Wow! I love all this stick the pin in the page and see what number we get stuff!
Guys.
I know I am a pitiful bore when it comes to this kind of thing, but there IS a way of doing this, remaining competitive, AND still being in business in a year's time.
There's two side to this, of course.
The first is setting the correct rate, and the second is refusing to play the "lowest cost wins" game.
Let's look at the first, first. I posted recently on how to calculate your labour rates properly. Don't guess, and don't be swayed by what your competition is doing.
The formula, in simple terms, is direct costs or overheads, plus Gross Drawings, plus Mark Up, divided by chargeable hours. Chargeable hours, on a one man basis, are typically between 1000 to 1200 tops in a year.
You can work out your overheads easily enough - this is everything that isn't your pay, or materials. Make a list in a spreadsheet, and then adjust all the figures you have for a full year - i.e if you spend £80 a week on fuel for the van, that's around £4160 a year (*do this bit on 52 weeks, not 48). Once you've done that for all the things you pay for - phones, electricity, rent, stationery, advertising, and so on, you have an overhead total. You also need to include training, tools, computer stuff, and so on in that figure.
Once you've arrived at that figure, work out what you need for yourself, realistically, each year. You need the gross figure at this point - e.g. £30,000 or whatever number you have.
Add the two figures together, and then apply a percentage mark up to it - this is for two primary reasons. One is to cover any "missed" items, and the second is that you are, after all, entitled to make a profit if only to reinvest in your business. Typical mark up is around 25% or so.
Having done that, divide the number you arrive at by the realistic maximum number of chargeable hours you have in a year - as I say, a good level is around 1000-1200.
You then have a sensible hourly rate, that will cover you, your business, and your growth/sustainability.
As for the second issue - refusing to play the lowest cost game......
Discounting is the enemy of good business, and so is selling to a lowest price point - even if your competition are. Deal with this in a different way - by countering pricing objections before your potential customer even opens his or her mouth. Develop some simple leaflets, for example, to include with each quote you send out, or invoice, or anything you send out - put it on your website, sing it from the roof - you get the picture. Concentrate on selling the BENEFITS of you, and your business - better quality, longer warranty, branded materials, local service, reliable, always on time, whatever they are - get testimonials from other happy punters and SHOUT them out - make a folder to take with you, each spread showing the customer testimonial one one side, and the other side showing what you did, photo, and how you dealt with the work. In short sell the reason you're worth the extra.
The key thing here is not to "disrespect" any of the competition directly - and very carefully indirectly. Rather than stating that all those five week wonders know nothing, emphasise that you are one of the only electricians in the area who holds full qualifications, and a full apprenticeship......for example.
Of course, another really successful way of setting your rates is to stick a load of numbers in a hat, and pull one out at random
Just my newly increased 2p worth - now 2.4p.
