T&M work
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Pro-Getting paid Con-not getting paid
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But, your hourly rate should cover all overhead and expenses. So, you're not charging enough.
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1,120 Posts
crap
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With nothing left over.
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Pro:
I can change my hourly rate based on the homes neighborhood and square footage
Con:
I can't charge enough to pay for gas for my 2004 F250....:laughing::laughing:
Pro: T&M is no-risk for the contractor.
Con: No-risk, no-reward
The best T&M business model I heard years ago is T&M based on two men per truck. You have a journeyman and a laborer. As an example, you say $100/hour each and in reality it is something like $170 for the journeyman and $30 for the laborer. So the true labor rate is masked, just as it is in flat-rate residential service. It doesn't work with one guy because you can't get $170 for one, or $340 for two journeymen. But you can get it with creative minimums, $100/hour 3 hour minimum.
$100/hour is as an example. You could plug $150 or $350 into the above example.
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But remember little Miss O'Leary will keep you there 3 hours moving furniture and washing floors. Minimum 3 hours are dangerous words.
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when I worked for a buddy, we did some t&m that paid handsomely. I'll do it again in a heartbeat if that gravy train ever shows up again, but mostly when contractors mention it, they also want some ridiculous constraint like "guaranteed maximum". when they utter that word, I just try to give them a contract price because if there weren't unknowns we wouldn't have been discussing t&m in the first place. It's the deep pockets that just want feet on the ground NOW that will pay nicely for t&m (if you can trust them to pay the bill and not weezle out for a discount when the invoice gets to them)
If you do that, why not just call it flat rate? :laughing:
"I can do the job hourly or flat rate. If I do it hourly, it's going to take me 3 hours at $130/hour with $100 in material. If I do it flat rate it's going to cost you $490. Which one do you want?"
Pros: you can get paid for the work that you do by the hour. There really is no losing (unless see con b)
Cons: (A) a lot of people want a hard estimate for the job instead of having no clue of how much it will cost. (B) people get sticker shocked and might not be so happy to pay.
Number One "Con" of T&M.
IMO there is nothing quite as motivating in contracting as the fact that they have just signed a contract that $XYZ is paid on completion without discussion of "Am I paying for your trip to the store?", "You charge $25 for a breaker?", "Do you have a left-handed discount?".
Best IMO to get the shock out of the way in the beginning and take all the stress out of the call, rather than placing all the stress on myself at pay-time.
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