Life has presented some huge changes and potential opportunities since my last post. As a result I have had some dramatic shifts in thought. In short we may move from large booming city to small rural northern community. We would be moving into my Grandmothers recently past tense home (grandpa passed away) on three acres. So my question, what will the market bare? What can we charge and be competitive without going broke? How honest are the local trades men going to be when I contact them and quiz them? I took the advice from before and figured out our overhead including the good stuff like holidays and being prepared for down time and I came up with a hourly rate of $40. We could get away with this where we live now but also the cost of living is high. The cost of living where we are going is not going to be a whole lot less – big difference and bonus for us is home ownership and living off the land stuff. So if we charged less per hour we could come out okay – I suppose the wage draw would go down – profit margin too. This is the feedback I have gotten so far – I would appreciate any thoughts or input.
a) First feedback I got was from the economic development board for this region. He responded simply that there was a shortage of skilled trades people in the area and that there should be no problem finding work.
b) Talked to a GC who said he always needs good guys and would pay $23.00 p/h for a guy like my hubby – he stressed that he has never hired a ticketed guy before and that there are none up there. When he recognized my family name he opened up more and expressed that we could go it on our own with ease – the town is booming with new sawmill and two existing. He took the time to really stress that there was a livelihood to be made. In closing he commented that he did not realize my husband was completely tooled up with rolling shop and all. Kids were crying so I did not get to ask what he would pay a guy with tools.
c) Talked to wife of guy who builds – just him and one other guy. Does not hire employees or need any. Laughed when I talked about pay rates and said husband can charge $24.00 and none more. Said that work was steady lately with ups and downs over the years like we all know.
d) Talked to hardware store. They do work and sub the work out. Said again economy is good and they need good guys, particularly jack of all guys – like my husband. Pay rates he said were $20 – $25. Said lots of work for reno guys.
Summarized work is there but are these guys making money? Down the line when our house was paid for we might or when I am bringing in an income or if there was never down time or teeth cleanings or medicare or holidays. So I think $28.00 I could manage that. Do we blow into town market the skill level and experience, use the huge family contacts and charge more and so make money or do we do what the rest is doing. I know there is no crystal ball here but that’s what we would need to make and really that would be a start.
That second guy that would hire my husband today that suggested we go on our own – I think I will call him and ask what he charges his guys out at. I figure if you are doing well in your business you will have no problem with the new guy on the block. I bet he charges more than that $25.00 especially if he could pay a guy $23.00. I suppose I will make some more phone calls too.
Your time and thoughts appreciated.
Nicky
Replies
I'm living in a rural part of Alaska and I'm charging an average of $40/hr. Sure there's plenty of guys around that work for $25/hr but I doubt if they are insured, licenced or bonded, but even if they are that's their choice and they can work for that if they want because I'm still getting plenty of work. If it gets to the point where I'm hurting for work then sure I would lower my rates but as it is now I don't need to.
That being said I should also point out that I've lived here for 12 years and been a contractor here for 10 years so I have plenty of referrals from homeowners and buisinesses alike. I should also point out that I started out at $25/hr and stayed there for the first 5 years before I felt comfortable enough to ask for more.
I don't envy your position being new in town. you may end up having to work for a lower wage to start and then charging more as you get more work and build more confidence up in the community.
Good Luck, Dave
This is what I think...
If you can't charge enough to make a profit - do something else.
Building is too hard on a man's (or woman's) body to give it away.
Your time is the most valuable thing you've got.... I wouldn't want to trade it for the hassle of running a business just to bring home $10 - $15 per hour.
It doesn't matter what anyone else charges. If when all's said and done, the competition is able to do what you do for less money, find something else to do. Or embrace a lower cost lifestyle, like a nomadic sheepherder....
Now being a W2 employee is a different ball game - $20-$25/ hr isn't bad if you can clock out at 5:00.
edited to add that I'm in rural AK (Talkeetna) as well lol hi Dave
Edited 8/30/2004 2:46 am ET by ALANROBERSON
10 months ago I went on my own. Was planning to ease into it but my boss got very demanding all of a sudden so I jumped.
I went to a couple of outifts and told them what I did, left some cards and asked for work. Got a couple of jobs and things ticked along.
My hourly rate was less than I needed, but I also needed to get started and establish a reputation.
A couple of months ago one of those outfits asked me to participate in a 3 day "house fixup" for a lady whose husband had died. I immediately said yes.
Now, my relationship with those people is even stronger, I have done work on the home of one of them, get asked my opinion on things. My incoming referrals via them has gone ballistic. Work coming outa my ears!
My hourly rate is now where it should be, my waiting list is getting longer. All the time I am meeting more people and making more contacts. Got high end work coming at me now from a top designer. It took 10 months of relationship building, but now it is hitting top gear. ( I think 10 months is fast, but I am not complaining )
Charge a little less to get started, do good work, go to meet people and get to know them. Cant see how you could fail.
As said above, someone elses hourly rate is their business, doesnt mean you can live on it.
Everything, 100% of it, depends on how you look at it.
DW
spose if it were me, I'd jump between local and the next largest city near you as long as it wasnt more than 45 or less minutes away....just to get started.
When I was trying to buy land a yr and a half ago in a sort of rural part of Calif (Sebastopol)my consideration was to do "some" work in SF which is over an hour away or Santa Rosa which was about 30 min away.
Thing is SF was a lot further yet I "know" I could have made at least 50% more there so the drive'd been worth it.
Know what I mean?
Be well
andy
The secret of Zen in two words is, "Not always so"!
http://CLIFFORDRENOVATIONS.COM
That is some good feedback - affirms most of what I thought. This is rural Saskatchewan, Canada - beautiful country. Closest big center 3 hours away but I guess we do have family in one of these centers. This is a part of the world where my Great grandparents on both sides were homesteaders - cut the trees, lived in sod houses - so the contacts (personal) are immense. Also there is a Provincial. park rated in top ten where cabins are plenty. One time a family friend told me they can not get trades people to the lakes. yep, so be patient and rest assure that the time will come when we can charge enough. I think we will prob. give it a go at the $28. so we do not go broke in mean time. Good point about insurance, bonding and such. Hubby does good work and is one of those guys that will make you crazy - doing laps and never sitting down. One hour of his time is a good hour.
One last question..... should I let go of contacting these local guys and quizzing them? Those that have read previous posts will know - I am trying to get a good handle on bus. side of things and this has taken me off my focus. I am thinking I should just set up our bus. as best as we can and so be very professional going in - as some of you have said "give less thought to what the rest are doing." Try to do better.
I finished reading E.Myth Revisited and it was a tough read - challenging thoughts. Just ordered Running a Successful Construction Company. I need some examples of estimating worksheets, change order forms, cost tracking worksheets. I will set these up on excel. Should be another post.
Thanks,
Nicky
nicky... good points by Jeff.. every once in a while.. he actually makes sense..
one thing to keep in mind.. your rate and what you charge are not always the same..
in other words..if you decide that you will charge out at $28/hr ( which is of course rediculously low )... fine
however.. try not to get jobs where you have to charge a rate.. better to bid jobs at a fixed price.. so you can make a profit and pay yourselves what you really want or need..
EG:
in the PROOF system.. you could decide that you have to make $75/ hr..
so you get a job with a contract to furnish and install 10 doors and trim them out..
it takes you two hours to measure the job.. two hours to do the estimate and two hours to sell the job....
and it takes say 20 hours to do the work... two hours to clean up .. total hours 28
the materials cost $2000....your labor is $75 x 28 hours ($2100) you sell the job for $4100..
no one has to know your labor rate.. if they ask .. tell them you charge $45 or $28.. or what ever you want to tell them.. the thing is.. you have to sell the job for $4100.. then it never becomes an issue of how much you charge... they either want you to do the work or they don't.. if you can deliver their dreams.. they will not care.. if all they are doing is trying to dfind the lowest labor rate to hire.. you don't want them for customers anyways...Mike Smith Rhode Island : Design / Build / Repair / Restore
damn.
Ya had to go and mention the proof system right AFTER RhodeFest!
I coulda used a good beer drinking in depth explanation of it ...
JeffBuck Construction, llc Pittsburgh,PA
Artistry in Carpentry
sheeeit... i had that stuff sitting on my desk when you and pete were there.. course you wouldn't remember then to ask me about itMike Smith Rhode Island : Design / Build / Repair / Restore
hey ... I hear wildwood is about half way ...
next weekend?
another write off ......
JeffBuck Construction, llc Pittsburgh,PA
Artistry in Carpentry
next two weekends in NH.. .that's the plan, anyways... probably hook up with qtrmeg....
tryin to entice recko to make a visit.... we'll see...
cadioli is making noises about visiting in Sept or Oct... you and Cath could come up too.. now that you know the wayMike Smith Rhode Island : Design / Build / Repair / Restore
ahh ....
yer yard is always too busy ...
we'd just get lost in the crowd again.
JeffBuck Construction, llc Pittsburgh,PA
Artistry in Carpentry
just some generalities here ...
when I was in trade shcool I had a buddy from rural Pa ...
he went back home looking for work and got hired on with a builder/remodeler.
didn't like that guy's style of winging it ... went to another ... and another.
seems he figured out that no one in his area was really a professional.
Even the biggest builders were running with no insurance and paying all their help under the table ...
so ... at 19 years old ... my buddy set out to be the one legit operation in the area.
Even at 19 .. he had the gift of self confidence and was as level headed as they come and loaded with common sense.
Within a year or so ... he had too much work to handle and was charging his idea of top dollar.
Don't know what that dollar amount was ... but I know it was about double what everyone else in town was asking ....
So .. it can be done. He had the benefit of being local ... people knew his family name ... but he was the first in the family to have a construction biz ... and the fact he was 19 didn't help at all either.
Go in and find a nice small-town way of letting everyone know you're the best .. and most expensive.
all depends where ... but small towns can hide lotsa wealthy customers ...
this wasn't the case with my buddy ... but I drive out of the city to a more country setting ... that's where the big money is. Might be some place within an hour or so to hit up and advertise to.
Jeff
Buck Construction, llc Pittsburgh,PA
Artistry in Carpentry
You've got to have some margin to set aside for slow times or disability, God forbid you should ever need it, but that's good business sense.
Just remember, it's always easier to drop or discount prices on a job or two than it is to start increasing prices to good customers.
Welcome to the
Taunton University of Knowledge FHB Campus at Breaktime.
where ...
Excellence is its own reward!
Nicky, you said:
"What can we charge and be competitive without going broke?"
I guarantee you that if you charge what your competitors are charging you will go broke! Remember that over 80% of your peers go broke within the 1st 5 years, and 80% of the remaining 20% go broke dureing the next 5 years. That leaves about 4 out of the initial hundred after 10 years.
Jeff and Mike gave you some great advice, take it, and remember that 19 year old's success. It reminds me of inventors and entrepreneurs that invented something or created great companies simply because no one ever told them that what they did couldn't be done.
I charge double to triple my competitors and still cannot handle all the work, and half my jobs are from condo associations, normally about the cheapest people in town - any town.
If you email me I'll prove to you that you cannot charge less than $55/hr using the conventional system or less than $65 using the Proof system, unless of course you either want to go broke, or get burnout first - then go broke.as Michael Stone (Markup and Profit -- A Contractor's Guide) would say, "It's simple mathematics."
Okay Sonny Lykos prove away. Keep in mind that I have two children under 3 and so getting back to you will not be easy but I would like to hear what you have to say. I have read your posts before here and on jlc. Charging these amounts seems appropriate in the city that we are living in now 900,000. population base good economy. This move would put us into a population base of 5000 - 8000 , more if we move out to lake country. Mind you the feedback has been that work is plenty and trades people few. These high rates make sense to me absolutely I guess I just think everybody is broke like us. And you know it is crazy because for three years we have done what we thought was the absolute best for the kids my not working. We have been so limited in our thinking that we accepted being broke - price to pay for single income instead of charging what my guy is worth. And you know he really truly is excellent at what he does - just he has been so busy buried in his work to have time to even explore the business side of his trade. Yes buried and working hard and fast always. And slow and skilled when he gets the chance to finish or be creative. He is like an artist in many ways but works like a dog. Body hurts too tired to stay up past 9:00 and for squat money. He is 37 and me 30 time to learn new tricks and but fast. So I research and read now - soon to be doing work at home on computer to build up some cash flow so we can move. Mark up and Profit is on my reading list. Just now reading a very dry book on estimating. Waiting for Running a Successful Construction Company to get here in the mail.
So let me tell you about my guy. Journeyman and ticketed, worked for the Hungarian crew starting out and they were perfectionists everything just so - do it over get it right (built houses from start to end with no subs). Then on his own in small town before me renovating and doing crafts (carvings, desks, chairs). Did well but buried in the paperwork left town to live with me - had great refs. and reputation. He wanted to be a cabinet maker thought he could be more creative - made poor money and did too much assembly work - not enough variety. 3 years now sub work at hourly rate renovations (this in previous post). Money not there (not charging enough). Customers love him and his work and his work ethic - GC makes the money. Honestly before my first visit here I thought that this was just an industry where top dollar was where we are at now - $28.00. Naive eh? I think I have the business head but I need tools and reference points. These sites have been a great starting point.
My step father is a great business man but we always doubted his knowledge in reference to trades. One big thing was setting your sites higher. But wow how about covering our butts now.
Thanks Nicky
Nicky, while I take the time to create a rather lengthy response, please go to the JLC forums, register and sign up. I intend to emial you some critical and appropriate threads from there. By being registered you'll be able to click on the "urls" I email to you.
I'll also email you an operating expense sheet for myself. Then we can discuss the answer to your question, and partly by using my own OE example.
On of these days I'll create an internal "white paper" and keep it in my computer since I get into this issue often and end up repeating my self each time. That way, I can just email it to the person involved.
http://forums.jlconline.com/forums/forumdisplay.php?f=9
My step father is a great business man but we always doubted his knowledge in reference to trades.
an outside opinion might just be exactly what ya need ... good business is good business ... trades or no. Like Sonny said ... most trade businesses fail anyways ...
how far of a drive does he make ... I'll regularily go over an hour and a half if the money is right ... as it is .. most of my work takes me out of the city ... about 50 min in the morning and 70 or so in the evening ... then there's the days I pick up my little boy from GrandMa's ... and it's about a 2 hr trip for me ...
but when the money is right ... who minds a nice drive?
Beats coming home dead tired because ya got beat up all day for low rates ...
Not sure how it works in your area ... but look into beinging incorperated or LLC ...
with you being an employee ... just bacause you are home with the kids doesn't mean ya can't help grow the company ... even if ya don't get incorperated ...
you are probably doing lotsa of that work as it is ... just make it official and collect a paycheck ... and the write offs ...
I pay my wife she she needs to cover her bills ... like the mortgage, daycare and car payments .... get the hint?
Moving to a new area might mean you are now the advertising staff running around all day while he's out pounding nails ... plus .. a car outfitted with 3 car seats makes for a great "goofer vehicle" ... see .. now yer a business partner and not a stay at home Mom!
When I went back into business ... was employeed when the wife first had our baby ... I made a conscious decision to focus on the type of work that I wanted to retired from ... I decided for me ... the besy position was to do high end carpentry ...
so I focused on druming up that type of work. I also focused on raising my rates ...
I'm not running on easy just yet ....
But slowly and steady ... focused ...
each job leads to more exposure ... I drain every lead and prospect I can from each and every job ... I take tons of pics and try to arrange as many on site viewings as I can ... all to show the level of work I do ...
the more that see it .. the more that want it ...
slow buy steady ...
one side of that focusing ... I refuse to do handyman work. I will for existing customers ... but when I check out a new lead and see they really don't have the budget for what I like to do ... I kindly step back and refer someone else.
Other guys make a killing at that kinda work ... but it's not my focus ...
I'm not to the point where I can pick and choose my customer ...
but to a certain degree ... I do pick and choose.
I also sub myself out ... haven't lately as I've been too busy with my own stuff ... but when I do ... which I will soon ... I also keep the same line of thought when deciding who to sub for. I only go with people that bring in the type of work I want to keep my hands in ... and on my own projects I do 99% of what I can myself ...
when I sub .. I'm picky about the stuff I'll bid too .... I'll not sub half the stuff I do for myself. May sound odd ... but it's all about the focus.
I'll dig my own post holes for my own deck job ...
I won't sub myself out as a post hole digger!
If your husband is so beat when he gets home ...
might be time to refocus.
I'm 37 ..... and usually can have a bit of a hop in my step when I finally get thru the door ... usually ....
JeffBuck Construction, llc Pittsburgh,PA
Artistry in Carpentry
Hey Nicky,
Just a word of encouragement. One of the hardest things is trying to run a business w/out the spouse's support. Not a problem w/you and your husband. You can feel the love for each other. Keep it up, together!
Sounds like there is plenty of work in the new place. Saskacthwan? I know I butchered that spelling. Rate is a factor of how busy you are. So get a cash flow cow going on first. Might be a property management co servicing lake cabins or anything else that will provide cash flow reliably each month. Then start upping your prices on your new accounts. A little a a time. Bit by bit. Summer rates are different than Winter rates, etc.
Get yourself on the payroll. Even if it is only a little at first. You need x number of Quarters in Social Security to qualify. Get em in.
What do you mean by ticketed? Journeyman?
Nicky, what Jeff is doing is actually two things: 1) “Branding†himself and 2) “Positioning†himself.
Literally saturate yourself with branding information: What is it? What are some examples? How do you create it? How do you maintain it? To whom is it directed? I'll send you some pertinent articles about it.
The reason I say to “saturate†your self with the branding philosophy is because without thoroughly understanding the concept, you will at best never rise beyond being a mediocre company.
But if you understand branding, embrace it, create your own and treasure and protect it, the sky is the limit for you. Microsoft, Apple Computers, GE, McDonalds, The Gap - heck, even America. They all represent some “thing†for which people will pay a premium, including their own lives in an attempt to obtain it.
Before reading Michael Stone’s book, buy and read “The Experience Economy.†This book using many examples, explains the importance of offering and “positive experience†for you customers. For example, what is the differences between having a cup of coffee while inside McDonalds, at 69¢ verses an “experience†in a family style restaurant, and then again that experience verses having the same cup of coffee costing each “seller†the same, but this time at the Ritz Carlton? Explain to yourself the “experiences†offered to you from each of the three.
Also buy “Brand Harmony†and Michael Gerber’s book entitled: “The E-Myth Contractor - Why Most Contractors Businesses Don’t Work and What to do About It.†If money is tight, email me and I’ll send you my copies.
Next question: What market do you want to serve and how to you serve them? For 13 years I lived in a small Michigan town comprised mainly of factory workers and farmers. We also had people from the south side of Chicago who owned many of our 36 area summer lake cottages. I had a separate roofing division and sold enough jobs to have a “divisionâ€, and each job was at least 20% higher than my competitors. Ditto for our bath, kitchen remodels, our decks, siding and window replacements, another division - all at the least a 20% or more premium over my competitors. Why was I able to do that in mainly a blue collar and farm community?
My point is that regardless of where you live, what the economic status or any related issue, 1st class service people, and we are “service†people first, can command and get 1st class margins.
Thanks Sonny - I print and read this stuff over and over again. I sent you an email and signed up for JLC. Should be able to pull fund together for books but thank you so much for your offer.
Nicky
Never did get your email.
Thanks Sonny. Good reminder to all, no matter what our trade, we are in the customer service business first.
MES
Thanks - for the supportive thoughts. Ticketed and Journeyman mean he has the education and training/qualifications (pretty simple 24 weeks of college plus apprenticeship under lead carpenters).
Nicky
I would have replied to this thread earlier, but for some reason the reply window wouldn't open. Anyway, what I wanted to say was that it seemed to me that you were quite concerned about the hourly rate, and how a suitably high rate would put off potential customers. I would like to support what Mike Smith said earlier, and add some emphasis of my own, that you MUST get away from quoting an hourly rate and start quoting for completing the job. No HO wants to buy so many hours of time, what they want is to have some specific job done. It will be up to you to figure out how many hours it will take to do the job and quote on that basis, taking the risk that it might take longer. That risk should be balanced by the fact that it might take less time than you budgeted for.
If you work for a contractor then they are going to want to pay an hourly rate and in effect you will be earning less money because they are finding the work for you. Best to find your own work and make a decent living, only sub when you absolutely have to, there's only so much profit in any job and the GC will want most (all?) of it.
When I started as a handyman I charged by the hour and it soon became clear that no way was I going to be able to get work at a decent hourly rate. As soon as I started charging by the job I was able to get the money I wanted. Risky maybe, but skill and experience helps to reduce the risk, as does a carefully worded proposal which will deal with unexpected problems and change orders.
John
John
Nicky, I agree with what some others here have said about our tendency to sell ourselves short. One night many years ago, I was driving to a job in Florida and listening to Bruce Williams on the radio. He had a financial advice show. A woman called in and said she made beautiful knit sweaters and has them for sale for $25. She wondered what she could do to sell more sweaters. After asking her if they were truly nice, well-knitted sweaters, and verifying that they were, he immediately advised her to raise her price to $75, and offered to buy the first sweater at that price.
There are people who will see two sweaters hanging side by side, that look exactly alike. One is priced at $25 and one at $75. Some people would immediately pick the cheaper one and think they got a good deal. Some others would ssume that since it costs 3 times as much, the higher priced sweater must be better, and since they have the money, that's the one they'll buy. Which of these two types do you think you should be marketing your business toward?
Edited 9/5/2004 2:50 pm ET by Allen
When you get the invite from the customer to see the job, plans, specs, whatever, you should be the most qualified, confident, nice, generally good person they ever had the pleasure of meeting. Most people I have dealt with over the years believe I am the best at what I do. That is just fine with me. They don't have to know that I really have no clue. If low bid gets the job, then eat beans for a while and go get the job that pays well for good work. Chin up, chest out, best foot forward, and fill that wallet.
CurlyHand Hewn Restorations Inc.
Restoring the past for the future.
Nicky,
Congratulations on putting family first! When we had our first child, my wife went down to part-time, and we plan to have her quit in 2 years. We are both 39, and we have 3 kids, ages 3,5, and 8.
We live very frugally, and my minimum rate is now $42/hr. I have been pushing the ceiling and have job-costed a few bids that fetched $56/hr, and $65/hr. (one small fluke at over$100/hr) Most are landing in the $50/hr area. The $56/hr was in a rural market where the going rate is $25+/hr. Of course there are some lower than that, but my point being that the only "market" that changed was the one between my ears. (before this year the most I had made was $42/hr)
I do some sub-contract cabinet installs, but it is by bid basis only. I don't make as much, but my risk is lower and I have very little overhead time, and it doesn't wear out the body as quickly. A few weeks ago I did an install for a new house that job-costed at $44.75/hr.
Again, we live very frugally. Any doubt in your mind that the $25/hr crowd is broke? Or more likely, living off their wife's income?
Good Luck,
Bowz