Billing Hours

jpplumbing

i am a new business owner and i was wondering how you guys go about your rates. i was talking to a couple of guys and they say you need to charge for the first 1/2 hour for a service charge. so lets say that the labor rate is 90 an hour, form what i understand guys are getting around 95-110 (depending on labor rate) for the first 1/2 hour than it goes to there labor rate of 90 per hour. after the first hour it gets pro rated per 15 minutes. If i understand this correctly if they are there for a 1 hour there labor charge is the 95-110 plus the 90 which would bring it to 185-200 for the first whole hour? thanks

jmic

Wow, makes me glad I know enough about plumbing to keep me out of trouble, and debt!

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Joe

realpurty2

I don't think your understanding it correctly or I am not understanding your post one.

Are you sure they were referring to the minimum charge? Most hourly rates include a minimum just to show up. This covers your mobilization if you get there and the problem is something small and quickly fixed. 1/2 seems low though unless your hourly rate is higher than most.

Here, if we do a service call on an hourly rate, the price is quoted as $xx/per hour with a 2 hour minimum. In other words, if we get there and your problem is fixed in 20 mins, your still paying for 2 hours because that is the amount of money it requires the business to cover the expense of sending someone out to do the call. You don't want to set your hourly rate too low or else you will never even make "break even" point, but if your hourly is too high, you won't get jobs.

Best way to calculate your hourly rate is to determine first what you need to make as the company to meet expenses of doing business and break that down into hourly. Then add how much you need to make as the serviceman.

It may be different in your area but I've never heard of a $185/hr labor rate for a plumber. You might want to check around in your area and compare rates.

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Double-A

Business 101.... Don't charge what the other guys charge, because they will never tell you everything they are spending their money on.

Purty hit the nail on the head. Basically, what do you want to make a week, divided by the number of hours you want to work per week. Add overhead, labor burden and profit.

Many plumbers are moving to "Flat Rate" or "Up-Front" pricing. Do a search on Google for Maurice Maio, Ellen Rohr, or Frank Blau. These are the guru's of pricing service plumbing. Their techniques can be used in all service businesses, including construction.

jpplumbing

sorry i didnt clear it up for you guys. i guess what i was trying to say is the guys that i talked to are getting around 85-105 for the first 1/2 hr than it goes to there labor rate after that. so lets say that your there for 1 hour. woukd you be charging the 85-105 (for the first 1/2 hour)plus the 1hour labor rate ( for the second 1/2 hour) . i guess the first hour is like there service charge or something to that effect. i usually go and charge my normal labor rate of 90 hr for up to the first hour than it gets prorated into 15 minutes and everyone including customers say that i am too cheap. i am just trying to clear things up. the flat rate priceing seems like its way to much money to be charging customers but maybe thats the way to go since i am not doing all that well so far.

Double-A

Sorry for the image, I couldn't get my tables to line up the numbers. I'm not proficient enough with forums coding to do it

Double-A

So assuming $105/hr then for 1 hour its $105 + $52.50 = $157.50.

Assuming 1 hour again @$90.00/hr then its $90.00.(your current method)

$90.00 + $45.00 = $135.00 for one hour (your competitors method)

Given that a good service plumber can only do 6 hours of actual work in an 8 hour day on average, you're leaving $67.50 on the table by your "competitors" rates and $22.50 on the table at your rate by his method and $45.00 on the table by your current method for every service call you make. If you can make 6 service calls per day, then its more like $405.00, $135.00, or $270.00 on the table per day.

So, let's look at gross receipts using your method. $90.00 x 2080 (one man year, no vacation) = $187,200.00

If you're looking for 12% profit, then you just made $22,464.00 plus your salary. Can you live and retire on that?

But wait! That is for 8 billable hours per day.

We just said that on average, you're only gonna bill 6 hours per day. So 2080/8 = 260 x 6 = 1560 (one billable man year, no vacation). 1560 x $90.00 = $140,400.00 gross labor sales.

Again, 12% profit on your investment would be $16,848.00 plus your salary.

Disclaimer: All of this assumes several things, and without knowing your actual costs, this is nothing more than an exercise in speculation. Use your numbers and come up with your own conclusions. I'm not a professional accountant or financier or anything of the sort. I've just been in your shoes before and this is what it took me to upgrade my life. Your mileage may vary.

tzzzz216

What i've heard , charge for a service call , and this only because of the area, small town U.S.A. ,$65.00 for the first hour and $50.00 for every hour after that and they do charge for the full hour and not 1/4 or 1/2 hours , and a 10% mark up on material. 40% of the hourly rate covers everything else.

jpplumbing

guys thanks for all your help in this subject. double a i will plug some of my number s and see what i come up with. thanks for all your help once again

Double-A

Glad to help. Be sure to check out Ellen Rohr. She's the most level-headed of that bunch in my opinion.

mdshunk

The service call fee for me includes the first hour. I tried to change it to 1/2 hour a while back, but some of the regular customer's balked. I changed it back to 1 hour. The service call fee is higher for this first hour, to cover getting the truck to the place, then it drops down to the regular hourly rate after that.

a1plumbingyakim

Central Washington...
most of us are $70/hr,,, 1 hour minimum , fuel surcharge $4-$8 for in town, .50/mile outside town + time, then you have your mark-up on your parts. after the first hour i usually give 1/2 hour increments....so far is working good...