Announcement

Announcement Module
Collapse
No announcement yet.

Is $280 to $340 The Correct Hourly Price

Page Title Module
Move Remove Collapse
X
Conversation Detail Module
Collapse
  • Filter
  • Time
  • Show
Clear All
new posts

  • Is $280 to $340 The Correct Hourly Price

    I've been charging my customers $280 to $340 per hour. I would like to know if this is the correct price. Can you help me by sending a list of what you think is costs for one employee for one year.

    For example, I think an employee should earn $1500 per week. If the employee can bill for only 4 hours per day divided by 1,000 hours per year, then you need to bill the customer $75 just to pay the employee.

    Then, I need to know the annual cost for the employees liability insurance, health insurance, worker's comp, retirement plan, office supplies, truck rental or lease, secretary, office phone, mobil phone, uniforms, truck maintenance, tools, tool maintenance, uniforms, and whatever you can think of. I will compile the totals and post the results. I'm betting at $280 to $340 per hour.

    I appreciate all help. I will be respectful, courteous, and just plain nice.

    Thank you very much.

    Jack

  • #2
    Re: Is $280 to $340 The Correct Hourly Price

    Originally posted by bestline3 View Post
    I've been charging my customers $280 to $340 per hour. I would like to know if this is the correct price. Can you help me by sending a list of what you think is costs for one employee for one year.

    For example, I think an employee should earn $1500 per week. If the employee can bill for only 4 hours per day divided by 1,000 hours per year, then you need to bill the customer $75 just to pay the employee.

    Then, I need to know the annual cost for the employees liability insurance, health insurance, worker's comp, retirement plan, office supplies, truck rental or lease, secretary, office phone, mobil phone, uniforms, truck maintenance, tools, tool maintenance, uniforms, and whatever you can think of. I will compile the totals and post the results. I'm betting at $280 to $340 per hour.

    I appreciate all help. I will be respectful, courteous, and just plain nice.

    Thank you very much.

    Jack
    do your customers know that they are being billed $280-$340 an hour?

    do you actually write on the invoice the hourly charge?

    i seriously doubt the customer has a clue what your hourly rate is. if they did, i find it next to impossible they would be willing to pay it.

    are your techs. licensed journeymen with a city of los angeles journeyman's license?

    is your overhead really that great?

    i guess i am only 25%-33% of you. 33 years of plumbing has not taught me anything. i guess working hard is no longer the right attitude.

    maybe i should just walk away from my 1100+ established customers and start off fresh with new uninformed desperate customers. i too will wait for the phone to start ringing.

    i guess i'm only a plumber and not a businessman

    rick.
    phoebe it is

    Comment


    • #3
      Re: Is $280 to $340 The Correct Hourly Price

      My total on the bottom is up to $286 for each billable hour and I am not finished.

      My answer, in previous posts, is yes and no. I don't do T & M. I charge my customers $5,000 to $9,000 to replace their water or drain pipes. I am one-fourth the price of the big boy and sometimes my crew completes a job in 6 to 8 hours. I am forces to use the calculations that I am talking about. You really have to bill at $280 to $340 per hour to run a shop with employees.

      An employee shoud earn at least $1500 per week.
      He can bill for an average of only 4 hours per day = 1000 hrs/year
      Divide every annual cost for that employee by 1000
      To pay the employee $75 per hour we must charge $75/hr
      Worker's comp is 10% of payroll = $7.50/hr
      Liability is 6% of gross sales including materials $5.00
      Gasoline for gasoline including getting materials, donuts, etc. $7.80
      Truck monthly lease $600 month = $7.80
      Advertising should be at least 10% of the gross.
      Truck Insurance $2400 per hear = $240
      Truck maintenance, oil, alternator, battery $1500/yr = $1.50
      Combination wife, dispatcher, bookkeeper, payroll calculator $17.50
      Office supplies for truck business cards, invoices $9.00 per book,
      stapler, calculator $1,000/yr = $1.00
      Utilities for office split cost, heat, water heater, crap paper, $1.00
      Telephone for office $1.20
      Mobil phone for plumver $100/month $1.20
      Retirement plan $1.50
      Uniforms, coveralls, regular clothing if you don't use uniforms,
      cleaning uniforms, gloves, boots, rain gear $1500/yr = $1.50
      Tools, sewer machine, snake cables, sawzall, blades, maintenance $1.50
      Booties and items to cover customers floors, rags, etc . $1.00
      Heath insurance for an employee with a wife and two children
      in california is at leask $450 per month = $5.40\
      The company has to match the employees taxes about 30% = $22.50
      The boss needs to earn a profit from the hourly charge. The boss also
      has to pay taxes. gasoline, vehicles, etc $ 75.00
      Advertising has cost me over 10% of the gross since I was in business. I have been to many plumbing seminars and most companies figure the cost to generate a call through a yellow page ad, flyer, television commercial or whatever is about $150 or more. That would be $150 per billable hour. I'll be fair and say that 50% of my 33% of my business is referrals (mine is really much higher), 33% is old customers, and 33% is from advertising. Then I come up with a cost of $50 to get each call or a cost of $50 to get a one hour service call.

      My total so far is about $286.20 per billable hour. Am I crazy?

      Please prove to me that I am wrong.

      Jack

      Comment


      • #4
        Re: Is $280 to $340 The Correct Hourly Price

        I'm sorry, the truck insurance is $2.40 per billable hour, but the $286 total is still correct. I was copying these totals from a list.

        Jack

        Comment


        • #5
          Re: Is $280 to $340 The Correct Hourly Price

          I don't know what the total is. I just made a few changes and smashed my calucator into smitherines.

          My total on the bottom is up to $286 for each billable hour and I am not finished.

          My answer, in previous posts, is yes and no. I don't do T & M. I charge my customers $5,000 to $9,000 to replace their water or drain pipes. I am one-fourth the price of the big boy and sometimes my crew completes a job in 6 to 8 hours. I am forces to use the calculations that I am talking about. You really have to bill at $280 to $340 per hour to run a shop with employees.

          An employee shoud earn at least $1500 per week.
          He can bill for an average of only 4 hours per day = 1000 hrs/year
          Divide every annual cost for that employee by 1000
          To pay the employee $75 per hour we must charge $75/hr
          Worker's comp is 10% of payroll = $7.50/hr
          Liability is 6% of gross sales including materials $5.00
          Gasoline for gasoline including getting materials, donuts, etc. $7.80
          Truck monthly lease $600 month = $7.80
          Truck Insurance $2400 per hear = $2.40
          Truck maintenance, oil, alternator, battery $1500/yr = $1.50
          Combination wife, dispatcher, bookkeeper, payroll calculator $17.50
          Office supplies for truck business cards, invoices $9.00 per book,
          stapler, calculator $1,000/yr = $1.00
          Utilities for office split cost, heat, water heater, crap paper, $1.00
          Telephone for office $1.20
          Mobil phone for plumver $100/month $1.20
          Retirement plan $1.50
          Uniforms, coveralls, regular clothing if you don't use uniforms,
          cleaning uniforms, gloves, boots, rain gear $1500/yr = $1.50
          Tools, sewer machine, snake cables, sawzall, blades, maintenance $1.50
          Booties and items to cover customers floors, rags, etc . $1.00
          Heath insurance for an employee with a wife and two children
          in california is at leask $450 per month = $5.40\
          The company has to match the employees taxes about 30% = $15.00
          The boss needs to earn a profit from the hourly charge. The boss also
          has to pay taxes. gasoline, vehicles, etc $ 75.00
          Advertising has cost me over 10% of the gross since I was in business. I have been to many plumbing seminars and most companies figure the cost to generate a call through a yellow page ad, flyer, television commercial or whatever is about $150 or more. That would be $150 per billable hour. I'll be fair and say that 50% of my 33% of my business is referrals (mine is really much higher), 33% is old customers, and 33% is from advertising. Then I come up with a cost of $50 to get each call or a cost of $50 to get a one hour service call.

          My total so far is about $228.20 per billable hour. Am I crazy?

          Please prove to me that I am wrong.

          Jack

          Comment


          • #6
            Re: Is $280 to $340 The Correct Hourly Price

            first off i don't agree that you only generate 4 hours of billable time per day.

            are there not any jobs that are more than 1 hour?

            don't know about you but i do anywhere from 1 to 6 jobs per day. that 1 job would be an 8-10 hour day. those 6 jobs would be anywhere from
            .5-2 hours each.

            therefore the customer that has you for more than an hour is actually paying for all your downtime. all your overhead. and i guess all your trucks are a 1 man crew? none of your guys work together?

            they are more costly than a licensed union journeyman plumber?

            i own everything with my business. including my 2500' shop. and the hundreds of thousands in equipment and inventory. my customers didn't pay for it. i did with my hard work since age 12.

            yes i do charge for specialty equipment. $65. is just a joke for drain/ sewer cleaning. if all you did was go there for $65 you'd be broke in a month. i should recommend you to my customers for drain cleaning and then have them call me for everything else.

            i don't break every last expense into figuring my hourly rate. i look at my yearly gross and my net.

            i can look up my hours billed at anytime, but not every job i do is hourly. many are contract prices. so there is no real way i can pinpoint my exact hours per year.

            what amazes me is the amount of advertising you need to do just to keep 8 guys busy.

            my buddy who just sold his shop of 30 years with 15-20 guys in the field, didn't do anything other than a magnetic sign on his truck and company
            t-shirts. i know his guys billed more than 4 hours a day. his plumbers were billable hours and his helpers were paid hourly all day long.

            he was a t&m shop and was well under a $100 an hour for a journeyman plumber. so i guess he was doing it wrong too

            so the moral of the story is, the less you work, the more you charge your customers to stay in business.

            rick.
            phoebe it is

            Comment


            • #7
              Re: Is $280 to $340 The Correct Hourly Price

              Some quick thoughts...

              1. What does the market support?
              2. What is the job worth (this is different than how long it takes to do the job plus the expenses related to the job)?

              Don't get fixated on an hourly rate when the particular job may be worth more.

              You have done a good job of identifying the cost per hour.

              Is there not a trip charge or a minimimun time charge? I wonder why there are only 4 billable hours in a day? What are the guys doing for the other work hours of the day?

              Comment


              • #8
                Re: Is $280 to $340 The Correct Hourly Price

                I have been in business over thirty years and I am not starving and can look in the mirror when I get home after working for my clients who keep returning and know I haven`t ripped them off and that is what you are doing I hope you can say the same in thirty years but I don`t think you will last that long as the word will get around.


                Tony

                Comment


                • #9
                  Re: Is $280 to $340 The Correct Hourly Price

                  True operating expense is a tricky thing because most of us don't bother to figure in all the little costs that seem like nothing at the time. Unfortunatly most of us are out there working on the job and the book keeping end of it gets done when we have the time, or feel like it. (which ain't too often) That's why we got a professional to come in ad do an evaluation. It took the guy most of the summer and included a very thourough audit as well as a complete and thourough inventory (because unsold, or slow selling inventory will KILL you) When he was done he put together a glat rate schedule as well as a bottom line hourly rate. To make any profit at all we had to raise the hourly rate to $ 110.00 which we did, but we don't do much hourly any more because we find that we do much better with flat rate pricing. (here we go again) There is no doubt that you can loose a lot of money a lot faster the more employees you have and if you can't get 6 to 6 1/2 hrs billable out of them you need to get rid of some or re-vamp your dispatching and scheduling. We put gps and locators in the trucks so we know where the guys are at all times. (cuts down or joy riding) and that made a big diference on lost travel time. In todays economy you need to find ways to stay lean and efficient in order to compete. One of the reasons the big guys are sucessfull is because they have bean counters that are constantly finding ways to shave the bottom line. Unfortunatly most of us would rather snake out toilets than spend an hour at the books.
                  sigpic

                  Comment


                  • #10
                    Re: Is $280 to $340 The Correct Hourly Price

                    Originally posted by bestline3 View Post
                    I don't know what the total is. I just made a few changes and smashed my calucator into smitherines.

                    My total on the bottom is up to $286 for each billable hour and I am not finished.

                    My answer, in previous posts, is yes and no. I don't do T & M. I charge my customers $5,000 to $9,000 to replace their water or drain pipes. I am one-fourth the price of the big boy and sometimes my crew completes a job in 6 to 8 hours. I am forces to use the calculations that I am talking about. You really have to bill at $280 to $340 per hour to run a shop with employees.

                    An employee shoud earn at least $1500 per week.
                    He can bill for an average of only 4 hours per day = 1000 hrs/year
                    Divide every annual cost for that employee by 1000
                    To pay the employee $75 per hour we must charge $75/hr
                    Worker's comp is 10% of payroll = $7.50/hr
                    Liability is 6% of gross sales including materials $5.00
                    Gasoline for gasoline including getting materials, donuts, etc. $7.80
                    Truck monthly lease $600 month = $7.80
                    Truck Insurance $2400 per hear = $2.40
                    Truck maintenance, oil, alternator, battery $1500/yr = $1.50
                    Combination wife, dispatcher, bookkeeper, payroll calculator $17.50
                    Office supplies for truck business cards, invoices $9.00 per book,
                    stapler, calculator $1,000/yr = $1.00
                    Utilities for office split cost, heat, water heater, crap paper, $1.00
                    Telephone for office $1.20
                    Mobil phone for plumver $100/month $1.20
                    Retirement plan $1.50
                    Uniforms, coveralls, regular clothing if you don't use uniforms,
                    cleaning uniforms, gloves, boots, rain gear $1500/yr = $1.50
                    Tools, sewer machine, snake cables, sawzall, blades, maintenance $1.50
                    Booties and items to cover customers floors, rags, etc . $1.00
                    Heath insurance for an employee with a wife and two children
                    in california is at leask $450 per month = $5.40\
                    The company has to match the employees taxes about 30% = $15.00
                    The boss needs to earn a profit from the hourly charge. The boss also
                    has to pay taxes. gasoline, vehicles, etc $ 75.00
                    Advertising has cost me over 10% of the gross since I was in business. I have been to many plumbing seminars and most companies figure the cost to generate a call through a yellow page ad, flyer, television commercial or whatever is about $150 or more. That would be $150 per billable hour. I'll be fair and say that 50% of my 33% of my business is referrals (mine is really much higher), 33% is old customers, and 33% is from advertising. Then I come up with a cost of $50 to get each call or a cost of $50 to get a one hour service call.

                    My total so far is about $228.20 per billable hour. Am I crazy?

                    Please prove to me that I am wrong.

                    Jack
                    After reviewing your costs it appears to me you are passing your waste and inefficiency on to your customer. If that is what works for you so be it as long as you are up front with your customer. My guess is there is work for you with the government as much of what I see in your business model is what pisses me off in government.

                    Mark
                    "Somewhere a Village is Missing Twelve Idiots!" - Casey Anthony

                    I never lost a cent on the jobs I didn't get!

                    Comment


                    • #11
                      Why the 4 hours per day

                      Reasons why we can bill only 4 hours per day.

                      A few days ago, 3 of my crews started the day with 13 calls ad 7 am in the morning. We pulled out the driveway, called our customers at their scheduled times and about 8 of the customers did not answer. This was unusual, but it happens.

                      Another reason is, we take the time to travel to a home and we don't get to charge the customer for many reasons.

                      The average good new construction plumber is getting paid $35 per hour. Las Vegas union plumbers are getting about $35 per hour. Compares to repair plumbers, construction plumbers are getting paid at least $70 per hour because the new construction plumbers get to work a solid 8 hours per day with no travel.

                      If the new construction plumber is getting paid $35 per hour, then the calculations put into the bid have to include similar calculations that equal $150 - $300 per hour.

                      How you, specifically, can save money and lower your cost is great if it makes you feel good to give discounts that are not necessary. Lowering the price, lowers the bar for the whole industry. Some contractors try to calculate how low they can get their price thinking their customers will giver them mor work and be happy. Truth is customers don't know the right price and they are not loyal.

                      Jack

                      Comment


                      • #12
                        Re: Is $280 to $340 The Correct Hourly Price

                        Thank you very much.

                        Everyone gave a lot of great response.

                        I'll lower my price to $275 and now I can sleep better.

                        Jack

                        Comment


                        • #13
                          Re: Is $280 to $340 The Correct Hourly Price

                          If your employees make $1500 per week and you need to bill at least $280 per hour then something is wrong.
                          On a related side note. I needed a toilet replaced. I called a few places out of the phone book. 2 would give me estimates on the phone assuming that there was nothing unusual or unexpected. Both wanted about $800 to do the job, including the toilet. They gave me 2 options on the toilet they had. I priced the toilet itself and it would cost me about $200. So they wanted $600 to install a toilet. IMO, only a fool would pay $600 for what was a simple install. I bought a new toilet myself and I got a referral to a licensed plumber from my neighbor. He charged me $200. It took him less than 1/2 hour to do the job including unpacking the new toilet and cleaning up after he was done.
                          Who do you think will have my business from now on? The thieves from the yellow pages or the plumber who doesn't advertise but get referrals from happy customers?
                          www.TheWoodCellar.com

                          Comment


                          • #14
                            Are you lying to yourself

                            The has been a lot of great response, but I think most are not telling the truth. I think most plumbers have two standards and should not be looking in the mirrors at themselves.

                            Most plumbers can sell the replacement of drainage systems for a 1 bathroom home for $4,000 to $6,000. It takes one plumber and one helper 6 hours to do the entire job. The materials cost $300.

                            The customer asks what your hourly rate is and you lie.

                            How do you justify the difference from charging $75 an hour for a service call and $500 an hour for a contract.

                            Liars! Just joking!

                            Jack

                            Comment


                            • #15
                              Re: Is $280 to $340 The Correct Hourly Price

                              I don't understand only 4 billable hours. Why such a low number? Maybe for a owner/operator who has to take care of everything, but an employee? How do your employees make 75 per hour? They only work 20 hours per week? If they work 40hr weeks, they should make 37.50 to get 1500.
                              Buy cheap, buy twice.

                              Comment

                              Working...
                              X