| We get asked all the time why plumbing pricing is so | | | | Here is an example, a customer has a new kitchen |
| different from contractor to contractor. This is an | | | | sink faucet they want installed. The plumbing |
| attempt to explain how pricing is calculated or should | | | | contractor has to take the old faucet off and install the |
| be calculated. Not all plumbing pricing will have all of the | | | | new. The plumbing technician gets under the sink and |
| steps included in them although they should and you | | | | finds that the basin nuts is fused to the faucet and it |
| should have a pretty good idea why and how an | | | | can't be removed with a normal basin wrench. The |
| estimate is achieved. | | | | project just became infinitely more difficult. So what a |
| Let's start off with the simple concept of labor and | | | | plumbing contractor will do is try and take these things |
| move on from there. Labor....whether you are union or | | | | into account when relaying the price to the consumer. |
| non-union, has a base wage you pay, plus any fringe | | | | It Takes Time to Drive |
| benefits (Fringe Benefits - are any non-wage benefits | | | | Another huge issue consumers have with repair work |
| an employee receives which includes but is not limited | | | | is drive time. Most plumbing technicians are paid by the |
| to health insurance, retirement, unemployment | | | | hour so if they are going from one call to the next |
| insurance, life insurance, etc.) the employer pays. For | | | | they are getting paid to drive. This time is included on |
| the benefit of this article lets put the base wage @ | | | | each estimate. There is no way to bury that time into |
| $35.00 p/hr, the average amount of fringe benefits in | | | | over head, it must be passed on to the consumer. This |
| the US is about 38% of payroll expenses which bring | | | | is also a sticking point on time and material jobs as |
| you to $48.30 per hour. | | | | well. You have no idea how many times a plumbing |
| OK so you've got a raw cost labor rate of $48.30 per | | | | contractor hears "you were only here for 45 minutes |
| hour. Most companies now attempt to figure out what | | | | but you charged me for an hour and half". |
| their overhead costs are in relation to their overall | | | | Material Used on the Job |
| sales volume. The average mechanical contractor | | | | Most service companies base their profit forecast on |
| realizes anywhere between 15% and 21% overhead | | | | making a profit for both the labor they provide and the |
| costs. By overhead costs we mean, clerical help, | | | | material they sell. For some reason consumers DO |
| utilities, worker's compensation and general liability | | | | NOT like to see 10%, 15%, 20% mark-up on the |
| insurance, building rent or mortgage, office equipment, | | | | material but it has to be added somewhere. |
| fuel, tool rental, executive salaries etc. Yes the Owner | | | | So How About the Bottom Line |
| has to get paid as well. O.K. so we'll take the average | | | | So you have the labor rate with fringes, you estimate |
| of the overhead and make it 18%, that adds another | | | | how long your service tech will take to complete the |
| $8.69 per hour for a total of $56.99. Again the above | | | | repair and you know your overhead and you know |
| company hasn't made any profit yet, they are just | | | | the material costs for the job. Now what is a fair |
| covering their respective costs. We're going to explain | | | | margin to make on the job? That is a question no one |
| profit in a bit but for now we'll continue with labor and | | | | can really answer but I think it would surprise most to |
| how a job is estimated. | | | | know that the average profit margin in the mechanical |
| When a potential consumer or commercial customer | | | | industry is just 3%. Most would love to make 10% net |
| inquires about a plumbing repair and asks for a price | | | | profit but it rarely happens. So everything is added up |
| on the phone most contractors resist a little because | | | | and the entire amount is multiplied by the profit margin |
| of prior experience with this kind of request. There are | | | | the owner feels necessary to make it worth keeping |
| two reasons for the hesitation, #1 without seeing the | | | | the doors open. |
| repair or problem it is very difficult to give an accurate | | | | Please take note, there are plenty of service people |
| price and #2 if a price is given and the plumbing repair | | | | that are happy to work for wages or wages with |
| proves much more difficult than described it is very | | | | some fringes however the costs they charge are not |
| difficult to charge more for the project. Having said | | | | realistic to sustain a viable company with employees, |
| that, contractors that do give pricing over the phone | | | | trucks, inventory and the like. |
| will take into account what an average plumber can | | | | If there are any questions you'd like to ask or |
| put in in 2 hours, or 4 hours or per day if the project | | | | comments you'd like to make please do not hesitate to |
| takes that long. The job is not bid to the quarter hour, | | | | comment. |
| figuring the finest fastest man/woman in the shop. | | | | |