment in my attitude would have resulted in such results----
because in reality--- I am thanking them for the "privilege "of charging more than most other folks.
Freakin Crazy---I admidt it----but I am willing to swallow a little pride to get the desired result.
I haven't worked more than 1000 hours in years----I am happy to stay home A LOT.
Very best wishes,
Stephen
Weren't you starting a sideline in doors? Doormen meet a lot of people.;)
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yes Piffen---I see where you are going with that. It is pretty funny actually----
However
You meet people----but it's limmited contact. Mostly---it's previous customers---who I have already "trained" to my way of doing things
and the duration of my contact with them for each job falls well within the 2 day limmit my defective mind can handle! LOL.
I wanna work at a different address every day---or every couple days tops.
3 days at the same adress is an eternity----4-5 days?????--- I might as well punch a time clock at a factory as drive to the same location for 5 days in a row----that's a slow excrutiating death.
Stephen
intended phunny. Glad you caught it.
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!