Pricing

Handyman Pricing Considerations

When I first considered becoming a handyman I asked myself, “How much can I earn as a handyman and can I charge enough to make a decent living?”  I proceeded to scour the internet to see what other handymen were charging for their services.

The rates being charged were all over the board.  Some handymen quoted hourly rates on their websites and some quoted job rates.  Some quoted rates for every small job you could think of while others didn’t quote any rates at all.  More than one handyman quoted additional weekend, holiday and overtime charges as if he was trying to cover himself for any eventuality.  It became obvious that there are regional differences with some areas as low as $20 per hour and some as high as $75 per hour.

Overall I was encouraged by what I found.  My goal was to earn a decent living and be paid fairly for the work that I performed.  The rates being quoted by the most professional handymen/women were high enough that I thought it would be possible to make good money.  But the next question came to mind…

How Large a Deposit Should I Request?

There are limits on what you can request as a deposit.  Check the laws in your state for the exact limits.  In California, contractors are prohibited from asking for a deposit of more than 10% of the contract price or $1,000, whichever is less.

You’ve heard the horror stories about “tradesmen” asking for a 50% deposit and then skipping town with the money.  Don’t be mistaken for one of these people.   If you have to request a deposit, even if you’re not a contractor, follow the contractor laws for your state.  Following this rule will increase your credibility and increase your chances of getting referrals.

I have chosen to never ask a customer to pay for materials in advance.   I charge all of my purchases on an air miles visa card.  This gives me thirty days to pay and a free round trip ticket when it comes time for a vacation.  If you can, do the same.

If you don’t have the available credit and the job has a large materials requirement there are solutions.  Have the homeowner buy the materials so that they are on hand when you arrive.  You can also go to the store together and let the homeowner choose and purchase the materials.  Handled this way, the homeowner will know that they are paying nothing but cost for the materials and you will have stayed within the law.  Don’t ask for a large deposit.

How Much Should I Mark Up the Materials That I Sell?

I’ve always based this decision on whether or not I was being paid to pick up the materials.  If I’m on the clock when I’m doing the shopping, I will not mark up the materials but will simply show them the receipt for reimbursement.  Otherwise, I will mark up the materials from 10-50% over my cost.  Some of the lower priced items can be marked up even further.

Can I Get a Contractors Discount When Buying Materials?

Any discounts you receive have the potential of being either extra profit for you or additional savings for your customer.  It’s a winning situation either way so don’t hesitate to ask for a discount.

I have found that the major chains have differing policies.  One chain flat out said no, that they do not offer contractor discounts while another said they would sometimes discount very large purchases.  That let me out on both counts!

The smaller chains and small independent hardware stores will be more willing to talk since these stores have local ownership and more flexibility due to their higher margins.  They will probably be willing to give you at least 10% off.  I suggest you approach them when you’ve got a large purchase on your cart.

Some suppliers will allow you to make purchases on account.  This can be helpful for a couple of different reasons.  First, this will give you 30 days to pay and maybe even a contractor’s discount.   But also, this account will establish a history of purchases.  This history may serve as proof of experience if you choose to pursue your contractors license.  Check in with a local contractors licensing school to see what steps you can take to satisfy the experience requirements.

Should I Charge for Mileage or Travel Time?

I don’t charge for travel time or mileage within my normal area but many contractors do.  The plumbers and electricians are particularly known for this.  Check to see what other handymen in your area are doing.

When traveling outside of my normal work area I always charge for mileage and/or travel time.

If you charge for mileage, use the federal mileage rate (2008 business rate is 50.5 cents per mile).  This rate was set with the intention of covering all of your vehicle expenses including gas, maintenance, insurance and depreciation.

When negotiating travel time you should use your regular hourly rate.  If your customer balks at paying for the entire round trip, offer to share the burden by splitting the time.

Should I Hire Handyman Helpers?

The hiring of employees can be a great way to increase your income as a handyman.  Here is California, handyman helpers would earn from $15 to $25 per hour.  After figuring in payroll taxes and workman’s compensation insurance the cost per hour would be closer to $25 to $35 per hour.  Marking up the employee cost to $50 to $70 per hour to the client would net a profit.  Multiply this number by several workers at multiple locations and it starts adding up to some real money.

Besides hiring helpers to do some of the grunt work, workers can add flexibility to your scheduling.  They will enable you to overlap jobs.  This is particularly helpful when jobs take longer than expected or run into additional problems.   Tuesday’s work can start on schedule while your worker picks up the loose ends of Monday’s job.  Several jobs can be started at the same time and you can leave a job site to estimate new work or to pick up additional supplies.  The pool of jobs that you can take on will be bigger because you can accept more labor intensive jobs that you wouldn’t normally do.

Employees create many challenges.  Can you find any that are qualified?  Will they be honest and dependable?  Will the quality of their work be up to your standards?  Will there be enough of the right type of jobs to keep them working?  With the slim markups that you’ll be making on employee labor hours you can’t afford to have them sitting idle.  Your job turns into a supervisory and a marketing position where you’ll be applying your skills to meeting with new clients, estimating work, marketing your business and managing employees.

When you get to the point where you are turning away work because your schedule is full, it’s time to hire some helpers and build your empire!

What Should My Hourly Handyman Rate Be?

My web search yielded no local handyman rates so I continued my search the old fashioned way…I started asking around.  I know some real estate agents in the area and I asked them if they knew any handymen, and how much they charged.

From their referrals, I talked to a handyman who had a good reputation with these agents.  He told me that he quoted $25 per hour.  I thought it was too low for our area.  He also told me that he would send some of his business my way because he was too busy to handle it all.  Now I knew he was definitely undercharging!

The laws of supply and demand should have driven his rates up, yet he claimed that he had been charging the same rate for the last 15 years.  He hadn’t raised his rates because he didn’t want to upset his long time customers.

This example showed me how important it is to choose your rates carefully.  It will be more difficult to raise your rates later, particularly when you are getting a lot of referrals from current customers.

You don’t have to price yourself cheaply when there is plenty of business available.  Another handyman I talked to had all the business he could handle and charged $50 per hour.  He presents himself well and receives lots of referrals.

To take this project a step further I researched a handyman franchise in our area.  I found that they are charging $115 per hour and have a 2 hour minimum!  Are they too busy also?  I don’t think so.  In fact, they had a booth at the last Home Show I attended.  There they were, hawking their services and showing off their beautiful marketing materials.  Clearly, their challenge is finding enough customers who are willing to pay extra for a professional licensed handyman. Perception is everything and the handyman franchises are doing a great job of cashing in on their professional image.

With this sampling of rates I had a starting point.  Not having high overhead, I knew I didn’t need to charge as much as the handyman franchises.  Since I’ve never been a big fan of working long hours and earning less than I’m worth, I decided that I didn’t want to start too low either!  If I could maintain a professional image and do good work, why not try for a higher rate?  If I charge less then the major franchises I’ll still be seen as an inexpensive alternative.

I decided to start out charging $60 for the first hour and $45 per hour thereafter.  I correctly guessed that my customers would be willing to pay my rate. I also knew that I could offer a discount to my rate as a ‘special’ or even knock off some time when totaling up the invoice if I felt I should.

Do the same research in your area and don’t hesitate to push the envelope.  What ever your local rates are, there will always be a low rate set by the wannabes, a middle rate set by the professionals and a high rate set by the franchises.  Position yourself as a professional by setting your rates at or above the middle and below the top.  You don’t need to be the cheapest handyman in town to get all the business you need!

Should I Offer Senior and Group Discounts?

Yes.  Offer seniors and non-profit groups a discount rate.  When friends and former co-workers approach you with work offer them a discount rate too.  There is great demand in the senior community and non-profit groups for reasonably priced work and, if you deliver on your promises, will be glad to pass your card on to their friends.  The Board of Trustees of one of the local churches approached me to do work.  I decided to offer the church and all of its members 20% off my hourly rate.  They continue to be a great source of business.

Many times I’ll have friends approach me to do work for them.  Because they are friends I feel guilty about charging them for my work.  But realistically, I can’t work all day for nothing…I have bills to pay too.  These same friends would have to pay someone to do the work if I didn’t do it, right?  The solution is to give them a great price and let them know that you are giving them a great discount.

What About Weekend, Holiday or Overtime Rates?

If you want to charge extra for weekend or holidays I suggest you charge time and a half for weekends and double time for holidays.  Most customers will be comfortable with this structure since it closely matches the familiar work day environment.  Will they want to pay it?  Probably not, but at least they will understand the basis for the rate! Use these numbers as a starting point for negotiation.

I decided not to quote weekend or holiday rates on any printed materials or on my website.  Frankly, I didn’t want to advertise the fact that I might be willing to work outside of the regular Monday through Friday hours.  I wanted to keep my weekends for family, rest and fun.  If the customer asks, or the job demands it, I’ll tell the customer that there will be a surcharge for weekends or holiday work.

I’ve never been successful in charging overtime rates.  In every instance where I might have charged overtime I’ve never felt comfortable doing it.  However, if I had an employee and I was paying overtime to them I would definitely pass the cost on to the customer.

Should I Charge By The Hour or By The Job?

There is no best answer for this question.  How you quote prices depends on two main factors: how confident you are about the estimate and what the customer’s particular needs are.

By the job, you are taking the risk of the costs running over.  In order to make this type of estimate you must be confident that you will make money at the estimated price.  If the work goes smoothly you win, but if not, you will find yourself taking the loss.  The more accurate you are when estimating the work to be done and the time it will take, the more money you will make.  Bidding by the job has the best potential for increasing your bottom line and ironically, many customers will be more comfortable with this approach.

Bidding by the hour you’ll always be safe and your compensation will exactly match the amount of time that you spend.  If you’re not sure how long a job will take, this is the way to protect your bottom line.  You can bid on every job that comes your way and always feel comfortable that you will be paid for the time spent.  Understandably, your customers will not always be comfortable with a straight hourly estimate and will want some type of assurance that the cost will fit within their budget.

Ultimately my objective is to cover myself financially and not scare aware customers with my estimates.  Sometimes I’ll charge by the hour and sometimes by the job.  Often I’ll do both at once, charging by the hour but putting a cap on how much I think the entire job will cost.  This makes the customer happy and is a safe approach for me.  I will lose however, if I’ve set the entire job estimate too low.

To cover yourself, always add some sort of cushion to your pricing.  If you think a job will take 3-4 hours to complete, quote 4-5 hours.  If you think it is a $350 dollar job, quote $395 using odd pricing to your advantage.

A handyman I know quotes his rates over the telephone at $25 per hour, a low amount for our area.  However, when he gets to the client’s house and estimates the work to be done, he never quotes the job by the hour!  He always gives them a quote for the entire job.  In this way, he is never held to the low hourly rate that got him in the door.  After looking over the amount of work to be done, he might quote $195 for a job he knows will only take 3-4 hours.  When he finishes the work, if questioned he simply explains that he always figures in time for picking up materials, travel and clean-up.

I’m not suggesting that this is the best way to go about your business but I think it illustrates the answer to the “by the job or by the hour” question.  With experience you will probably make more money quoting by the job than you will if you quote by the hour.  Stand back to look at the job you are estimating and ask yourself, “How much would most people be willing to pay for this work?”  If your hourly estimate will be lower than the perceived value of the work, quote it by the job at the higher price.

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