Pricing

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.

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.

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!

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.

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.