Consider this a friendly reminder. If you’re doing service work on a time and materials basis, make sure your client knows what to expect before you start. You should be working from a written agreement, but even if it’s verbal, you need to clarify:
- The hourly rate for anyone and everyone in your company working on the job. Your rate should be fully burdened, which means it includes all payroll taxes, benefits, etc. It should also include your full markup and any additional overhead needed to cover your in-house expenses and complete the billing.
- Your fixed trip charge, or a statement that any trips away from your office, whether to the job site or for materials, permits, etc., will be charged at $xx per hour plus 53.5 cents per mile. Note: Any trip charge needs to be communicated BEFORE you make the trip.
- Your markup on materials, which should be at least 30-35%.
- Specifically, what you will do, about how long it should take, and, if you’re smart, a not-to-exceed clause to give your client peace of mind.
We’re subscribed to our local Nextdoor.com network, and a recent post prompted this reminder. Some of you are probably familiar with Nextdoor.com. It’s a free private social network for your neighborhood. For the most part, we hear about lost dogs, road work, burglaries, and prom dresses for sale, the usual neighborly stuff.
Here’s the post that caught our attention:
This message is a “heads up” for anyone needing to hire a plumbing contractor. Recently used (company name) for a small job, replacement of a 3/4″ valve/PRV at meter box in house water supply line. I was very unpleasantly surprised with the invoice total of $1518, including a labor rate of $150/man-hour.
I can’t comment on the price because I wasn’t there and don’t know how involved the project actually was, but this isn’t good. Even worse, the plumbing contractor doesn’t live in our neighborhood and will never have a chance to see that post or respond to it.
This post led other neighbors to respond with their stories. One homeowner had dealt with the same plumber:
I had the same issue with (company name) charged me more to fix my water heater then it would have been just to replace it and then I had to have someone out again to fix it shortly after.
If I was the homeowner, I’d be upset as well. This should never happen. The plumber isn’t conducting business in a responsible, ethical or honest manner, and sooner or later it will catch them.
This stuff can be prevented by letting the homeowner know how much the project will run up front using a high and low range. You probably won’t hit the exact number but you can get close. Include a “not to exceed amount” and hold to it.
Another neighbor posted about a different company:
(Other company name) will quote you and they have always stuck to the quote for me.
Now there’s a simple one-sentence referral that will cause their phone to ring. That’s how to do business.
The knowledge and experience Michael Stone gained in his 60+ years in construction has helped thousands of contractors improve their businesses and their lives. He is the author of the books Markup & Profit Revisited, Profitable Sales, and Estimating Construction Profitably, and is available for one-on-one consultations.
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