question for pros: time+materials or bid?

SomeTradesJack

What's better for the tradesman? For the customer? I'm talking service-type jobs not system installs.

lostinheating

I'm not a professional by any means but 2 issues always a rise. 1) time and material ppl think you're milking it for more money 2) bid if you finish fast people think they're getting ripped off.  I think more people like bid.

psb75

Clients like bids, sure. They like the certainty. If you are GOOD at bidding...BID! You will make more this way. If there is a lot of trust between you and clients... do time and materials....especially if you are learning the business end of things. But it is often difficult to estimate on service work with lots of 'troubleshooting.' DON'T ever quote someone a price over the phone before being ON SITE. I learned all of this above stuff...the hard way.

GroundUp

For service, it's almost impossible to bid things fairly as you have no idea what it's going to need. For installs, bid always. I hardly ever visit the site prior to an installation or swap, everything is bid over the phone and documented with what's included and what's not. If I drove to every site to bid every job I was asked to bid and never got, I'd be 4 years behind- I spend at least 2 hours a day doing bids from home, it'd be an easy 6 hours a day if I drove everywhere

Jamie Hall

Looking at this from the point of view of both the customer -- which I, or at least my daughter, still am, and from the point of view of professional engineer designing and overseeing large and sometimes very complex projects (civil engineering).

Speaking from both hats. If I had or have a relationship with a contractor which involves a lot of trust -- for whatever reason it may have developed (a topic all of its own, by the way), I always preferred time and materials and so, I think (I hope!) did the contractors working for me. I can think of half a dozen folks, more or less, here on the Wall whom I feel I could trust that way -- and who, I hope, would reciprocate the trust and we could work together to get done what needed to be done, correctly, and with no fuss. There are a few contractors from my previous life (as it were) and other areas who are in the same position. (no names!)

But this is a somewhat fragile relationship. Both I and the contractor have to feel that the other will give a fair shake, without there ever being anything more than a professional difference of opinion, resolved by professional consideration, of what needs to be done and how to do it, and never any question about what the work is worth -- nor hesitancy about paying for it. I may not have always gotten the lowest cost -- but I always knew or know what I'm getting, and the value of it.

In any other situation a bid is probably better. However, and it is a big however, a bid has its own difficulties. Some of them -- some of the worst -- stem from an underlying but unspoken necessity to have every T crossed and every I dotted -- bluntly, a lack of trust. Which I will get into. But back to the beginning of the process: every bid has two fundamental parts. The specification by the customer of what is to be done and, often how to a certain extent, and the response by the bidder of how and with what materials and forces he or she proposes to meet the specification. In the professional engineering world, I was very fortunate in having two really bright people working for me who were wizards at writing specifications and drawing up the plans which go with them (they also reviewed bids for accuracy and completeness, and such devilry as unbalanced bids -- the bane of a civil engineer's existence). And, supposedly (I sometimes wonder..) I knew what I was about, so that the whole package would produce a finished product which accomplished what the ultimate customer wanted done properly, legally, safely, and at minimum or at least reasonable cost. As we have often noted here on the Wall, though, in most cases you, as a heating contractor, don't have that luxury. In some cases it may be dealing with a homeowner who waves their arms around and says "I want heat". In others you may have a customer who insists on this or that feature without knowing whether it will do the job properly -- or at all. Or you may be blessed with an engineer or architect who, frankly, doesn't have a good grasp of what he or she wants and how to go about it.

All this makes you job as a bidder far more difficult -- and risky. In the engineering business we called such projects "turnkey" projects, because we were in a situation where we were expected to produce a finished project to meet a very vague specification to please a customer. I avoided these to the extent I could (I did do a few, but only in cases where there was a large trust factor between me and the ultimate customer).

Which brings us to the bid. If you do have a set of intelligent plans and specifications, it's not really so hard -- although it can be time consuming -- to prepare an equally detailed and accurate bid. On rare occasions you may face an ethical quandary, however, which you should be aware of: if you discover something in the plans and specifications which you are reasonably certain will not work (not where you don't like the style, or whatever, but actually will not work) what do you do? I don't have a good answer for that, as it would depend very much on the relationship -- if any -- you have with the specifier, and their relationship with the ultimate customer. In some cases -- I'd like to think most cases -- I'd have welcomed a comment -- well before the bid deadline -- to the effect of "Br. Hall, did you really mean...?". Not all specifiers think that way. Worse, not all jobs can be done that way -- in anything involving a low bid for a governmental or other public body, for instance, that could be regarded as collusion with very bad consequences for all concerned.

If you do not have a set of intelligent plans and specifications, however, you have a genuine problem. You essentially have to create your own to do what you understand what the project is supposed to do. So the first thing is to set out, very clearly, in your bid what the proposed work will and will not do. Then, having done that, you need to decide how you are going to accomplish the job -- and here there is almost always a conflict between doing the job the way you would really like to see it done and doing it for a price which you think the customer will go for. Can't help you with that. All this is doubly important if you know, or have reason to believe (now I sound like a lawyer...) that the customer has requested multiple bids. Then clarity in exactly what it is you propose to do and how it will meet the customer's desires is extremely important since, without plans and specifications the bids will not be strictly comparable, and -- assuming you really want the job -- part of that preamble has to be written to convince the customer that he or she really wants and will get what you have on offer.

The bid itself shouldn't be a problem -- if you've been in the trade for any length of time and can anticipate potential difficulties (even trivia such as that boiler won't fit through the door -- what can we do?) and allow for them in your choices and numbers. If you're starting out in the game, this is going to be more of a problem -- and you will likely make mistakes or face unexpected circumstances (of which more later).

The bid -- in the absence of those plans and specifications -- should also set out what you are not going to do. Perhaps things such as running additional electrical power, or a new water supply, or building a chimney, or a new gas line. Clarity, clarity, clarity -- assume that anything which can be misunderstood will be.

Then there are change orders. In any contract there must be some provision for them (I don't think I've ever done a project which didn't have a few). What is the procedure, and under what circumstances, are they needed? Who is to decide their value? And who is to decide who picks up the tab? That must be spelled out.

Lastly, I hope -- clarity in when the job will be started, and completed (and in a larger job, stages), clarity in what to do in the event of circumstances beyond either party's control, and clarity in who is going to pay whom, how much, and when..

It might be argued that a lot of the above is really part of the contract, once the job is awarded -- and that is true; However, if you are clear about such things in the bid, then the contract becomes more of a matter of affirming that the job will be done in accordance with the plans, specifications, and bid.

Is all this massive overkill for changing out Mr. Smith's boiler? Perhaps. But the general principles need to be there. A lot of it is boilerplate -- once and done.

Best of all, build up a relationship of trust and you won't have to worry about any of it. When I was a practicing engineer, there were a few literally multi-million dollar jobs which I did on the basis of a series of handshakes. There were a few jobs in the low tens of thousands which came with a 50 page bid...

I apologise for rambling, but I hope this is helpful...

GW

We flip flop back and forth as I see fit. Just gotta be careful, some shrewd customers expect it both ways, as in: "I know you gave me a price but now i want a breakdown". Or, "I know we discussed time and material but in the beginning you guessed at 1234 and now you're telling me it's 5678??".

I have general responses to both (of this class of customer). And, if it were easy, everyone would be a contractor in the trades.

In general i prefer price up front becasue getting all the time spent is a pain (there's obviously more time spent that what the customer saw at their own home/place of business)

BTW I despise the word 'bid' but I just go with the flow when it's used, no use in getting all contorted for small things.

Larry Weingarten

Hi, My approach is a bit different. It's T&M with a "not to exceed" number. This seems to give the client some comfort and works nicely for the sort of work I'm familiar with. If a client wants me to do something strange, it's strictly by the hour.

Yours, Larry

SomeTradesJack

Thanks, everyone. I asked because, in asking a plumber for assistance, he wanted to look at the job and then do an estimate. Both are fine, of course, but I really don't need him to count ounces of flux, etc.

The customer-professional relationship/trust thing IS certainly a big deal. I'm assuming that's been discussed before on this board. I spent lots of time driving yesterday and listened to several of Dan's podcasts. Lots of relationship material there.

GW

Youngplumber said:

T&M for quality. Bid for wal mart customers. 

Wow that’s a new one😀

GW

Relationships—-clearly homeowners need to hire trades pros that they don’t know. And even if there is an ongoing relationship, there’s no promises that either party will “stay the course” 

With today’s online grading systems (angies list, Google reviews) you can sort of get an idea what you’re in for. 

Bigger companies- you may get their new guy or the guy that went on a bender the night before. Smaller companies, well I guess that’s possible but less likely. 

Smaller companies—you likely deal with the same people but when there’s a sick day or vacation, there may be a ripple affect (or no service at all)

If there was a perfect system or method there would be the beginnings of a huge monopoly. But most trades guys stay small (like me, big is more difficult to manage)

STEVEusaPA

Service is fairly easy to bid in most cases. Usually on a service call, I charge a diagnostic fee. Go to site, take a look. Most cases its simple enough to diagnose then give a bid for the cost to repair. If it's more involved then it may be a T&M, not to exceed. If it's a mess or a situation where you have to do a lot of work to even see if it can be fixed to be able to assess the costs, then they'll have to sign off on a full T&M.
I usually never have a problem no matter what way it goes.

Jamie Hall

Youngplumber said:

T&M for quality. Bid for wal mart customers. 

Interesting comment... could I ask, just perhaps to be perverse, what makes the difference for a WalMart customer? Other than the minor detail that they probably are not wealthy, don't they deserve the same quality work as John Q. Megabucks, Esq.? And just may be more appreciative?

The Steam Whisperer

I see where young plumber is coming from.... If a job is T and M, doing the extras to make the job work much better than typical can be done. If all a person is looking at is price ( Walmart's market), then there is no room for anything better than minimum. Unfortunately that usually means the person is saddled with much higher long term costs......as has become the norm in the U.S. market. A high quality job can be a lot easier on T and M if there are no bid specifications setting a standard.

Campyman

An overwelming majority of the time my clients prefer a bid. Then they know exactly what to expect. Time a material jobs can be problematic for both clients and customers alike.

Jamie Hall

Leviticus 19:15

SomeTradesJack

I don't mind spending money on quality. But sometimes I don't know enough to gauge that...until it's too late. As the homeowner, it doesn't help my mental health to be suspicious of a trade who might take advantage. As a husband/father who works hard, I need to do due diligence. That's why I'm here, educating myself. Plus, you all are a hoot! Quite a cool community here.

EdTheHeaterMan

This sounds like it is getting Political.

I have a story of how I stayed in business after 4 years of self-employment contracting. 80% of my work was service calls. 20% was Installs. Mostly replacement or adding air conditioning to an existing furnace. My competition was charging around $40.00 per hour for service work at the time for time. (I'm showing my age) I was barely making ends meet at that rate. The phone company was charging over $70.00/Hr (that is more than a dollar a minute) for telephone repair work back then.

As part of a mandated continuing education to stay a Dealer for Lennox equipment, I took a class in this new concept called Flat Rate Service Pricing. The instructor was basically selling his software. But I listened to the pitch and here are some of the high points he covered.

1. At the end of the job the customer will look at the bill and dispute the actual time you were there with the hours you charged for. Usually having to do with travel time. And usually taking an extra 15 minutes of your day to reduce the price by 30 minutes.
2. You don't charge the hourly rate you deserve.
3. You don't mark up your parts as much as you should.
4. You don't get paid for any trip to the shop or supply house to pick up parts (if needed)
5. You rarely get paid for 8 hours in an 8 hour day
6. If you are good at what you do and get it done quickly, you are getting paid less for your experience.
There were several other points but those were the highlights I remember.

This next part is interesting, and a little comical but you can skip to the next post below for the rest of the story.

I decided to spend $1200.00 on this software based on his sales pitch.
Now I have to go home and tell my wife I just spent $1200.00 on 4 little computer disks. That was more than a refrigerator & stove, ... combined. (of which we need to replace them soon.) So I loaded the software into my ADAM computer only to find that after the 3rd disk was loading into the ADAM there was an error message. "INSUFFICIENT MEMORY". So now I own 4 worthless disks unless I purchase a new Computer. Off to Radio Shack to buy a TANDY with "Windows" With a guarantee from the man behind the counter that there was enough memory to install the program on the 4 disks.

Back home with $1700.00 in computer stuff. Monitor, CPU, printer, and a power station (that may have been a surge suppressor). 4 hours late I plugged in all the wires and cables under the skeptical eye of my Dearest Patricia. The program loaded and I was off to the races. I just needed to enter some variables like parts markup, labor cost, labor rate you want to charge the customer, and a few other things. I made a printout of the pre-loaded price book that was included with the software. There were over 20 different sections and each section had over 10 pages of "Flat Rate" scenarios with the material needed for each project and a secret code for the allotted time for the project. The computer did all the math, and there were 3 prices for each repair. The Retail price, the Overtime price, and the Discount price (maybe for service contract customers). Each section had just about every possible repair covered. A condenser fan motor replacement that included the capacitor and wire connectors and miscellaneous hardware with 40 minutes of labor allotted. already priced. There were over 20 different motors listed, different voltages single-phase, three-phase, different horse powers all the normal possibilities. The same with blower motors, gas valves, circulator pumps, zone valves, circuit boards, defrost timers, just about everything you could need. BUT there was a problem... I did more oil heat repair than anything else. There were only 2 oil heat pages and that covered 8 different repair scenarios. Pretty worthless after spending almost $3000.00.

So I started to keep track of how long each different repair I did on an oil burner took. Replacing a nozzle 12 minutes. Replacing a nozzle, cleaning and adjusting the electrodes, 17 minutes. Pump strainer, 9 minutes. Oil filter, 7 minutes, Ignition transformer exact replacement, 14 minutes. Universal Transformer with adaptor plate 21 minutes. and on and on and on, Each evening I went home and added another few repair scenarios until I had over 20 pages in the Oil Heat tab in my book. This took about a month. Now I was ready and I printed the book. I based the pricing on $60.00/Hr. retail to the customer and I charged $39.00 for the initial service visit. The customer assumed that was the hourly rate which was lower than the $40 -50 my competitors were charging. I also had a phone number 399-6864 which on the phone dial you could just Call 39-YOUNG for $39.00 we will do a service visit.

EdTheHeaterMan

So You can see from the story I can now go to my first service call with my Flat Rate Book and the script from the Flat Rate Class, I just took over a month ago, and this is what happened.

It was a Monday morning and I received a No Heat call from a new customer recommended by a fuel oil dealer. The customer was an over-the-road trucker and was not making any money while waiting for the "serviceman" to come and fix the heater. I arrived and recited the script that basically says "for $39.00 I'll find the problem and if it is minor that will be all there is. If it needs parts or additional labor I will tell you the total before any work is done so you can approve it." The customer agreed and we went to the basement where I found a defective ignition transform within 4 minutes. I also noticed the relief valve had a bucket of water under it and the pressure gauge read 12 psi but the relief valve had a slow steady drip.

We Then went back upstairs to the kitchen table with the customer. I had my BOOK and a repair ticket. I explained that the problem was the Ignition transformer. But I noticed the relief valve was dripping and the cause was a waterlogged #30 Extrol tank. I added the relief valve to the ticket and the expansion tank to the ticket. I then said the boiler needed to be drained to make those two repairs and added another line item for "Drain boiler for needed repairs." Finally, I said that I had all the parts on the truck except the expansion tank, If he wanted that replaced I would need to go to the supply house and get one, so I added a "Short Trip to Shop or Supply House" line item. He watched as I explained each line item I entered on the ticket.

Now I open the BOOK to the page for Ignition transformers and point to the price and write it on the ticket, then the relief valve, then the expansion tank, and right on down to the "Pick-Up Parts Short Trip" and entered the price for that. Added the $39.00 to all the other items and the bill came out to over $300.00. This Guy was soo happy with my skill, and the professional proposal he slapped down the total in cash, handed me the keys to his house, and said "You got the job, lock up when you are done and leave the keys in the flower pot outside. I'm going to work"

As a drove away from the home to get the needed expansion tank, I stopped and added up how much I would have charged with my former time & material invoices. (that the customer would have needed to wait for until I was finished) and figured out that I would not have gotten labor hours for driving to the supply house and would have not marked up the material as much as I did. The guy would be pissed at the amount of work time he lost and he would have said I charged for more time than I was there , in order to get a better deal.

After I totaled the "old way" invoice... I could not stop laughing. This customer was soooo happy to pay me over $300.00, but would have been pissed if I charged him ... You won't believe this ... Only $158.00. I thought to myself "... Self, I am going to start to make money now." I can charge what I'm worth, get paid full price, and get the job done in less time than the allotted price book time, and the customers will be happy to pay for it!

WOW! I have been a believer ever since. As my business grew, getting the service technicians to understand the process was fairly easy to do. I even had one mechanic working by the billable hour based on the price book time codes. He was able to bill 10 hours in an 8 hour day. And the customers loved him. He never needed to punch the time clock because he knew he was making money based on the service tickets time codes. When he had a callback and the customer was not billed for the repair because it was covered by our standard service call warranty, the mechanic did not get paid. This was an incentive to get it right the first time. regularly

I hope you got something from this story.

Yours truly,
Mr.Ed

Jamie Hall

I love your story, @EdTheHeaterMan !

And it is getting political -- or perhaps ethical, which could be worse. I will make only one more comment, and it has nothing to do with bidding versus T&M (since there are times when one is appropriate, and times when the other is), and it is this (perhaps someone will read this and see the point; perhaps not): regardless of whether you are working T&M, or on a bid, or on an hourly wage; regardless of whether the job is using the best materials possible -- or the least expensive to fit the purpose -- you, the worker, have an absolute obligation to do the best work you know how to do, on every job, every time. "Good enough" won't do. No excuses.

SomeTradesJack

Youngplumber said, "Sometimes when you fix a leaky pipe another leak develops a little later."

HA! You mean like those miles of galvanized pipe in my basement ceiling? The leaks are self-sealing until you touch it.

EdTheHeaterMan

@Jamie Hall You are absolutely, 100%, "hit the nail on the head" Correct! My name is on that product/service, and so is the mechanic who is doing the work for me. Quality workmanship is paramount.

Youngplumber said:

Sometimes when you fix a leaky pipe another leak develops a little later. When you got called back for that, did the tech get paid? I imagine not paying a tech for some things, but paying for others could get contentious. 

The tech on the job would make the call, If the tech thought the leaky pipe was his fault and decided to do the repair at no additional charge, then the tech knew he was getting paid for what he billed.

I forgot to add that I paid a much higher hourly wage. At the time the top mechanics (Non-Union Shop) were getting about 13.50 per hour and the helpers were getting paid 5.50 and the minimum wage was 3.50/hr I paid $32.00 per billed hour. And when I put an ad in the paper for a mechanic, I always got an excellent response with the pay rate I offered. (Yes... the "Want Ads" in the newspaper...That is how employment was advertised back then)

So a mechanic that was less experienced than the average guy had the option to go on billable hours or 5.50/hr for time clocked in until the time clocked out. Joe who was at 6.75/hr and was a year out of technical school, decided to go billable hours because he was billing about 20 hours a week. He got paid more for 20 hours @ $32.00 than working at 6.75/ hr

This plan was fair for the customer too. Joe's inexperience did not cost the customer more because he took longer to do that same job that Jim could do in less than 1/2 the time. The motor replacement cost to the customer was the same no matter who did the job. As Joe got more experience he created his own raise. After 4 years I decided to increase my labor rate and increase the dollar per hour to reflect the increase. That was an added gift in the Christmas bonus envelope one year. When the company was sold, Jim, Joe, and another guy named Greg left because the new owner was not interested in the program. Greg started his own business and was successful for many years until he retired. (he was older than me)

It was a great arrangement for all who participated. I had 6 men at the time. Three were on the plan and three were by the clock. You needed to trust the mechanics to be honest and, for the most part, the customers were happy with the pricing for the work completed because they approved the price before the work was started.

This was Flat-Rate in its infancy in the HVAC business and I will highly recommend the idea of "Up-Front Pricing, or Flat-Rate or whatever you want to call it. The homeowner will always be more satisfied knowing the price ahead of time, the mechanic won't feel pressured to get the job done quickly and the boss won't be calling the tech "on the carpet" to discuss how the mechanics interacted with the customer. Much less stress all around.

Respectfully,
Mr.Ed

GW

Y’all are really over-complicating this. Either way is fine. You can have superb income with either method. You can be a stone cold crook with either method. You can go bankrupt with either system. You can be the most incompetent trades person that ever walked the face of the earth with either system. The system doesn’t matter. It’s the person that’s operating the system, that’s what matters. 

I’ve sat in classes with Blau, Maio, Crissara, Ellen, and many others. If you’re t and emming it, best of luck out there. 

Couple years ago a lawyer wanted me to do a deposition/ expert witness. He asked me my rate, I gulped. 400 bucks. Once I spit it out, I felt pretty good. The lawyer dropped off a check for $1600. I never heard back after the deposition. I’m pretty sure the lawyer got his moneys worth.

The moral of that little silly story is, figure out what you’re worth, and charge it. Unless you put your customer in for a full Nelson, they can either accept or they can deny your efforts. I kid you not, some would pay double what you ask for. You just don’t know that.

Web site moderators that’s my white collar lawyer fee, I am not discussing my fee as a tool man here 😀

hot_rod

when a customer complained about a trip charge I would ask them to bring the problem to my shop to work on

bucksnort

hot_rod said:

when a customer complained about a trip charge I would ask them to bring the problem to my shop to work on

You could've told them, "Well you go get it then. The meter is still running either way. Hurry back".

EdTheHeaterMan

Youngplumber said:

Did Gary just admit to ripping off a Lawyer?  🤔

Just kidding @GW

No not at all, He charged what any lawyer would expect. That lawyer marked that up 40% and charged his customer for expenses, Gary did him a favor!

GW

Precisely the point I wasn’t able to articulate: if you have low self worth, charge low rates. If you’re average, charge average rates. If you’re better, faster and smarter, get paid accordingly, or, go back to the cave from which you crawled😀. 

hot_rod

And beyond what you feel you are worth or deserve, you need to figure out your cost of doing business, add to that a reasonable wage, including your wife's if she helps with the books. That is how a selling price is arrived at. No two businesses have the exact same cost of business.
We ended up with a small, 20 pages of flat rate jobs, the rest were bids or prices created for the specific job.
It's tough to flat rate a new construction plumbing and heating job, for example. T&M or a bid with change orders is best for new building systems.

Jamie Hall

To add a bit to @hot_rod 's comment. I think -- from years of observations! -- that figuring out what the real cost of doing business is is the hardest part for a person starting out on their own. Not only do you have to figure out -- somehow -- what your own time and ability really is worth (accurately -- as @GW said!) but there are so many expenses and costs which add on to that, many of which aren't obvious at first (one not obvious -- the cost of carrying your inventory, including parts purchased and installed, for upwards of 90 days for some accounts!), but which have to be paid.

Just to give an idea -- the engineering firm I was with for years charged the various people out at between 2.5 and 3 times their salaries or hourlies, depending on the nature of the job and the credit worthiness of the client.

GW

HR, I chopped my teeth on new construction in the 90s, 100% quoted up front. Yes there were “extras” thrown at me, that’s routine. But in all the years I’ve been doing this, since the mid-80s, I’ve never heard of a T&M on a new construction job. That’s pretty wild. 

Cost of business- In the early years, my rates were low, and (on occasion) people told me my rates were high at this point, I’m quite sure some of them lied to me. I had very little money in my pockets. 

I do not disagree with your theory of knowing what your costs are, but there’s a little bit more to it than that.

Some trades people are pretty clueless but they carry themselves with a high level of professionalism. Conversely, some of the most talented trades people that ever lived cannot hold themselves very well with other people. No spreadsheet can overcome that fact.

Eat drink and be merry, Gary

STEVEusaPA

Ripping off a lawyer...that's the funniest thing I've read on this site yet. I think if I'm talking to my lawyer on the phone and she sneezes, I get charged for the kleenex.

SomeTradesJack

Steve, you probably only get charged by your lawyer for 6 minute increments, or for 6 Kleenex's at a time.

HomerJSmith

I use a lawyer's computer program for time and materials. Lawyers charge by the minute.
It has a clock on it. When you call the clock is turned on and when the call ends it is turned off and the hourly time is added to the bill.

I always explain to the customer where I am asked for a bid that the bid has a 25% added cost for any unforseen contingencies that might be forth coming. I also tell them that T&M is the fairest way for him and for me. Contractors don't lose money. If the bid is too low, I have seen them cut every corner or do shabby work and even walk off the job.

I know contractors that under bid jobs to get the job and then bully the customers into over charges.

I tell the customer that competitive bids have to be apples to apples in every regard and the contract has to have precise specifications and performance guarantees.

Most customers believe that a bid is the best way to go and if the contractor under bids the project the customer will benefit, fat chance.

If you screw the customer, he will know it and everyone of his friend will know it, too.
If you treat the customer honestly, as Ed said, he most often will pass you on as a reference to his neighbors and friends. But, I know there are customers whose policy is to screw the contractor. But I have a very good intuitive understanding about dishonest customers and will turn down the job because I know that no matter how it turns out in the end, I'm going to lose. Thank God there aren't too many of those.

kenjohnson

Just a homeowner take on the topic, for what it's worth.

I am technically knowledgeable and enjoy learning about how my systems operate. I like to have things done very well to last a long time and not need them to be re-done for reasons that could have been prevented. I realize that costs extra money both for materials and for time. I also realize that it might mean the contractor needs to use materials they are less familiar with or learn something new (incur risk).

I live in an area that I will only characterize as an area of below average incomes with most people struggling economically and without the means to do what I do.

Having said that, it is not a problem to find contractors who can do the quality of work that I would like done. It does require a conversation with them to help them understand what I am looking for and that I am willing to pay more for it, and this usually leads to a time and materials arrangement. The default, going-in expectation on the part of the contractor is that I (like most people they do work for) just want the typical, cheapest possible job with the lowest quality (cheapest) components to fix the problem now and then hope it doesn't happen again. I have to spend some time to reset that expectation. Sometimes, I can't reset it and they try to tell me why I don't want what I want, in which case I am polite but I find another contractor (this doesn't happen now that I have a preferred contractor for just about anything I need done).

So I guess what I would add to the conversation above is that it pays to know your customer and ask them a few basic questions, i.e., is this something you need done right away? is the most important thing the price or are you looking for longevity or something in between? etc. I can easily imagine that this is a hard conversation for most contractors to have with their clients, and that a lot of clients (or potential clients) might find it weird. But knowing your client is a great way to know how to approach them for the job.

Ed's story was great - the client wanted to get to work - time was money for him. He didn't care that it cost him $142 extra in the end - $300 sounded good and fair for what was needed, so he was done and off to the next thing. It's not an invitation to rip people off, just to understand what they value.

And yeah, some people just want the cheapest price, and you have to figure out if you can find a way to serve those people and still make a profit.

EdTheHeaterMan

CLARIFICATION NEEDED

I believe that my HVAC business was 80% maintenance and repair. Only 20% of my income came from new equipment in the form of replacement or conversion from one fuel to another. I can count on one hand how many "New Construction" jobs I worked on in any given 5-year time frame. My prices were too high for that market and there were enough competitors out there that would do that work at those prices.

That said, When someone calls for the first time for a "No Heat" or a "No Air Conditioning" repair visit, they are not usually calling for a Quote or to question my pricing policy. They want the heat back on and the bill for the repair work is usually not included in that month's budget. It needs to come out of the vacation fund or the Christmas shopping money, or worse. So getting the price before the work is started using a Flat Rate Pricing system helps to level the playing field. Especially if there are choices like the "Minimum or GOOD, BETTER, BEST choice to get the heat back on. Much of the stress is gone if a repair cost is known ahead of time.

So I agree that T&M may be best for projects over $5000.00 and putting a Bid for a 6 figure project can be counterproductive in the final result (See * Below). When it comes to repairs costing less than $500.00 some folks need that ability to say NO before the job starts. They get the written report of the needed or suggested repair, and pay the diagnostic fee (or trip charge or service call fee). If they give the paper to a cousin that is a handyman and can get the motor at cost from Amazon and put it on for them for $50.00. I got paid for my expertise with the Diag fee. The economically challenged consumer can get the heat on economically without throwing 6 or 7 parts at it only to find they needed to call me anyway.

I'm ok with that. Most customers don't do that. Most will pay for the repair and I'll have the heat on within the hour. They also appreciate the fact that they know the upfront cost before I get started. It takes some time to get a new mechanic who is used to the old T&M policy of his former boss, to understand that a Flat Rate done right is better. But they all understand how it makes life easier once they catch on to the program.

* in reference to Bidding on large projects, I like to remind government employees, when I'm standing in a government structure, building, or bridge... "You do realize that where we are standing was built by the Lowest Bidder. How does that make you feel now?"

Respectfully Submitted.
Mr.Ed