Ecmweb 7406 Bill Murdy Pr 2
Ecmweb 7406 Bill Murdy Pr 2
Ecmweb 7406 Bill Murdy Pr 2
Ecmweb 7406 Bill Murdy Pr 2
Ecmweb 7406 Bill Murdy Pr 2

Pricing Your Way to Success

May 18, 2015
There are many factors to consider in the price you charge for your work.  

Let’s face it, growing a company takes capital. Trucks, tools, marketing, insurance — you name it, and you have to pay for it. How do you stay ahead with a growing business and still make a profit? Knowing what to charge is the first step.

Know your worth

Bill Murdy

Electrical contracting should be a profitable business. You’ve spent at least seven years training and working as an electrician, putting time into studying, and taking courses to master your trade, and now you’re established as a master electrician. You’ve earned the right to charge for your time. Most business failures are not due to lack of work, but rather due to lack of profit. Low balling your competition is probably the surest way to ensure you’ll never have enough money to grow. Establish your pricing based on your costs, and stick to it. Take into consideration all of your expenses, and factor in the costs of marketing a growing business.

Tangible vs. intangible

The direct costs of the job are easy to see: You’ve got your employee’s hourly wage and the material costs. But it’s the not-so-tangible items that are often forgotten while establishing price. In the service business, fewer paid hours are actually on the job and billable than in construction. If your tech averages running three calls a day, then how much of the day is he spending behind the wheel of the truck in traffic? Add a factor to cover his efficiency as this is a real cost of doing service work. You’ve got truck insurance, fuel and toll costs, truck payments, and truck maintenance and repair. An aging fleet may save on monthly lease payments, but repair bills can cause unexpected and costly down time. Explore your options but understand that you’re going to be paying one way or the other, so it is important that you have this figured into your rate. Tools need to be purchased, maintained, and replaced — add this to the job price as well.

You’re licensed, insured, and maybe bonded. Everything has a price. Even if you’re starting out as a one-man operation and aren’t paying workers’ compensation bills, you’ll stay that way until you start figuring the cost into your pricing so you can afford to take on help. You’ve got liability insurance and maybe an umbrella to cover any loopholes in insurance. As the principal in the company, you’ll probably need life insurance too. These aren’t luxuries or accessories; they’re the cost of doing business, and your price must reflect it. You’ll have unemployment insurance, disability insurance, and all the other portions that get added to payroll; figure them all in. They are real, and should be anticipated.

Now you’ll want to get the word out about your business. This means your marketing efforts likely will cost money too. Establish a marketing plan and a budget to make it happen. Most businesses can maintain their existing presence with somewhere in the range of 7% of their gross sales being put back into good marketing. If you’re looking to grow, you’ll probably need more. If you want to grow quickly, you’ll need a good bit more. Whatever your plan, establish it in your price, and plan for it.

Add more of the tangibles, such as rent, office supplies, printing, uniforms, call taking services, etc. Are you doing your own books at night? Well, if you derive as much pleasure at that as you do going fishing or playing softball after work, then knock yourself out. Otherwise, figure in the cost of hiring someone else to do it.

Show me the money

Don’t forget about profit; it’s the reason you’re in business. Put a realistic amount in for that also. Now you’ve identified the true costs that go into pricing. From here, you can establish a multiplier based on what you pay (or expect to pay) a top tech in your area. You want the best working for you, so you’ll need to compensate him or her. Regardless of your invoicing method — whether you bill by the hour or price jobs as tasks ahead of time — knowing what you need to be charging in your service work will ensure your company grows and prospers as these “no name” trucks fall by the wayside.            

Murdy grew up in the electrical industry and holds a degree in electrical engineering. He has been in the residential electrical service industry for 30 years and has been a business owner for more than 25 years. He independently owns and operates the Mister Sparky electric franchise serving western Long Island, N.Y. He can be reached at [email protected].

About the Author

Bill Murdy | Owner

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