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How much should I charge my customers for component level repair?
Posted by
elcomtel
on 11 Jul, 2013 13:16
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I need some advice.
I recently became self-employed and registered my business:
See: ELCOMTEL
http://www.elcomtel.com.au/Quicker than I expected I received my first 'real' customer. This is actually a very prestigious customer that has an enormous amount of technology on site. The kind of customer that you wouldn't need other customers because one customer would give you enough work to keep you happy if you know what I mean.
My problem now is: How much should I charge them.
This is my plan of a reasonable fee structure:
- $200 an hour for the first 2 hours.
- After 2 hours the rate changes to $50 an hour.
- 'No fix - No fee' How can I charge someone where they get no value.
- 6 months warranty on all repairs.
- Free pick up and delivery in the Canberra A.C.T. region.
I am a highly regarded electronics specialist and my customers will get exceptional quality of service and the highest quality standards in the country.
Is my fee structure reasonable?
Am I asking too much or too little?
I just want to do an honest and fair job. My test and measurement equipment and other workshop equipment cost me a small fortune not including the effort I made to get my skills in the first place.
How should I charge my customers for my component level repair services?
Later I will be asking about how much to charge for electronics design work.
Cheers, Jack
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#1 Reply
Posted by
madires
on 11 Jul, 2013 13:43
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I don't know anything about the common charges down under but to find the right rate I recommend to check out what other local shops offering the same service charge. Also calculate what you need to charge to earn enough money for a living. If you can't compete by price you'll need to offer something outstanding or special to make potential customers choose you instead of a cheaper shop.
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#2 Reply
Posted by
GeoffS
on 11 Jul, 2013 13:46
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Deciding on you rfee structure should have been done as part of your business plan and setup.
It's a bit late to make this decision after you get your first customer.
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#3 Reply
Posted by
elcomtel
on 11 Jul, 2013 13:57
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I was asking for advice. Not criticism.
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#4 Reply
Posted by
NerdCore
on 11 Jul, 2013 14:09
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My problem now is: How much should I charge them.
This is my plan of a reasonable fee structure:
- $200 an hour for the first 2 hours.
- After 2 hours the rate changes to $50 an hour.
- 'No fix - No fee' How can I charge someone where they get no value.
- 6 months warranty on all repairs.
- Free pick up and delivery in the Canberra A.C.T. region.
I am a highly regarded electronics specialist and my customers will get exceptional quality of service and the highest quality standards in the country.
Is my fee structure reasonable?
Am I asking too much or too little?
I just want to do an honest and fair job. My test and measurement equipment and other workshop equipment cost me a small fortune not including the effort I made to get my skills in the first place.
How should I charge my customers for my component level repair services?
Later I will be asking about how much to charge for electronics design work.
Cheers, Jack
Sounds to me like this company hasn't accepted you officially but verbally. No company in their right mind would agree to terms...without terms. Honestly, the computer component repair business (at least here in Cleveland, Ohio) is so saturated with repair shops it's diluted and muddied the waters. Regardless of your qualifications, the bottom line is the bottom dollar. A business is more concerned with the cost of repair than the qualifications. Hell, they will choose the cheapest bid as long as it comes with a warranty. Who cares if it breaks, they will repair it. My advice to you is, as some have mentioned, find what your competition charges. Find the most common price and the average price. which ever is cheaper, undercut that a bit and use your credentials to sell your service over everyone else. Be prepared for long days scraping the bottom of the barrel. I got out of the computer repair business because everyone who knows CTRL + ALT + DELETE thinks they can repair a computer. As I said the market is so flooded that the only thing you can do is talk about price. Even if you say you have 30 years experience the next thing out of the customers mouth is always, "Yea, but XXX is cheaper."
Good luck! and don't quit your day job!!
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#5 Reply
Posted by
digsys
on 11 Jul, 2013 14:13
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First off, dropping back to $50 hr is ridiculous. Contract cleaners get more and at that rate (change), they'll think it's fishy !!
I'd pick ONE rate and stick to it for all NON project / contract jobs. Somewhere between $90 (absolute minimum) and $150 hr,
until you get your legs. In cases where there was no really defined or end of a project, I'd simply say open Invoice at
say $10K / $20K a month for say 100 / 200 hrs guaranteed. Then I'd itemise what I did as things progressed.
That stops a HECK of a lot of arguments (or possible scrutiny) about what was specified, what was changed, yadda yadda yadda
IF you don't think there's a month there, do a weekly rate. The WORST thing that happens is that you SET a fixed price, and others
in the company continually change the specs / rules / etc and even though it's justified, you appear untrustworthy to some.
Especially these days, where there's always a bunch of accountants in the background that have NO FECKIN idea of what was
involved or costs, just assw*pes trying to save a buck and look good .... OOPS, I hit a raw nerve here :-)
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#6 Reply
Posted by
digsys
on 11 Jul, 2013 14:19
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Addition: I notice that people suggest you look at what "competition" charge. IMO, DON'T go down that road - you decide what you do
and what you offer is worth, no-one else. I've seen a lot of crap from supposedly competition, over the years. Comparing unknowns is
a waste of time IMHO. You'll figure out where you fit.
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Deciding on how to charge for service , is an ongoing / constant thing .
At least that is what I have done , and as a result from doing this , it seems most other competitive shops do the same .
Like the auto repair bis. they have time-books that show the average time for repairs , there may be special circumstances , but the books cover this , in the beginning of the book they refer to working on new cars in fully equipped shops .
Then adding for conditions of cars in your area , like snow , salt - rust .
Sometimes your skill , special tools etc. can cut the average time , but that can be a baseline .
Take that as an analogy .
Then next as referred to earlier , sometimes making calls to other shops as if you were the costumer and looking for an estimate .
After a few or more of those you can start to get an idea .
Then after many of those you end up with 3 classes ,
lowest = generally not charging enough to keep up with either the lastest equipment or training .
mid = generally trying to be competitive and charging enough to cover the costs of being in bis.
high = I break this down into a few - after being in bis. for some time and having a costumer base and having enough bis. to not focus a lot on being competitive ,
or specializing which can cut the cost of doing bis. by not working on everything and having higher profits .
Then there is gouging , and I think that starts at the top [ corporate ] and creates an environment where as an individual bis. you have to find a way to deal with , because all your costs are established at the top of the pyramid and you have to adjust your bis. to cover your outside costs parts , equipment , real-estate / rent / lease etc.
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#8 Reply
Posted by
komet
on 11 Jul, 2013 14:30
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- $200 an hour for the first 2 hours.
- After 2 hours the rate changes to $50 an hour.
This is foolish. Just charge a fixed hourly rate, but define a minimum charge of e.g. 3 hours. Also define whether it's per item or per day or whatever.
- 'No fix - No fee' How can I charge someone where they get no value.
That is just setting yourself up for being taken advantage of. I do understand your position though. But remember that even a "no fix"
DOES offer value to the customer: the knowledge that they should not waste further time and money getting somebody else to have a go. If you do not charge a minimum you will regret it.
After a customer has returned several times and proven that he's a "valued customer", you can offer to have a quick 10 minute look free of charge, but you needn't make that an official policy.
I am a highly regarded electronics specialist and my customers will get exceptional quality of service and the highest quality standards in the country.
Then charge people accordingly. If you offer the highest quality, you must charge the highest prices. You ideal customers couldn't give a toss about the dollar amount anyway.
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#9 Reply
Posted by
NerdCore
on 11 Jul, 2013 14:30
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Addition: I notice that people suggest you look at what "competition" charge. IMO, DON'T go down that road - you decide what you do
and what you offer is worth, no-one else. I've seen a lot of crap from supposedly competition, over the years. Comparing unknowns is
a waste of time IMHO. You'll figure out where you fit.
That's a terrible idea. True you should know what you're worth but you should also know your competition. In the days of the internet, the only way to make a buck is to undersell your competition. If you see "crap" from your competitors then that is what you use to sell your service over theirs. You said it yourself, the accountants/bean counters don't know a clue what's involved in IT. Do you think they care? No, but the funny thing is they are most likely the ones who will approve you for the job. All they care about is price, bottom dollar is king. Could you use what you think you are worth and what you actually charge to make value, sure! Would it help? Maybe, but probably not. As I said many big companies will go with the cheapest contractor with a warranty. In the accountants mind, "Who cares if it breaks, it's under warranty". Also, figuring out where you fit, is a terrible business model. Anyone who goes into business is there to make a lot not just enough. You have to find the best market not the best fit. Sure you can do niche work and might be able to make due with it. Wouldn't you rather find a market that you can excel in and get a monopoly over? Once you find that killer market and business starts to pick up, then you slowly raise your prices as your notoriety and approval raise. You need to get your foot in the door though. The best way to do that is undersell. You need one company/person to say to another "WOW! he did great work for an amazing price!" The next person/company says "WOW! you do great work for a great price!" The next person/company says "WOW! you did great work!"
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#10 Reply
Posted by
NerdCore
on 11 Jul, 2013 14:36
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I am a highly regarded electronics specialist and my customers will get exceptional quality of service and the highest quality standards in the country.
Then charge people accordingly. If you offer the highest quality, you must charge the highest prices. You ideal customers couldn't give a toss about the dollar amount anyway.
Although I completely agree with you. He hasn't gotten a reputation for quality, or from what it sounds any customers. The companies who don't care about price and want it done now request large companies who are established, experienced, certified, and recommended. That's a symbiotic relationship at work. The contractor has been in business, comes highly recommended, is experienced, and certified. Because of this they can charge what they want. They have no competition. The company in need of repair also wants someone established, experienced, recommended, and certified and need it done NOW! so they are willing to pay. This guy, I don't believe has any of those things so he needs to start at the bottom unfortunately. At the bottom is a dog eat dog world. Large contracts require cheap bids...period.
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#11 Reply
Posted by
madires
on 11 Jul, 2013 14:40
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Addition: I notice that people suggest you look at what "competition" charge. IMO, DON'T go down that road - you decide what you do
and what you offer is worth, no-one else. I've seen a lot of crap from supposedly competition, over the years. Comparing unknowns is
a waste of time IMHO. You'll figure out where you fit.
Ignoring the local market isn't going to help to grow a business. If a potential customer hasn't any clue about the value of your service he'll decide based on the price. Some customers won't even notice if they get poor/bad service because they aren't engineers. They just care about the price and that the damn thing is running.
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#12 Reply
Posted by
komet
on 11 Jul, 2013 14:45
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I am a highly regarded electronics specialist and my customers will get exceptional quality of service and the highest quality standards in the country.
Then charge people accordingly. If you offer the highest quality, you must charge the highest prices. You ideal customers couldn't give a toss about the dollar amount anyway.
Although I completely agree with you. He hasn't gotten a reputation for quality, or from what it sounds any customers.
He did state that he is "highly regarded" in the field of electronics. I took that to mean "by people other than himself", which would suggest that potential customers already exist. Otherwise, of course you are correct that the greasy pole of reputation must be climbed, but there's no need to climb it twice unless you've fallen off it.
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#13 Reply
Posted by
NerdCore
on 11 Jul, 2013 14:52
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I am a highly regarded electronics specialist and my customers will get exceptional quality of service and the highest quality standards in the country.
Then charge people accordingly. If you offer the highest quality, you must charge the highest prices. You ideal customers couldn't give a toss about the dollar amount anyway.
Although I completely agree with you. He hasn't gotten a reputation for quality, or from what it sounds any customers.
He did state that he is "highly regarded" in the field of electronics. I took that to mean "by people other than himself", which would suggest that potential customers already exist. Otherwise, of course you are correct that the greasy pole of reputation must be climbed, but there's no need to climb it twice unless you've fallen off it.
reading his statement, I feel that his regard is in his current job. One which would be difficult to translate into your own business. Sure, you could say "The place I worked for loved what I did and I felt I should focus on that myself. But then you are killing yourself in not having real references. In his statement: "
and my customers will get exceptional quality of service and the highest quality standards in the country." Will shows me he hasn't gotten any useable references or customers to use.
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#14 Reply
Posted by
cthree
on 11 Jul, 2013 16:36
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If its just you doing the work, ie no employees, then the formula I use is contract rate / 500. If your salary rate is $80k/yr then you would charge $160/hr which means you need 500 billable hours a year or about 10 hours a week give or take.
Remember one thing: you can't bill for running your business but you still need to d that work. The time you get paid to do your bookkeeping, maintain and invest in tools and gear, finding new customers and collection money from existing ones you don't get paid for so you need to pass those costs and overhead on.
Bill in increments of 1 hour with a 10 minute grace (1:10 = 1:00, 1:11 = 2:00) and bill for your travel time.
If you have a large repeat customer as you do, an open work order detailing the terms with a budget like 10 hours per week and any on-call terms (double time after 6pm and weekends, triple time on holidays) is a good idea. That way you can submit your billing without having to get a sign off every time which is good for both them and you, less paperwork and they can call you in without having to supervise like if you need to go to a data enter or remote location or branch. Typically your get someone there to sign a work order when you are done on site.
Good luck but beware of being cheaper than you would be if they just hired you on a contract. You should cost much more as a free agent. Your price should be inversely proportional to your job security. The more they commit the bigger a price break you can give them. Similarly, having one big customer rather than a lot of little ones is far less secure a position to be in. If you are in a far more precarious situation than if you have a contract. They can dump you with no notice and no recourse on your part. They have to pay for the flexibility up front. You might want to propose a contract position instead for your own income security.
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#15 Reply
Posted by
Stonent
on 11 Jul, 2013 16:40
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Many times a company will have you sign a contact with your rates. I think it depends on what work you are doing. I paid 100 USD to have an electronics shop recap my digital tube tv including parts. But that was probably all through hole. If you're picking resistors up with tweezers and a microscope and / or dealing with bga stuff that requires a lot of skill.
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#16 Reply
Posted by
cthree
on 11 Jul, 2013 16:42
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I'll add there are a lot of people in this thread talking a lot of shit. If you don't have something constructive to add why do you say anything at all? You are all above being judged by random strangers when you ask for help and feedback I presume?
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#17 Reply
Posted by
nctnico
on 11 Jul, 2013 17:03
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I was asking for advice. Not criticism.
Well, making a business plan before starting your own business is good advise. A business plan should have answered questions like the number of billable hours you can make in a year and what the minimum number of hours per year and rate per hour should be to keep your belly full, a roof over your head, pay for income insurance, pension plan, healthcare, etc, etc. This may take while to figure out. I needed a pretty complicated Excel sheet for my situation and I'm used to doing my own bookkeeping...
I simply charge by the hour and charge a minimum of 4 hours for on-site work. But for big customers I may bent these rules a bit depending on the customer. My golden rule is to never ever compete on price because that will erode price levels and eventually bite you in the ass. Excellent service however is hard to come by so it will provide repeat orders and referrals.
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#18 Reply
Posted by
AndyC_772
on 11 Jul, 2013 19:37
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For component level repair, your service is worth whatever makes it economic to repair the types of product you're able to fix. If you're looking at repairing PCs, then don't even bother - you'll never do it cheaply enough to make repairing a sensible option. If, on the other hand, you can fix industrial equipment worth thousands, then your service can be quite expensive in terms of an hourly rate and it'll still make sense for people to hire you.
One statement you make does really, seriously put me off, though - in which case the rate you might charge becomes academic:
I am a highly regarded electronics specialist and my customers will get exceptional quality of service and the highest quality standards in the country
The reason it says to me "run a mile" is that it's so vague. An "electronics specialist" could mean absolutely anything from someone who has done nothing but soldering on a production line all day, all the way up to a degree qualified professional design engineer. If you're "highly regarded", cite people who know your work and who are willing to provide references. If you work to the "highest quality standards", state what they are: IPC, MIL or whatever. Otherwise, a statement like this is pure marketing fluff.
Be specific about your experience, your skills, and the nature of the work you can do, and customers will recognise that you might meet their needs. If you're not specific, don't expect the benefit of the doubt. Customers look for people in whom they can have confidence.
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#19 Reply
Posted by
DavidDLC
on 11 Jul, 2013 19:55
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I was asking for advice. Not criticism.
You claim 25 years of experience, you should not be asking this question.
Or on the Welcome note put on the bottom: We still don't know how to charge for component level repair.
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#20 Reply
Posted by
nukie
on 12 Jul, 2013 01:13
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Charging high rates is surfire way to kill your business. I used to repair stage equipment. Usually its just one or two passive components failure or a simple common power transistor or diode. I did it for a mates company and I charge a minimum of $10 for those easy repairs, actually taking apart the casing took longer than repairing when you have parts on hand.
In no time, mates of mates starts flooding me with all sorts of amplifiers and I was learning a lot from the circuits but definitely working for charity. It was great it worked for them because it takes two weeks to three months to return the equipment from the service center and they get slap a $250 minimum charge. I only take a few days to get it up and running or if its beyond my skills I just say no fix no charge. I stopped doing it since then because I am not certified electrician and I am concern about the legality.
So it sounds like I am spoiling the market but I am sure there will be someone out there who will be willing to work for less. So before you build up your customer base, keep the charges down. Unless you made your name in the industry and master in your class, you can charge whatever high skyrocket price the customer can afford. The quickest way to pricing is to start off with the target monthly salary you wish to earn then add your running cost to it. Finally predict(hardest part) how your business will strive monthly. Some months are slower so you should average it. This also applies for many other 'services' type businesses. Certain trading business starts off losing money(investment) but business providing services should start making profit asap. I also hope you have insurance cover in case some jackass decides to sue you for damaging their equipment.
The australian gov websites provides a lot of information regarding 'working for yourself' business, you should check it out, there's lots of guidelines and standards for various types of businesses. We are all tax payers which money goes to researching and gathering these information you should make use of what you have paid. Unfortunately not all information are available online the Rudd gov, wants you to pay for them.
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#21 Reply
Posted by
David_AVD
on 12 Jul, 2013 01:38
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Public liability insurance is a must, especially if you want to do any work on-site. A lot of clients require you to have a $10M policy these days and you may have to show a Certificate of Currency to them before getting any work.
Be careful about having just one customer, as the ATO (Australian Tax Office) may rule that you are an employee of that customer, not a subcontractor. This can get messy real quick.
We have a $50 minimum charge (+ parts of course) irrespective of whether or not the repair was viable. The no-fix, no-charge policy can attract a ton of crappy customers with crappy equipment.
Whether or not a high hourly rate ($200 seems high) and free pickup and delivery works for your (possibly niche) industry I don't know. I prefer to have travel, site and workshop rates - all billable.
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#22 Reply
Posted by
David_AVD
on 12 Jul, 2013 01:41
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I was asking for advice. Not criticism.
You claim 25 years of experience, you should not be asking this question.
I think it may be a case of 25 years of electronics experience, but little business experience? Plenty of talented people go bust when they go out on their own and have to manage all the (not so) fun stuff (IAS/BAS, insurances, etc).
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#23 Reply
Posted by
EEVblog
on 12 Jul, 2013 04:03
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- $200 an hour for the first 2 hours.
- After 2 hours the rate changes to $50 an hour.
$50/hr for the other hours is too low IMO. At least $75 I reckon. $200 is not unreasonable for on site work for the first two hours.
I know a lot of people that add an "on site" surcharge.
How should I charge my customers for my component level repair services?
Later I will be asking about how much to charge for electronics design work.
That's harder, because companies have a habit of moving the goal posts when you quote for a whole "job".
I always preferred small set jobs defined in writing. e.g. lay out this one PCB
I'd never take on a whole job, e.g. design and build an entire production test system to test X widget.
For design work in Oz you'd be typically charge $100/hr. $150/hr if you know you can get away with it.
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#24 Reply
Posted by
EEVblog
on 12 Jul, 2013 04:10
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Also, unless you earn well over $100K taxable income. i.e. after all your expenses, forget about becoming a pty ltd company, just stay a sole trader. There is no rea tax benefit unless you are over that figure.