Thread: Charging / Quoting

Ross, A good business normally has a business plan. In doing your plan you need to work out the cost of just being there, ie before you actually do any work what is your hourly rate for just having the business and living. Once you know that then you need to cover the cost of consumables and materials and then there is the profit. Takes a bit of working out and all depends on the number of jobs etc but you would be surprised how well it works out.

Once that is done its a guide for you to decide how you are going to charge things. My break even point is around $36.00/hr. Go ask a mechanic how they do theirs. Some jobs/customers are worth looking after but you should never plan on not making a profit.

In some cases, when things are slow doing a few small jobs will seem like better than doing nothing but they all use infrastructure and service which you have to pay for at the end. Then theres vehicles, insurance etc.

You can't work for free mate but you need to know what you cut off point is. I don't charge for delivery as I normally want to see the client and discuss the job at that time. (unless he lives in south africa) I probably build an hour in at the start for it though.

Cheers, have to go meter's running


Cheers

Originally Posted by Different

Guys I am having a bit of trouble deciding on a method of working out quotes for clients. What methods do you use and what additional things do you charge for and how much eg: delivery?

Ross

First of all, let me just say that I don't work in the building trade industry but for a safety consulting company and I am just letting you know how we do things rather than suggesting that this is the right way.

1. The choice between fully built-up costs or additional charges. As squizz states, you need to know your overhead costs for running the business and this needs to be factored into each job. The easiest way to do this is to include it in your hourly rate. You also need to know the additional costs relating to undertaking the job. This could include: travel, delivery, equipment hire, etc. We charge independantly for travel time but we include most other costs in our rate. The buliding industry normally doesn't charge for travel, but has a relatively high call out fee. You always here people complaining that they got charged $100 for a plumber come and spend 5 mins fixing something, but it probably takes a plumber 2 hours to do a 5 min job by the time he travels there and back and raises the paperwork etc.
The benefits in including everything in the hourly rate are: the client doesn't feel like he's paying for things that should be included as part of the job.
The downside of including everything in the hourly rate: You come across as being expensive in comparison to others, particularly in simple jobs where the additional project costs are low. We have a list of things that we believe are part of a project and we build that into our rate. Anything extra (ie an item that varies significantly from job to job) is charged as an additional item.

2. Estimating the cost for the job. When we estimate a project, we do it twice. First we use the hourly rate, an estimate of the time taken and the additional costs to work out what we should charge the client. We then look at how much we think the client is willing to pay. If there is a reasonable match, then we go ahead on the basis that we are happy we have quoted a fair price for a fair job. If we don't think the client is willing to pay our hourly estimate, we look at how we could reduce the cost. Maybe we could make some things optional (ie client could collect the item so reducing delivery fee), or maybe we do it for a discount knwoing that this may be a good client. Note that this can be a slippery slope - be careful about "buying" work by doing it at a loss, you'll find that the client will expect the same low price in the future. If we think the client will pay more than our estimate, we look at what we could have missed, what extra value we could add and what advantage we would get from giving the client a proposal that is cheaper than they thought.

As I said, this isn't really a suggestion of how you should do things but an indication of one approach.

Simon

Ross, I'm back from work and the meter is switched off but I had a think about your question (on the clients time). I change tack from my above post and the excellent information from Simon. Here another way to approach it.

Studies show most working families in Australia have a basic living cost of between $20,000 and $27,000. This for the mortage, tucker and the basic bills, health. If your doing say fine woodworking and expect to do about 24 jobs a year then you need to clear about a grand on every job just to get by. Then there is the business/cost of production and so on.

So if its a sideline to make some extra dollars well maybe you can do a bit at $500.00 a job average but not rely on it for making all of your living. Fine woodworking is an example of where hourly rates are often a pittance and wouldn't meet an award wage. Whilst I have all my figures worked out with hourly rates etc what I really look at is how much dough do I need to keep the family going. As a one man band I can afford to undercut some of the bigger companies but this is not good for the industry in general nor my future. I need to charge a reasonable rate to get by on and that the customer can afford.

If you take a large piece of fine wood working that has had 200 hours pumped into it from woe to go then thats $13,000.00 at $65/hr (typical trades rate). So what I'm saying is know your hourly figures/bottom line for those jobs when an hourly rate is appropriate but look at the industry and try and strike a reasonable chord on the margin you need on a larger job. Don't sell yourself short. If people want a quality product they generally respect the quality price. If your selling yo-yos forget all of the above and get over to china.

I am continually confounded by the omi-present australian small business attitude that to get business you must be the cheapest. Failing to understand all your overhead and capital costs and flogging cheaply has proven to be the recipe for disaster.

BTW: Job I was just at had the LAN Techo's in upgrading the network @ $135.00/hr. Pretty standard for that industry.


Cheers

This really is a variable area.

First I guess u must be good enough to charge money for yr work so if you are then it should not be a problem ;-)

Are you working fulltime, selling premade stock, taking commissions ?

Some people will tell to charge as much as possible, some will tell its better to have good relationships with yr clients as they will return for more work rather than go to someone cheaper.

I always try to have a higher rate for professional clients and a lower rate for small business and mates etc....

It also depend son how u value yr work what yr goals are, to earn a living or do satifsying work...?

Do u charge them to for u to learn...

All i can say is try and have a standard hourly rate or a set price for a finsihed peice.

Work whether u wnat money badly or yr main focus is quality...

charge a s much as u can get and if u feel ripped off then up yr charges next time.

Just remeber that if u r trying to build a business you must sacrifice cash now for what will make yr busines successful in the long term, meaning dont overcharge and try to build good relationships with yr clients..

good luck

We live in world where the marketplace sets the final price.
So get as much as you can !!

exactly echidna, i alone cannot set a price.i am one of many thousands of carpenters, if am constantly snowed under with to much work i'm probably too cheap, if i am only working 4 days a week i'm probably charging too much for the current demand..the best i can do is strive to be efficient, neat, reliable, polite, co operative and responsible to ensure i am an attractive proposition to those wanting my services

Here is a link to the www.business.vic.gov.au site that has a business plan sample for download.

http://www.business.vic.gov.au/CA256E36001D1550/WebObj/75EC80A307CFBC78CA256E6A00297454/$File/Plan%20to%20Succeed.pdf

Different,

The site Grunt has given has lots of good info and will turn up many different areas including marketing, insurance, costing and all sorts of handy info. On top of all the info given on the earlier posts its pays to remember that if you work 40 hours a week you won't charge for all of it. Time will go on quotes, talking to customers, sorting out the shop, picking up supplies etc. If you start to cheap its very difficult to get your prices up, if a customer says the price is to high it might just be a try on or they might mean it. In the end if you are not going to recover a reasonable rate you may as well just sit in the kitchen and read the paper rather than wearing out your gear. You don't have to be the cheapest to survive, in fact if you are you probably will not survive. Commercial work often does pay better than private commissions, just know your product and try to understand your market. In the end we occupy some form of niche and we co exist with others offering their services, if you are a little different it may help but those that try to out do everyone else don't get far. Work out what you need to charge allow for around a quarter of your time to be unproductive and try to do better than that. Its all about continual improvement, ask for referals get feed back and don't be afraid to ask for a deposit, if they haven't got that they can't pay the bill. Goodluck.



JohnC