How/what to charge?

[Voltimax]

This is not a thread asking "How much do I charge for blah blah"

It strikes me that there are a lot of folk out there running contracting business's that haven't got a clue and I'm fed up with being under cut by them so here is a little exercise to those who DON'T know how to work out what they should be realistically charging and aren't charging enough. I know there are those that will chip in and say "it doesn't matter, they'll soon go out of business". I agree they will go out quickly, but there's always someone else to take their place. Not only that, they damage the market place, because when it gets flooded by cheap unrealistic prices, customers begin to think it's the norm.

By the way I can't take full credit for this post, it actually came from a landscape contractors forum, so I've modified it a bit.

Establishing what is the right rate to charge yourself out at is the tricky bit and nobody will get it 100% correct -but how do you know where to start?

Below is an example of how a one man band should approach setting a charge out rate.

My first consideration would be to take the highest outgoing such as the mortgage or rent on your house.

Let us say that the expenditure is exactly

 

[Megaohm7]

Interesting point you have. I have usually taken note on previous post's that have been on here about pricing work and I'm certainly not far out with it. I urge anyone starting off to think about what they need to earn for a decent living as to what to charge for jobs, not forgetting the dear old tax man wanting his bit.Prices do differ depending your location of course. I recently submitted a quotation for a 3 bed rewire that was reasonable but the client said would I be prepared to drop the price! If the jobs not worth it financially to me I will walk away. My reputation is what I'm building up right now. It's the best advertising you can have.I was talking to a roofer friend of mine at the weekend and he has quoted for a number of jobs and people want him to drop his price all the time. He has been in the trade for decades..

 

[Bwy]

This is not a thread asking "How much do I charge for blah blah"It strikes me that there are a lot of folk out there running contracting business's that haven't got a clue and I'm fed up with being under cut by them so here is a little exercise to those who DON'T know how to work out what they should be realistically charging and aren't charging enough. I know there are those that will chip in and say "it doesn't matter, they'll soon go out of business". I agree they will go out quickly, but there's always someone else to take their place. Not only that, they damage the market place, because when it gets flooded by cheap unrealistic prices, customers begin to think it's the norm.

By the way I can't take full credit for this post, it actually came from a landscape contractors forum, so I've modified it a bit.

Establishing what is the right rate to charge yourself out at is the tricky bit and nobody will get it 100% correct -but how do you know where to start?

Below is an example of how a one man band should approach setting a charge out rate.

My first consideration would be to take the highest outgoing such as the mortgage or rent on your house.

Let us say that the expenditure is exactly

 

[Megaohm7]

OK I see and understand your point. Interesting exercise as well and not a bad idea for everyone to have a go at it.Now as far as your point about being undercut is concerned surely this will continue depending on the company quoting and the overheads for said company.

My point is, if a company consists of a 25 year old single man living with mother and paying her a minimum or nothing at all because he is only just starting out then he will be able to reduce overheads significanly against lets say the next guy below.

This is our 47 year old with a five bedroom house with a 95% mortgage and six kids (three at university). He drives the latest van which is on a contract hire system.

He has a loan to pay for an extension he is building and his wife is unable to work.

What chance does he have against the first guy.

I do see your point though I am not shooting you down please understand that. I will certainly do the exercise anyway.

Thanks for the idea. ut the kettle on

Yet another valid point!!

 

[sellers]

I see your point BWY, I am the 23 year old living with mum, well gf's mum and paying a small 60quid a week.

The 47 year old has plenty of opertunity, because I am not daft, I'll charge out at the same, but instead of having to pay the mortgage and kids, I spend it on holidays and enjoying myself, saving a bit for the impending mortgage!!

I know I have to enjoy it while I can!

 

[Megaohm7]

Fair play sellers. You work just the same and you deserve to reap the same rewards as the next man and having to save for your own place is never easy especially nowadays.

 

[sellers]

Not when your trying to find 10%.

If its the same work, it should be the same price! I don't agree that your mortgage household bills etc should come into what you charge. You should start at, how much am I worth, whats the going rate, what do my competitors charge. That gives you how much you can realistically charge and then set your lifestyle from that.

Theres no point in going and getting a mortgage out of your reach, a car on finance, having x amount of kids and then saying I need to earn x amount of pounds. You should earn the money first and see if you can afford to buy those things after!

 

[Evans Electric]

I think you have to avoid the mindset of , say, buying a Ferrari and then saying well I have to increase my hourly rate to pay for it .

 

[Bwy]

OOPS....did I say something wrong or was I misunderstood. ?

I thought the point was all about being undercut as some companies charge lower prices.

I have no objection to anybody charging what they wish to charge and spending it how they wish to spend it.

I have not complained about being undercut either.

I made my points as a reference only not to say anyone was right or wrong.

We all have to make a living in this game and we all know that some people are able to undercut because they do not have the overheads.

Yes I agree if you can get enough work charging

 

[spinlondon]

There are many methods of working these things out.

The method suggested by Voltimax is usefull for when initially considering whether to go into self employment, although 40 hours is in reallity 45 hours if you allow an hour for lunch.

You decide how much you want/need, decide how many hours you are willing to work, do the math and then compare your results with the general market.

Due consideration should be taken of the fact that you may be unable to work all the hours you have allowed for each day, depending on size of jobs and their location.

Many people have an initial call out fee that is higher than their hourly rate to offset their travelling time.

 

[Tarzan]

Marvellous, Now lets try and get some work................

 

[ElectekAir]

But then you also need to compare the full time employee who works weekends and charges say

 

[sellers]

bwy you haven't said anything wrong mate, I'm just saying that IMO what you should charge should be based on what the going rate is. Obviously if your business overheads are higher you can't help but charge more on the smaller jobs.

Charging shouldn't be based on what your personal affairs are. You wouldn't expect to go to a paper shop where everythings gone up 10p to fund the owners new car or house.

 

[Doc Hudson]

The method suggested by Voltimax is usefull for when initially considering whether to go into self employment, although 40 hours is in reallity 45 hours if you allow an hour for lunch.

Lunch break is, and always has been, unpaid in most businesses. The traditional 40hour week, 8:00-17:00, Mon-Fri, with 1:00 lunch, is obviously in reality 45hours total, but this would generally have no consideration in your calculation of hourly rate for an 8 hour day. Everyone would reasonably expect you to take unpaid lunch/tea breaks at some point during a full days work.

Doc H.

---------- AUTO MERGE Post added at 20:45 ---------- Previous post was at 20:37 ----------

bwy you haven't said anything wrong mate, I'm just saying that IMO what you should charge should be based on what the going rate is. Obviously if your business overheads are higher you can't help but charge more on the smaller jobs.Charging shouldn't be based on what your personal affairs are. You wouldn't expect to go to a paper shop where everythings gone up 10p to fund the owners new car or house.

Charging is and always will be based around a buisniesses overheads, which for a sole trader do included some of their personal outgoings. This country is not run on fixed cartel going rate prices, whether for labour or materials. Anyone who thinks all business should charge the same for similar work are missing a basic point of the capitalist competitive market. Even businesses within the same overall parent company group charge different amounts for the same product in the same local area.

Doc H.

 

[Voltimax]

Charging shouldn't be based on what your personal affairs are. You wouldn't expect to go to a paper shop where every things gone up 10p to fund the owners new car or house.

You are only partially right with that comment.

Of course you have to take personal affairs into consideration. If you don't take your living costs etc into account there's no point running a business, because you'll soon be bankrupt. This is why most electricians will never make much money and may as well be working on the cards for a boss. Take a look at larger companies, you fund the fat cats new cars there don't you? The whole point of a business is to make PROFIT, otherwise whats the point?

I'm not asking everyone to charge the same rate, buy the same materials etc, all I'm trying to do is stop the ignorant by helping to educate them, so at least they're not charging ridiculously low rates.

 

[gordy71]

I see your point BWY, I am the 23 year old living with mum, well gf's mum and paying a small 60quid a week.The 47 year old has plenty of opertunity, because I am not daft, I'll charge out at the same, but instead of having to pay the mortgage and kids, I spend it on holidays and enjoying myself, saving a bit for the impending mortgage!!

I know I have to enjoy it while I can!

Fairplay mate me too! Definately agree with keeping industry prices up. I generally try and walk away from any work where the customer wants the job for peanuts because i know its gonna be a mare! would rather spend time doing other productive stuff.... like ps3 lol.

 

[sellers]

Maybe its just me, but I still don't agree with taking personal affairs into your business, not if you run your business properly. My old mans been a self employed builder for 23 years, well known and respected around here, he didn't up his prices when he bought his new house or holiday homes, he upped his prices because he was in high demand which resulted in the houses and holiday homes. My mum who has only had part time jobs has now started her own shop selling horse products. She hasn't upped her prices to pay for the next home, they've actually cut back on luxuries to be able to fund the business.

I agree in a way that looking at your personal spending is a good way to know how much you need to earn to keep you in that lifestyle. But you shouldn't be in that lifestyle if you weren't already earning that ammount of money!

 

[spinlondon]

Lunch break is, and always has been, unpaid in most businesses. The traditional 40hour week, 8:00-17:00, Mon-Fri, with 1:00 lunch, is obviously in reality 45hours total, but this would generally have no consideration in your calculation of hourly rate for an 8 hour day. Everyone would reasonably expect you to take unpaid lunch/tea breaks at some point during a full days work.Doc H.

Sorry but when I started as a Subcontractor I worked 40 hours which included breaks and got paid for 50 hours.

Things have declined over the years, now I usually have to work 45 hours including breaks to get paid for 45 hours.

Everybodie's expectations are different, and my point is that you have to decide what hours you are willing to work.

If you want to work 40 hours including lunch hours then allow for such.

If you want to work for 45 hours....

 

[Voltimax]

Maybe its just me, but I still don't agree with taking personal affairs into your business, not if you run your business properly. My old mans been a self employed builder for 23 years, well known and respected around here, he didn't up his prices when he bought his new house or holiday homes, he upped his prices because he was in high demand which resulted in the houses and holiday homes. My mum who has only had part time jobs has now started her own shop selling horse products. She hasn't upped her prices to pay for the next home, they've actually cut back on luxuries to be able to fund the business.I agree in a way that looking at your personal spending is a good way to know how much you need to earn to keep you in that lifestyle. But you shouldn't be in that lifestyle if you weren't already earning that ammount of money!

He upped his prices though didn't he? Either way you look at it his luxuries were a direct result of his business practices as with any good businessman. All successful businessmen started a business to make money and be profitable so they could have a better life style, you just used your Dad as a prime example. Just take a look at people like Charlie Mullins, do you think he leads a modest lifestyle? You and I are in business to earn a living, therefore personal affairs have to come into it, you have to eat don't you? Most if not all people that start a business do so so they can earn more than they would if they worked on the cards, why the hell else would you suffer all the hardships of being a business owner?

 

[sellers]

He upped his prices though didn't he? Either way you look at it his luxuries were a direct result of his business practices as with any good businessman.

I agree totally with that post, but the thread has been sounding like, 'his business practices were a direct result of his luxuries' which is wrong IMO. buiness first luxuries second.