# Cost of doing buisness and what to charge?



## brian phillips (Jun 27, 2012)

Hourly or flat rate? Free estimate or charge? Overtime or no overtime? Advertise or not? Credit cards or don't accept credit cards?etc.

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## Gettinit (May 9, 2012)

Overhead? Add it to what you want to make a year and divide by 4000 hrs and that should be a starting point.


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## DesertOkie (Jul 15, 2011)

Go through the business topics, this has been covered a lot and there is some very good info.


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## brian phillips (Jun 27, 2012)

Thanks guys

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## plbgbiz (Aug 27, 2010)

brian phillips said:


> Hourly or flat rate? Free estimate or charge? Overtime or no overtime? Advertise or not? Credit cards or don't accept credit cards?etc.
> 
> Sent from my iPhone using PlumbingZone


Have you established a budget and accurately calculated your billable hour rate?


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## brian phillips (Jun 27, 2012)

I have,but I don't think I can charge what I honestly should be charging in order to pay expenses/overhead,insurance,retirement,
Personal bills,profit, and unforeseen. I think most plumbing buisness owners do not honestly charge what they need to charge.

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## Gettinit (May 9, 2012)

What do you plan on not paying for? How long do you think you can get away with it?


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## pilot light (Apr 21, 2012)

100 an hour 150 overtime!


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## plbgbiz (Aug 27, 2010)

brian phillips said:


> I have,but I don't think I can charge what I honestly should be charging in order to pay expenses/overhead,insurance,retirement,
> Personal bills,profit, and unforeseen.....


So if you have figured that out, please tell me you are not going to add to our industry ills by going into business anyway.

Maybe you should read this... http://www.plumbingzone.com/f4/more-than-owning-job-17477/


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## sierra2000 (Sep 19, 2011)

Gettinit said:


> Overhead? Add it to what you want to make a year and divide by 4000 hrs and that should be a starting point.


If you're a service company and one man shop divide your overhead by 976 hours to get your break even rate then add the profit percent to that to get your hourly rate.


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## sierra2000 (Sep 19, 2011)

brian phillips said:


> I have,but I don't think I can charge what I honestly should be charging in order to pay expenses/overhead,insurance,retirement,
> Personal bills,profit, and unforeseen. I think most plumbing buisness owners do not honestly charge what they need to charge.
> 
> Sent from my iPhone using PlumbingZone


So why go into business?


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## easttexasplumb (Oct 13, 2010)

Be sure health ins and supplemental ins is figured into your overhead. If you fall and break your leg the bills still come rolling in.


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## sierra2000 (Sep 19, 2011)

Be sure to add the future cost of trucks and tool replacement to your overhead.


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## Epox (Sep 19, 2010)

That's the hard part I see. We have a very competitive market here. Hacks are run a muck with ease. It's unbelievable. Really has taken a bite out of our potential work. Just Friday I was in one of our suppliers buying gas tight material. I asked the manager in front of them doesn't one need to be certified to do this? I heard the biggest load of crap come from the hacks. 
Of course the manager got conveniently tied up on the phone.:whistling2:
But it seems to me we have to not only compete with the other contractors but with hacks.


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## brian phillips (Jun 27, 2012)

We have a lot of handymen in our area and after just 2 years of proven experience they can pay money and go to work doing plumbing calls. They are not allowed to do any plumbing that requires a permit, but they do anyway.We also have some full fledged plumbers that are happy making 30-40 dollars an hour compared to when they were a employee making 8-12 dollars an hour. Hard to compete with those prices. If a handyman wants to due plumbing, then they can go take a test like I had too, plus all the other hoops we have to jump through being Lic. Plumbers.

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## Gettinit (May 9, 2012)

sierra2000 said:


> If you're a service company and one man shop divide your overhead by 976 hours to get your break even rate then add the profit percent to that to get your hourly rate.


Where does 976 come from? Can't seem to get that number to come up on the calculator....


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## user2090 (Sep 26, 2009)

brian phillips said:


> We have a lot of handymen in our area and after just 2 years of proven experience they can pay money and go to work doing plumbing calls. They are not allowed to do any plumbing that requires a permit, but they do anyway.We also have some full fledged plumbers that are happy making 30-40 dollars an hour compared to when they were a employee making 8-12 dollars an hour. Hard to compete with those prices. If a handyman wants to due plumbing, then they can go take a test like I had too, plus all the other hoops we have to jump through being Lic. Plumbers.
> 
> Sent from my iPhone using PlumbingZone



You have to decide if you'll be happy making that amount. Nothing in your numbers prepares you for the stress associated with owning your business. 

Even when my bank account grows to a all time high I ask myself if its worth it to continue. Can guarantee that I would not open a business and work for those numbers, it simply isn't worth it.


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## PinkPlumber (May 20, 2012)

brian phillips said:


> We have a lot of handymen in our area and after just 2 years of proven experience they can pay money and go to work doing plumbing calls. They are not allowed to do any plumbing that requires a permit, but they do anyway.We also have some full fledged plumbers that are happy making 30-40 dollars an hour compared to when they were a employee making 8-12 dollars an hour. Hard to compete with those prices. If a handyman wants to due plumbing, then they can go take a test like I had too, plus all the other hoops we have to jump through being Lic. Plumbers.
> 
> Sent from my iPhone using PlumbingZone



What area allows this?....so why do they bother having licensing for plumbers then?...or a test?


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## plbgbiz (Aug 27, 2010)

PinkPlumber said:


> What area allows this?....so why do they bother having licensing for plumbers then?...or a test?


There are many places in rural middle America that do not seem to be on the same economic planet as densely populated areas. 

If the market does not allow budget numbers to work, then you only have three choices:

1. Realize your market might not support your budget and adjust it accordingly.
2. Move to a Market more favorable to your budget. 
3. Come to grips with your inability to sell and get a job realizing operating a business is probably not for you.

Brian,

You should have researched this BRFORE opening shop.


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## brian phillips (Jun 27, 2012)

To have a profitable buisness our billable hours should be $150.00 per hour based on a 6hour work day, plus any mark-up on parts. The majority of plumbing owners in my area have a second income from their wife that in my option they are allowing her outside income to factor into the plumbing buisness profit and/or expenses. Roght now I charge $40 to come out and a 1 hour minum of 60 per hour.(1st hour total is $100.00) each hour after is $60.00. I know I should be higher, but these people around here will work to break even or lose money, I don't understand their mentality. Here I am 37 years old and have devoted 16 years of my life to plumbing inckuding apprentice school and a state certified master plumber Lic. And these this county allows handymen to do plumbing. They can't do AC or electrical but they can fix plumbing as long as the job total is below $1500.00. Right now that is 90 percent of the job totals being 1500.00 or less. I think I am going to get a petition together.

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## plbgbiz (Aug 27, 2010)

Man I wish Randy Hilton was still coaching. He is exactly the help you need.

The hourly rate needed to make a profit is subject to countless factors. And, don't be so sure the low rates you here people talk bout are always the case. Sometimes they are just cleverly disguised loss leaders.

If your market is really that low then you have to bring more to the table than a license and the ability to fix a leak. As you already know anybody can fix a leak but not everyone can be a "professional". 

Nobody is going to call you and pay you more just because it took you longer to get into business than a hack. The customer could not care less about you. They only care about themselves. Focus solely on what benefits the customer from their point of view and stop wasting your energy on the handy hack issue that you can do nothing about. 

You also might want to run a few specifics about your numbers by Richard Hilliard. He is in Florida and could weigh in on your market as well as anybody. That said, the fact that you even mention markup on material in the same sentence as your budget makes me think your billable hour rate may be off. 

I know after being on your own for a few years it can be a tough realization knowing that you may be out in left field but your not alone. It happens more often than not. To this day I still look to my mentors for guidance on business matters. Personally, I think there is more YOU can do to help your business around the hack problem in your market.

For us the big problem is DIY'ers. I can be in the parking lot of about 20 different big box stores within 30 minutes of my shop. Fretting over the handyhacks and DIY'ers doesn't help. I know. Believe me, I have tried. In the end, it is better to focus your energy on what you can do, not what others are doing.


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## deerslayer (Mar 29, 2012)

Unfortunately the one thing that is somewhat out of your control is the number of billable hours. We can do the math all day long and find the perfect rate for you, but we are only guessing as to the number of billable hours you will achieve each week.


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## Richard Hilliard (Apr 10, 2010)

Man I wish I had a nickel every time I have heard some words from plumbers and plumbing companies. Those words are: 
I can’t charge enough due to what others are charging. Why not! You may have to become familiar with a different way to communicate to help the customer get what they want and need.
My area is different. How is it different people work, people live in houses, pay for gas and groceries. Go to movies, have wide screen TV’s. 
My market is different. Every market is different however plumbing is plumbing and how you market will be different.
My demographics are not the same. People are people and have the same questions and concerns. You just need to know how to answer these questions and concerns to compel the person to own.
We have high unemployment. There have always been people unemployed, you must discover a way to gain agreeable terms.
I have to compete against handymen and the hacks out there. This has been this way since the beginning of time.
Can’t go more than what the market will bear. I like this one the best as NO one is testing what the market will or can bear.

I have a large company that when bidding against us will go below their costs to try and get the job. They may win roughly 10% when bidding against us even at below costs.

There are reasons why people hold themselves back from moving forward. One of the largest reasons is, I’ve always done it this way. Another; reason refusing to research and investigate properly before choosing to jump with both feet into a system ( organization) without understanding what needs fixed. You do not know what you do not know. These organziations are really good at what they do and they discover your weakness and then pounce. I am sure if we took a serious look we would discover it was an emotional buy verses a logical purchase. This always needs a logical reason first and backed up by emotion verse emotional satisfaction then backed up with logic.

Words are huge and very powerful. We as business people need to understand and use words that engage while driving interest that entices the buyer to a successful ownership exchange. A few simple words to change are show verse tell, inform verse tell. Evolve verse change, autograph verse sign here. Get rid of words like; I believe, if, I think and exchange them for definite words such as I know, you will discover, when you. The customer never gets this when they buy from you; you give this to him or her. We get in our own way of success the majority of times and love to play the blame game on the less informed. No one wins when the blame game is played.

Find out what you must charge and then discover a way to deliver what you must charge. Typically it is you that must evolve in order for your customer to accept.


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## High-plumbing (Jan 8, 2012)

I agree with Richard. You have to understand your customer. My property managers know they can get someone cheaper. They also know that they will not get the emails, pictures and options for repairs from someone else. They know that I know my job is to make THEM look good. Just remember to be patient. It takes a while to earn the trust from customers. Be willing to walk away from work. The best advice I have is this. There are four types of customers. 1. High profit, low maintenance. 2. High profit, high maintenance. 3. Low profit, low maintenance. 4. Low profit, high maintenance. We want ones and twos. You will never make a three or a four into a one or a two. This will help you make good choices.


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## brian phillips (Jun 27, 2012)

Thank you for the advice. I need to be better at selling our company, products, and services to the customer. We try hard to be punctual, and if not we call the customer to let them know we are running late. We are clean cutt and we wear company shirts, we clean up the job site and try to give the customer the best options for there needs and/or budget. I always get nervous when I bring the bill to them, anticipating a bad reaction to the cost. I thought maybe I should do flat rate pricing, but some customers want the bill or estimate itemized. We have only been in buisness since 2008 and have not experienced the good consistent times that some of the other company's have in the past. We are trying to build a customer base on honesty, quality, and integrity. I have a lot of customers that want quality work at a reasonable price. I try to educate the customer when I can. Some customers think that all you have to do to put a toilet in is just snap it in place. Can't count how many PVC toilet flanges I have had to replace from a tile guy that does not know how to pull them up or reset them properly. I guess in some ways it will all come full circle when the economy gets better and customers realize they get what they pay for. People don't want to fix their plumbing, they have too. They would rather take vacations, buy cars and play toys and eat out, etc.When times are good people will pay for plumbing that they want to have done, like upgrading to a nicer faucet or toilet. The 2004- 2007 days would based on people borrowing money from equity in their homes and remodeling their bathrooms for only 150.00 more a month on their mortgage payment. Now that they are unemployed or making less they actually have to save up a pay for a remodel with earned money not borrowed money.

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## plbgbiz (Aug 27, 2010)

First of all Brian, good for you that you are willing to be candid with your situation. 

From the outside looking in I see two glaring issues:

1. You are making a lot of assumptions about the customer's buying motives that may be very wrong.
2. You are not communicating effectively enough to your customer at the beginning of the call. That is resulting in buyer's remorse.

I'll take on #2 first.
Customers wanting a breakdown is no big deal for upfront pricing if you are operating correctly. If you have an appropriate billable hour rate and are accurately estimating your time, your T&M ticket will not vary much from your FR ticket. The only difference is WHEN the customer is brought up to speed. The faucet costs $XX and the installation costs $XX. Poof, there is your breakdown.

When was the last time you waited till after a meal to find out what it was going to cost? That only happens in the most expensive of the expensive restaurants. Ponder that for a while.

In the mean time, I would be willing to bet Richard is already typing a response to #1.


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## brian phillips (Jun 27, 2012)

Is it unprofessional to be candid with a customer on the phone and break down to them their options and explain to them respectively what your company offers in that price.example a new kitchen faucet installed is 300.00 and they say that is too expensive, then what, do you just say ok have a good day or do you say with that cost you get this....... From our company for that price. Example like warranty.

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## patrick88 (Oct 14, 2008)

I feel the only reason customers want a break down for flat rate. They dont understand it. I for one take the few min to talk to the customer. Let them understand. There really is no differance between flat rate and t/m


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## sierra2000 (Sep 19, 2011)

Gettinit said:


> Where does 976 come from? Can't seem to get that number to come up on the calculator....


I'm wrong on that. My calculation puts me at 996 available work hours for the year doing just service work and being a one man shop. 
There are 2920 working hours in the year.
Subtract 832 weekend hours.
Subtract 40 vacation hours.
Subtract 48 holiday hours, and this may vary depending on what holidays you recognize.
That gives you 2000 work hours left.
Doing service work a one man shop can expect to bill out no more than 4 work hours a day realistically, so there goes 1000 in unbillable work hours for the year.

For some reason my software gives me 996 billable hours instead of 1000 so that's what I use.


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## Richard Hilliard (Apr 10, 2010)

John Is 100% correct with customer motives.1 of the biggest mistakes in the construction trades is we sell to the customer for our reasons and not theirs. Brian in your thread you state the customer wants quality work at reasonable rates. What is a reasonable rate? Is 50 bucks a reasonable rate? Is 200 bucks a reasonable rate? How about 300 bucks? Defining reasonable is very subjective however your belief is what sets the tone for reasonable. 

My customers will not pay 150 dollars an hour. A solid statement some plumbers will make. Why would they not pay 150 bucks an hour? The person that is selling the job does not think the job is worth 150 bucks an hour. The same will go for the 200 dollar and hour or more. The first thing you or any owner, employee must realize is you are worth that kind of money. How can you sell something that you do not believe in? It cannot be done consistently. Having a belief by itself will not make it possible.

It is never 1 thing that sells the job. It is a series of steps for success that will generate a successful opportunity. Many miss the very important stuff and miss out on the opportunities. Many more do not want to take the additional time to spend with a customer to discover motives, moods, and personalities to have a predictable outcome. We have been taught to run as many calls during the day. To bill out 10-12 hours of work during an 8 hour work day verses 2-3 calls a day for the same or more money. By taking 15-30 minutes with each customer prior to physically doing the work will drastically change the perception of reasonable money.

During the information gathering time you will discover what is important to the customer. Why did they finally decide to call and take care of this issue? Most of the time we will discover the problem is over 2 weeks old or older. Why move now and not back then? I guarantee you this if you discover why they want to move forward today you will make the sale whether your price is reasonable or not. Why? It is simple you are selling and letting the customer buy for their own reason and not your reason.

Last Friday I started a series of Steps for Success in my blog. Friday’s steps covered getting history of a customer, todays covered arrival and entering the home. Next week I will be covering information gathering time and how to decipher that information into predictable behavior. I am not sure how many chapters will be in these steps for success however they are proven strategies that do work in any condition and with any type customer. Guess what it is free and open to the public. It does not matter if I like you or dislike you, it does not matter if you like me or dislike me the information is available to you for you. It is about raising the standard in our profession and then raising the perception.


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## Gettinit (May 9, 2012)

sierra2000 said:


> I'm wrong on that. My calculation puts me at 996 available work hours for the year doing just service work and being a one man shop.
> There are 2920 working hours in the year.
> Subtract 832 weekend hours.
> Subtract 40 vacation hours.
> ...


I just realized I put 4000 instead of 2000! Sorry. 

I have just begun charging time from last job till finishing the next on commercial plumbing and various other jobs. So far, no resistance. When a customer trusts you, price is a second thought. Case in point....just realized I messed up big time on four parts for a walk in cooler door. The total bill for parts my cost was $88 and I charged 50% mark up on that for each one. They seen the price, signed the ticket and said thanks for your quick response time. I called them today to straighten out the bill and they couldn't believe I bothered to call and lower the bill and also said thank you, that's why we use you...you are honest.


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## Richard Hilliard (Apr 10, 2010)

It is a lack of communication when a customer asks what your breakdown is whether it is t&m or flat rate. Prior to giving your solution or price take time to discuss not explain discuss pricing methodology. I would suggest to stop saying this is the price in the book or this is what the company needs in order to operate. Stop talking about your overhead and costs to do business. You’re passing off to the customer your problems and they do not care. Fix your overhead and lower the cost.

Design a script for every single person in your company to follow as a guideline to say in their own words that discusses why the price is the way it is and what you are going to do about it with discounts.

Customers like stability, they like the fact they will get you and the best thing is they do get you. They like that they get to speak to a live person. They like that you have talked to them about them and let them speak about their favorite topic which is them.


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## plbgbiz (Aug 27, 2010)

See, I told you Richard was working on #1. 
I love it when a plan comes together. :laughing:

Seriously though Brian, he gave you some real golden nuggets there.


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## brian phillips (Jun 27, 2012)

Thank you guys very much for your advice and input. I will definitely re-invent the way I communicate to customers when selling a job and/or product. I need to take time to understand what the customers needs are and be more confident in selling my plumbing abilities, our company and my self as a person. I will work on my cost And overhead budget and then realistically come to a labor rate that will meet my company and family needs. I will put pen to paper and un- learn bad habits I have come accustomed to over the years. Am I getting warmer?, or am I still missing the point?I will help to raise the standard of the industry. Thank You guys for helping this rookie buisness owner out. 
I will let you guys know how it all works out.


Be pridefull and stubborn.........puts me out of buisness!


Taking advice from the veteran buisness owners........priceless! 


God bless!

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## plbgbiz (Aug 27, 2010)

brian phillips said:


> ...Am I getting warmer?.....


You nailed it. 

Get your numbers more in line (it is a never ending process). Ellen Rohr calls this your KFP (Known Financial Position). Nailing down a realistic budget has got to be on the top of your list. As has been said by many smart folk that preceded us, if your are going to play the game you must play to win and that means keeping score.

While you are working on that, read (or re-read) "How To Win Friends And Influence People". It will help you to start thinking more in terms of your customer's needs rather than your own. After that, Jeffery Gitomer's "Customer Satisfaction Is Worthless" will hopefully got you to thinking creatively on how to develop loyal customers rather than satisfied ones. After all, would you rather your wife be satisfied or loyal. :laughing: 

The same principle applies to your customers.


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## Epox (Sep 19, 2010)

Richard Hilliard said:


> Last Friday I started a series of Steps for Success in my blog. Friday’s steps covered getting history of a customer, todays covered arrival and entering the home. Next week I will be covering information gathering time and how to decipher that information into predictable behavior. I am not sure how many chapters will be in these steps for success however they are proven strategies that do work in any condition and with any type customer. Guess what it is free and open to the public. It does not matter if I like you or dislike you, it does not matter if you like me or dislike me the information is available to you for you. It is about raising the standard in our profession and then raising the perception.


Richard where can we find your blog? I'm always interested in what you and Mr. Biz have to say. Thx


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## plbgbiz (Aug 27, 2010)

Epox said:


> Richard where can we find your blog? I'm always interested in what you and Mr. Biz have to say. Thx


I think this is it: http://practicebetterbusiness.wordpress.com/


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## GrumpyPlumber (Jun 12, 2008)

Confirmed, I lost a sizable job today to a lower bid.

3 bath, two kitchen, complete repipe on a 3 story, 65yr old CI DWV for a new purchase converted to rentals.

I'm more than happy to lose this one, I wasn't comfortable with the "atmosphere".

Hour per hour I'll do better on small jobs, the guy wanted it done yesterday and I was more concerned that my price was a little on the low side as it was.

Whatever plumber won this bid, he'll make less per hour while I'm able to work half the time to make as much and go home less tired, aching and fatigued/frustrated from pushing to meet an unrealistic deadline set by a home-buyer who knows nothing about the construction process.


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## Richard Hilliard (Apr 10, 2010)

plbgbiz said:


> I think this is it: http://practicebetterbusiness.wordpress.com/


 
That is it. Thanks John.


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## Richard Hilliard (Apr 10, 2010)

Please add your comments or ask any questions at the blog address. I am interested if this kind of thing is helpful to you and if this is what you want and need.


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## Richard Hilliard (Apr 10, 2010)

Chapter 4 getting the inspection is ready for your pleasure.


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## Wayneswilson (Jul 28, 2012)

*What can you bring to the table?*



brian phillips said:


> Hourly or flat rate? Free estimate or charge? Overtime or no overtime? Advertise or not? Credit cards or don't accept credit cards?etc.
> 
> Sent from my iPhone using PlumbingZone


First off, taking cc or not taking cc's? If Attention is paid throughout the day you will definitely find that more often than not the public uses convienence... Credit cards/debit cards are easier and faster for the clients. Flat rate pricing allows a commission based pay system which drives performance as long as your techs are honest. Education is the key factor being relayed to you with a few more words. What does your competition offer and how can you set yourself apart for the better? Educating your customers on how the problem could have happened and any know preventative measures that could be taken, helps gain trust on a professional relationship and preludes a sale. Set yourself apart from your competition with knowledge, conveinence, and above all SERVICE and how much you charge will rarely be a factor. Reason being, they called you generally because they cannot do it themselves. If you are the smartest and offering knowledge while maintaining professional and courteous service to your customer with outstanding work performance, then you will be the highest and the most sought after plumber. And rightfully so. Remember the calls are the same as what they were 5 years ago and people will still need need plumbing 5 years from now. If the value in the service and product equals your price then it's worth it. Your price should never be what sets you apart from the "other" guys. Quality is expensive but always worth it.


Advertise or not advertising?
The first realization here should be is that simple advertising is generally weak? Why should I call that guy? Marketing is the key, slogans and funny pictures grab attention sure, but does it make people remember and reccomend you? Talking to the customer and offering a service in a way that they reccomendation you to friends is the best advertising. Market yourself as to what you have to offer that's different from your competition that is more valuable to your customers. What is value to your customers is the first rule, and it is never price, period. Remember the key is we are not selling plumbing, we are selling ourselves.


Estimates can be either way, there are times when free estimates are needed, like larger jobs where there is a budget to be followed. It will allow you to get in the door to start selling yourself long before price is even brought up, other times simple charges to give and estimate could be required but rolled into price of job should the work start. For instance small fixtures replacement, etc. 


Breaking down the pricing for your customers, remember they are your prices for a reason and they should never have to be justified. When you are justifying something you are on the defensive which generally gives reason to believe you think that you are too high. Explaining the details on what you are going to do and how you will do it will build the knowledge and value instantly so when the price is stated, should any disagreements come up you are not justifying your worth. Instead you are questioning what your customer is requesting of you, and an agreement can be obtained easier.


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## PinkPlumber (May 20, 2012)

:w00t:


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## plbgbiz (Aug 27, 2010)

Wayneswilson said:


> First off...


An intro is requested from all new members. In case you missed it, here is the link. http://www.plumbingzone.com/f3/.

The PZ is for Plumbing Professionals ( those engaged in the plumbing profession)

Post an intro and tell our members where you are from, yrs in the trade, and your area(s) of expertise in the plumbing field.

This info helps members who are waiting to welcome you to the best plumbing site there is.

We look forward to your valuable input.


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## Mpillius (Aug 5, 2012)

To get the answer you must really track your billable hour efficiency. The example that used 976 is claiming to be close to 50% efficient. That is seriously hard work but lets use it. To figure your true selling price divide your annual OH by 976 to reach the tru BE, then divide by the reciprocal amount of your desired profit margin. ie: a 30% margin would mean divide by .70 


If we have an OH of 18k per month we will have a BE of $221.31
We will then have a total selling price of $316.16 per sold hour with a 30% margin


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## plbgbiz (Aug 27, 2010)

Mpillius said:


> To get the answer you must....


To get credibility, you must post an intro. I suggest you read the post previous to yours.


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## johnlewismcleod (Apr 6, 2012)

williamPS said:


> The hourly rate needed to make a profit is subject to countless factors.


True, but ...

http://www.plumbingzone.com/f3/why-post-intro-11368/


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