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New Buisiness-Hourly Rate?

13K views 23 replies 14 participants last post by  one2question 
#1 ·
Hello Gents,

I am starting a new business and I'm having a hard time finding the hourly rate I should charge. I've worked primarily industrial and commercial projects, so usually the people I worked for paid very well. The issue I'm running into is that I see most people are charging in the $50/hour range, and I can't understand how that money can support the business. I was making in the $50 dollar range working for somebody else (benefits included). So here is my question. These people saying they are charging $50/per hour, are they hacks, or are they nickel and diming the customer for materials, truck charge, insurance...etc? If I factor my cost; Truck, insurance, gas, tools, phone, and general maintenance (to name a few), I get to the mid $30s not counting insurance and before Uncle Sam takes his cut. This is taking into account that I'm working from my garage..... How on earth are these people throwing out a $50/hour bid and keeping people employed???
 
#3 ·
I am charging $52 per hour and I mark up material. I live in an inexpensive area in Southern Illinois. I see that you are in Houston. I am quite sure that you cannot make a decent living charging that where you are. You will have to charge more and compete on quality and service. If you have guys charging $50/hour in your area, you cannot compete on price if you are going to make a living.

Another thing to keep in mind is that if you are doing small residential jobs and service call type stuff, you are not going to get 40 billable hours in a week very often. You will have a lot of uncompensated time. I've been on my own 19 months and so far , I can tell you that it has not been worth it. The only thing that keeps me hanging on is the fact that I am building a customer base and hope the future will get better. In addition, my three main competitors are in their 70's. They can't keep going forever. The other thing is that there are not any good jobs to be had. I just can't see me working for someone else again.

Sounds like you are putting some thought into this. Good for you! Ultimately you will have to do the math and figure out what works for you.
 
#8 ·
I am charging $52 per hour and I mark up material. I live in an inexpensive area in Southern Illinois. I see that you are in Houston. I am quite sure that you cannot make a decent living charging that where you are. You will have to charge more and compete on quality and service. If you have guys charging $50/hour in your area, you cannot compete on price if you are going to make a living.

Another thing to keep in mind is that if you are doing small residential jobs and service call type stuff, you are not going to get 40 billable hours in a week very often. You will have a lot of uncompensated time. I've been on my own 19 months and so far , I can tell you that it has not been worth it. The only thing that keeps me hanging on is the fact that I am building a customer base and hope the future will get better. In addition, my three main competitors are in their 70's. They can't keep going forever. The other thing is that there are not any good jobs to be had. I just can't see me working for someone else again.

Sounds like you are putting some thought into this. Good for you! Ultimately you will have to do the math and figure out what works for you.


Also, let me add, I work for myself. I don't plan on ever having employees. It is a totally different situation when you have to make payroll every week and pay all of the other associated costs.
 
#4 ·
Only you are going to know what to charge. If $50 an hour isn't enough for you to keep the business going from month to month, how about going double that rate? Would $100.00 be too much? You need to figure out what your overhead is and how much money you want to pay yourself and how much profit you'd like to make. Then of course someone else will undercut you and get the job based on price and then where will you be? What if the truck breaks?
 
#5 ·
Well that's exactly my point. If the truck breaks when I'm only getting in the $20s for my product, then I definately wont' have enough to fix it. The site that the kind Mr. Sparkle pointed me to shows me at $71 an hour to remain in a 25% profitable situation. So I guess I'll start in that neighborhood.

Here's another question. I have to hire an apprentice....do I charge for his hours as well?
 
#11 · (Edited)
Here we are talking about an hourly rate of say $60.00 to $100.00 per hour.

Sounds a little low, so lets think big and charge $200.00 an hour.. THAT is nice money IMO.

Now lets look at a nice money making job.. a service change.. :rolleyes:

I know a guy who charged $6500.. round numbers.. materials cost say.. $600.00... and then labor.. business expenses.. say $500.00.

So that leaves $5400.00 divided by (8) hours comes out to $675.00 per hours.

So lets all go out there and estimate at a labor rate of $675.00 per hour for our jobs.

Let me know how that works out for you where the job is going out to bid.. :thumbsup:

Oh yea.. one more thing.. some here say I don't know all the facts.. :wallbash:
 
#12 ·
Welcome to the wonderful world of electrical contracting.


Hourly rate is simple.

Take all you annual expenses, and total them up. Divide by 2000. That's your hourly rate.














Or, you could just use the 'going rate' method and let your competition set your rate.
 
#13 ·
Welcome to the wonderful world of electrical contracting.


Hourly rate is simple.

Take all you annual expenses, and total them up. Divide by 2000. That's your hourly rate.

Or, you could just use the 'going rate' method and let your competition set your rate.
The going rate is an average of what the competition charges for a service or product.

I use it in my estimate on certain items that are basically the same.

This method works very well for me, but obviously others here don't agree..:rolleyes:
 
#15 ·
Get a cost calculator. Find your over head. Their is a guy here that has a cost calculator that is great and he has a flat rate program. You can get a demo on the program and try it. He has a website, electricalflatrate.com. The companies that are charging low labor rates probably have the employee base to spread the cost out over. Small companies don't have that. The more employees the lower your hourly rate can be. But I'm sure they are higher more like @$90. Remember service is less hours worked then non service. Service 1200 hrs non service 2000hrs a year.
 
#16 ·
I guess its ok to know what others charge for certain work but you have to use your own judgement and formula with that one. I know of many here that dont think their work is worth as much as it really is when you compare other trade pricing structure.
 
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