Contractor Pricing

[Greg from K/W]

I am starting this thread so Mike and I can discuss pricing. But if anyone else has anything to add to this please feel free to join in.

I try to stock my van with everything I think I will need. I dont have a trailer but my van can hold most things. I hate renting tools also and I am trying to get to the point where I dont have to. I am covered by a full contractors insurance policy.

I do my best to exceed a clients hopes. My current clients are so happy that they are willing to give me a letter of reference.

I am currently charging $40 and hour for labour and I try not to add in a material mark up as I don't feel it really does anything to help me out in the end. I don't know if this is reasonable or not but that is what I am currently doing. I try to add in delivery charges whether its me going to get it or I have a supplier bring it.

If I know I will have debris I order a bin or I bring my trailer to take it away.

I know geographically prices will differ as to what the market will stand. I have done work with other contractors that charge $45 an hour in this area. So I dont think I am too far out of line.

[Todd]

Hi Greg, with not being here that long i am wondering what line of contracting are you doing? My best guess would be carpentry but then again it could be something totaly different like irrigation or chiminey sweeping.

[Greg from K/W]

I am a Renovator/Carpenter. I do alot of the same stuff Mike listed in the other thread. Framing drywall install and taping cabinet installs. Some flooring though I usually sub all that out. I do some tile work such as back splashes and shower surrounds. I Sub all plumbing HVAC and electrical work unless its switching out taps or a few outlets and switches. I also sub out brick work and I try to act as a general contractor for my clients. I have no employees so WSIB can keep their hands off my account.

[Todd]

Out of curiousity what do you subs charge out at a hour especially electrical and plumbing?

[master finishing]

I used to own and run a landscaping company in Toronto and when I sold the company in 2001 I was charging $60 an hour. $40 an hour seems pretty low. Some math I run through my head. 50 hours a week times $40 an hour x 50 weeks a year is $100,000. Take your vehicle, fuel, insurance, tools, a few mistakes thats a lot of work for not enough money. Adding $10 an hour adds $25000 to your bottom line and you should be able to charge that provided your work is good and your are established. Never be afraid to charge for what you do.

[Max In Sudbury]

Originally Posted by Greg from K/W

I am a Renovator/Carpenter. I do alot of the same stuff Mike listed in the other thread. Framing drywall install and taping cabinet installs. Some flooring though I usually sub all that out. I do some tile work such as back splashes and shower surrounds. I Sub all plumbing HVAC and electrical work unless its switching out taps or a few outlets and switches. I also sub out brick work and I try to act as a general contractor for my clients. I have no employees so WSIB can keep their hands off my account.

Hi Greg,

WSIB actually makes a ruling one whether or not the "subs" that you use for flooring/plumbing/electrical, etc are your workers or not. They don't let you decide. There are questionaires that you must complete, and you must also provide proof that the subs are operating independent businesses (invoices, receipts, etc) - otherwise they can go back and charge you a percentage of the wages paid to the subs.

Also, Dalton has quietly passed Bill 119 that targets contractors that work by themselves (like you and I). This will/may force ALL independent contractors (with no employees) to obtain coverage from WSIB - above and beyond their commercial coverage. This is expected to be mandated within the next 3 years or so. Good luck ever getting benefits though should you be injured as an independent contractor.

Check out the following link...

http://dcnonl.com/article/id31525

I'm guessing that this is another blatant tax grab (not a new tax, but a tax on a new group) and the big push is from trade unions trying to get rid of the independents.

Sorry for the bads news....

Max

[Todd]

Max, does this not apply to only subs that work only for one particular general and it has to be for an extended period of time like 6 months or longer?

[Max In Sudbury]

Originally Posted by Todd

Max, does this not apply to only subs that work only for one particular general and it has to be for an extended period of time like 6 months or longer?

Hi Todd,

I assume you are asking about the employee status ruling. There is no minimum time frame involved. For example, if you are doing a reno and hire a drywaller, pay him by the hour, and supply the materials for him - he's likely going to be ruled an employee, and you'll have to pay coverage for him - even if he only works a week. Its basically the same as hiring a helper. You also have to cover family members - including your wife if shes the bookkeeper/purchasing agent, etc. WSIB shares info with CRA and can find out if you are reporting subcontractors but not registered with WSIB. And vice versa with CRA.

If in doubt, contact WSIB. Otherwise the guy (not a homeowner) you are working for can get stuck with the bill for your premiums and then hold back a portion of your contract.


Max

[OttawaP]

Buy this book, it will change everything in the way you approach your pricing model and correct all your guesswork. Pricing yourself according to what others charge is not a winning strategy in any business. Do you know what your hourly overhead costs are ?? What is your profit margin?? Do you know how much money needs to be in the bank in 5 months and 14 days exactly, down to the dollar?? How much more money do you need to make to hire another employee?? If you can't answer these questions honestly, then you may be on your way to failure. BTW, you are giving your work away for peanuts.

http://www.amazon.ca/Markup-Profit-C...0866757&sr=1-4

[Greg from K/W]

I get clearance certificates from each subtrade for WSIB. they have just changed them though. THey are now only valid for 2 months. So each time you use them you have to get a new clearance cert. I also do a questionaire for eache person I hire. For instance I hire my cousin once in a while to do trim work for me so I have to do a questionaire for that. I guess from the comments I have seen here so far I need to do some figuring and rejig the way I do my quoting. This is the info I am looking for guys thanks.

[scott_w]

Greg,

I didn't want to start something in the other thread, but I have been sick for a few days and a little edgy!

Anyhow, I think Mark had an excellent point of never being afraid to charge for what you do. THIS was the hardest thing for me to overcome, and I am still working on it.

The book that OttawaP mentions is like the bible of our industry. I hear about it all the time, and am actually going to get myself a copy. There is alot to the business other that charging "the going rate".

You'll find that these small jobs are high cost due to the fact that they make you little money. Thats why you need a decent minimum (3-4hrs labour). This time includes material runs, setup and cleanup time. Why should you do anything for free?

When quoting larger jobs (5K and up), I only give a rough "estimate" usually within a few thousand dollars. This is just a ballpark estimate. If this is within the customers means/budget and they would like to work with you, THEN and ONLY then do you do a full proposal (VERY different from an estimate as it is an exact cost). This you charge a deposit for, I charge $500. Once the customer sees the proposal, they can refuse it, however they lose their deposit or proposal fee. If they go ahead it is creditted against the job. This is VERY fair on both ends. Why should you spend hours or days writing up a $20K proposal to find out they "thought" it would only cost 5K.

If you ever present a price to a client and they say that it is outragious, or very high. Kindly ask them "Compared to what?" I can guarantee you that they won't have an answer. If they say "My brother (or whoever) says it should only cost $X" Tell him if he can get all the details, you would be glad to explain WHY it can't be done for that price.

MAKE SURE the paid proposals are foolproof down to every detail. This sells itself in the fact that you are GUARANTEEING them what is included and what is not. There are not alot of contractors that do this in my area. They give them a hand written single price on a generic office estimate form. You can shoot these estimates down in about 2 seconds by telling them that that estimate leaves them WIDE open for extras to be charged by the contractor.

Lost my train of though... still rambling a little(sick). I'll try again tomorrow.

OHHH... BTW EVERY....EVERY trade you bring in must be marked up!!!! Why should you co-ordinate and take on the responsibility of this for free?

scott

[scott_w]

Forgot to mention (looking at amazon reminded me), I have Gerstels book, "Running a Successfull Construction Company"

Its on the same page as the other book mentioned.

scott

[halflap]

Originally Posted by scott_w

Greg,

I didn't want to start something in the other thread, but I have been sick for a few days and a little edgy!

Anyhow, I think Mark had an excellent point of never being afraid to charge for what you do. THIS was the hardest thing for me to overcome, and I am still working on it.

The book that OttawaP mentions is like the bible of our industry. I hear about it all the time, and am actually going to get myself a copy. There is alot to the business other that charging "the going rate".

You'll find that these small jobs are high cost due to the fact that they make you little money. Thats why you need a decent minimum (3-4hrs labour). This time includes material runs, setup and cleanup time. Why should you do anything for free?

When quoting larger jobs (5K and up), I only give a rough "estimate" usually within a few thousand dollars. This is just a ballpark estimate. If this is within the customers means/budget and they would like to work with you, THEN and ONLY then do you do a full proposal (VERY different from an estimate as it is an exact cost). This you charge a deposit for, I charge $500. Once the customer sees the proposal, they can refuse it, however they lose their deposit or proposal fee. If they go ahead it is creditted against the job. This is VERY fair on both ends. Why should you spend hours or days writing up a $20K proposal to find out they "thought" it would only cost 5K.

If you ever present a price to a client and they say that it is outragious, or very high. Kindly ask them "Compared to what?" I can guarantee you that they won't have an answer. If they say "My brother (or whoever) says it should only cost $X" Tell him if he can get all the details, you would be glad to explain WHY it can't be done for that price.

MAKE SURE the paid proposals are foolproof down to every detail. This sells itself in the fact that you are GUARANTEEING them what is included and what is not. There are not alot of contractors that do this in my area. They give them a hand written single price on a generic office estimate form. You can shoot these estimates down in about 2 seconds by telling them that that estimate leaves them WIDE open for extras to be charged by the contractor.

Lost my train of though... still rambling a little(sick). I'll try again tomorrow.

OHHH... BTW EVERY....EVERY trade you bring in must be marked up!!!! Why should you co-ordinate and take on the responsibility of this for free?

scott

I agree with everything you said. I have the book by stone and it was worth every penny spent. I charge my company rate as I calculated it, with employees and sub trades...not the going rate in my area. I don't do cash jobs, and I don't take on jobs I cant do....

Do I get every job.... no, that is the part of doing business, but I make sure I make a profit on the ones I do get, and most importantly do what I was hired to do, and some...

[Lost in the Woods]

I absolutely agree that you should charge what you are worth. I'm not in the construction/renovation biz, but I do I do a lot of fee for service in my field. Many years ago, I charged cheapo rates, or for some things I'd do for nothing at all to get at other business opportunities. Too afraid to charge was one reason. The minute I started charging for everything and properly, I lost the tightwads you can never please and who often shop things to death, and the ones who can't afford to do what really needs attention.

If you low ball or don't charge appropriately, many will not view you for what you are worth. That's just the way people are.

If you are worth more than $40 an hour, charge it! If you are the one buying the product on their behalf, I believe that you should be charging for this as well. Otherwise, why don't you go do their grocery shopping for them on your way back from HD/Lowes/Rona.


In regards to the WSIB issue being forced on by the province. I did hear something about this recently - anybody got a good link to this issue, I'd like to read more on this - and from a consumers point of view, I'm happy they're doing this. I learned many years ago, that if a trade would injure himself on your property while working on a job for you, he/she can actually come after you if he doesn't have, or is not covered by WSIB.

The one time I didn't seek a clearance cert for a job, was when I hired Caroll's Home Improvements to cut and insert a walk-out patio sliding door. I had used them before for a bunch of window's and they had a clause in fine print right where you sign that says that their workers are covered. When the worker who turned out to be a sub was at my place, inadvertently informed me that Caroll's gets them to "sign off" that they are responsible on their own and he didn't have any WSIB, I was even more pissed than when he told me earlier that he had a bender the night before (he quoted 14 beers). This was after he had cut a big hole in the side of my house. This was actually only the start of my problems with this half-arsed job. Never use them again, and when anybody asks, I got my story/experience I pull out of my back pocket that I gladly share. This firm is not a dinky little firm either, has been around for many years, and charges more than most of its competitors. I believe that you get what you pay for - or should at least - and in this case, the doors and windows, which they don't actually manufacture themselves, I expected good qualified work. That's not what I got. Into the pot of boiling hot oil they should go IMO.

I'm still ticked about this and it's been five years. Sorry for the rant.

[scott_w]

Kevin makes a lot of great points. As I mentioned earlier (here or in the other thread) that price lends itself to perception. When you charge a higher rate, the client views you as more professional and would do a better job, in MOST cases.

You have to educate the client on the fact that they are not buying a comodity, like a tv, car etc etc. These you can usually buy anywhere and go after the best price and get the same actual product (although service may vary). With renovations, just because you get 3 different quotes, by going with the lowest, is it the same quality as the rest? Who knows, thats where you have to educate them on YOU. Explain how YOU are just as much a part of what they are buying as the rest of the project. Many times, I have been hired just because of the image/knowledge I present. My prices in some cases were 3-4 times higher on a small job (I quoted 1200, they got other quotes that ranged from 200-400). But I educated them on what I would be doing and how. Then I proceded to explain what "other" contractors would do. They were shocked and asked how I knew. I told them that because it was the easiest method for them to get in and out with some money. That their stairs would still creek a month later. I did the job, and actually didn't accept any payment for a month to ensure their satisfaction. They were again shocked as these "others" wanted payment upfront when they started.

I don't know what you company image is like, but it goes a long way. I had a nice logo done, and my vehicle and trailer have consistant colours, as do my business cards. I always get compliments.

As for workers comp, and independant doesn't need it as long as he has a very good liability policy, I also carry 2M. I clarified this with my agent. If you have employees they all must be covered my wsib.

Dont sell yourself short! That is the hardest thing to learn, it is nice to try to give them a great price on a fixed price job, but what happens if you severly underestimate? Do you think the client should give you more? Of course not. Thats why you need to make sure your price is more than enough to cover yourself. At the end of a job if you are WAY over and want to be a nice guy, give them a little break, but not the WHOLE difference. You are taking the gamble not them.

The other thing is that 90% of the time people will go for a fixed price job even though the price might be way higher than if you did it by the hour. They like knowing they'll pay one price. REMEMBER THIS when quoting. It is not ripping them off, it is insurance incase you run into problems with the job.


scott

[Greg from K/W]

Thanks guys I guess I am selling myself short. Its easy to say well I want to make this much an hour but are you? I am going to order that book. I have the one from tauton. I need to reread it too. I am going to reexamine how I do my quotes and how I go about charging a job.

I too dont do cash jobs. They can get messy. I dont need the hassle. I had a guy that insisted and told me he had plumbers and electricians out to his farm all the time all cash no GST. Tried to force me to take his cash job. I walked away and called Rev Canada on him. They did a full investigation of course. I dont know the out come but I can tell you he had a rectal exam. He was so ignorant I couldn't beleive it.

I am glad I started this thread guys thanks for all the insite you have given me. I am restarting my business after a 3 year hiatus. So I want to do this right. Funny I took a job on this past summer. They liked my work so much that they kept adding on and adding on. Had to start saying ok but I will have to do it T&M. I didnt have time to do up anything except ranged quotes for them. They agreed to it no problem. Now I am trying to play catch up for them. I started their job in August. I am still working on things they added now. Nice to have the work but I still find by the end of the day I dont have wha tI should to bring home for bacon. This I will change guys thanks to your help.

[scott_w]

Keep us posted Greg, I too am going over my whole process again to refine it. Sometimes it takes a few steps to get to where you are comfortable.

You'll always get people that say heck I don't make $40/hr (or whatever). These people just don't understand and never will. Just because they make $10/hr, the cost to their employer is actually more like $20-25 and this is without the other overhead you carry.

You have taken a huge risk being your own boss. You have tools, vehicle etc that need to be maintained, and always tools to buy. These all need to be accounted for above your hourly rate.

I don't do cash either, but there is a trick you need to learn. You will always get certain nationalities that it is almost part of their culture to barter. They are not being rude or ignorant, they NEED to get something. You need to identify them, and adjust your quote a certain percentage higher. Then when they say "I pay you no GST!" you say no problem! I'll knock off 5% But of course you still have the original GST accounted for to submit to the gov! It works everytime.

Scott

[Natedawg]

Besides Markup and Profit another good simple read is the E-Myth. This book really goes on to show how people value perception, especially in our industry.

[Greg from K/W]

I have run into that a few times and refused to do it. Mainly because I did one job and they agreed on the price and then wanted a discount after the job was done. I told them I did the work you agreed to the price thats it. Pay me or I will call the police. They paid me and I refused to go back for more work.

So I deal with that similar to how you do now. but I make sure I have even a small simple contract that spells out what to do and how much even if its hanging a picture.

[Rizak the Really Horrible]

I feel the same way about when people ask me to help fix their computers. If they've come to me, it's because they need an expert and can't do it themselves (or maybe they don't have the time).

My standard rate is $50/hour, 2 hour minimum.
Double that for family.