One of the problems I see homeowners continually make, when shopping for a home repair service provider, is to equate value with the hourly rate. There are some repair companies here in Cincinnati who charge as much as $250/hr. In contrast, I know sole-proprietors that work completely cash, under the table for less than $30/hr. Simply the rate by itself is no measure of merit.
Yet I meet people every day that view both extreme cases as equally suitable for meeting their expectations for quality, service and warranty. Sadly, they are often disappointed, as they fail to obey the Three Golden Rules for Better Home Improvement before making a hiring decision.
Some companies do not charge markup for materials. Some charge as high as 225%. There are sound reasons why companies do what they do. They are each targeting a certain segment of the market with the services and benefits they offer, even if they all end up repairing a broken light fixture. Judging the material markup by itself, again, is no measure of merit.
Some people feel a plumbing company who charges $250/hr is a rip-off until you realize that they employ guys who are “on-call” for that drain backup or emergency leak. These “on-call” technicians might only get a few hours of work each day. The overhead for such emergency service is outrageous, and the resulting price must justify the investment. However, the ability to mitigate further property damage is invaluable to the homeowner in a crisis.
Same is true with materials. Some people become furious when they see a heating and cooling company charge over 200% markup on a furnace part until they realize that these companies maintain an entire warehouse, stock trucks full of these parts, and develop sophisticated computer tracking systems to show up with the correct materials on any given service call. Many times these companies make most of their money off the parts and equipment they sell, not the labor to service. In either case, a company who can replace the failed furnace motor on the spot in the dead of winter is worth more than waiting 2 weeks for a back-ordered part.
It is common for people to think that the companies who have higher billing rates or material markup are making more money. Usually, this is not the case. Almost all trade companies are small businesses with razor-thin profit margins whereas most less-expensive, sole-proprietors have much higher profit margins due to the service, warranty, and legal/insurance compliance they fail to provide making their overhead near negligible.
Consequently, one might conclude that the less-expensive, sole proprietors are really the ones “milking the homeowner,” since their costs are so low they really ought to be charging the consumer even less than they do. Others conclude that the really expensive trade companies should all be put in jail for their “outrageous” prices. Both extremes are unconstructive, as they fail to acknowledge the strengths and weakness of each.
Instead, I’m a big fan of diversity, competition, and an educated consumer who can pick and choose which service provider is the best fit for their particular need. Our country needs more ethical, reliable and professional tradespeople and companies across the entire service/price spectrum.
In an era where economic and governmental forces are making small business entrepreneurship less and less attractive, we need to collectively focus on the real enemy: shady characters who fail to live up to professional and ethical standards of conduct, perform shoddy work, fail to pay their taxes and don’t stand behind their work.
That’s my view on the matter—I’d love to hear yours. Feel free to sound off with your comments on my blog at www.MasterMyList.com/blog/ or email me at [email protected].
Happy Remodeling!
Don
Thanks for a nice share you have given to us with such an large collection of information. Great work you have done by sharing them to all. simply superb
Don, Like how you approached the topic as it is a real problem in our industry. People just don't remember that you get what you pay for, and so the implications are always that we messed up where in reality we mostly deliver what we commit too … but the customer expected more.
IT is one of the blog article and i understand that