Electrical Contractor Price Book: A Complete Guide to Refer

Many electrical contractors are switching to a flat-rate pricing system instead of the traditional time and materials system. Based on a recent BLS report, electricians can earn up to $20,000 more than the median salary for all occupations in 2020, compared to median salaries and wages for all occupations combined.

Flat-rate electrical shops often use an electrical contractor price book because it lists everything they buy and sell, how much labor they charge, the types of jobs, markups, and what materials they use. After using this a contractor gets a crystal view on how to price electrical jobs.

When contractors have flat-rate pricing books, they are more efficient and customer friendly. Their ticket prices and profits are also likely to rise as a result. For a more convenient solution to your business, you can subscribe to InvoiceOwl. It is invoicing software for electrical contractors that lets you keep track of all the expenses at your disposal.

But for now, discover these simple electrical pricing strategies in this manual.

Best Electrical Contractor Pricing Strategies That Boost Profit Margin

1. Examine local target markets

Whenever you make your first sale and want to make it highly effective, you should gather insight into your target market. To determine among the top residential players, you may want to run a survey or ask some of the top questions when targeting a residential audience:

Always be precise about one thing, as the more details you have, the more significant the changes you will be able to close the sale deal effectively to your ideal prospects. After you've sent the survey form to your ideal customer, you can ask them the following questions:

• What do you appreciate in our electrical business?
• What makes you turn to us over their competitive companies?
• What is your key point of action when seeking to choose an electrical service provider?

It is essential to consider your insights about your local target market when improving your marketing strategies and increasing sales.

2. Analyze break-even points

As soon as you've determined the break-even point for your service, you can then decide on the minimum fee for a property to be serviced. If you would like to calculate this, you should first add up all of your overhead costs each month:

• Service utilities
• IT/Software
• Payments for vehicles
• Insurance for vehicles
• Insurance for businesses
• Rental costs for properties
• Pay for office staff and leaders
• Inspecting and maintaining vehicles and equipment

The total monthly business overhead expenses will be calculated once you have calculated all monthly overhead costs associated with jobs. Calculate the total estimated labor costs by multiplying these numbers together:

• Team size in terms of electricians
• Salary on average
• Working hours

3. Decide on an electrical pricing model

If you determine the break-even point for your project, you can choose whether to use a time and materials pricing model or a flat rate pricing model for your electrical project. Despite this, the pricing model may affect factors like profit goals and cost calculations.

Time and materials pricing

A time and materials pricing system entails billing customers for an electrician's time, adding in any additional expenses incurred after the job is completed. There may be challenging to sell this pricing model initially, especially for first-time customers. It is essential to determine the cost of time and materials to ensure that jobs are profitable.

Due to this, some electrical companies bill their customers in this manner to maintain their cash flow. To make the billing process well organized, you can consider implementing InvoiceOwl. This eases your billing process and lets you create professional invoices in a matter of minutes.

There are many advantages to time and materials pricing:

• The profit margin on each project can be controlled more easily.
• Knowing the exact average time and materials before the work is done is unnecessary because you can calculate the costs after the job has been completed.

Flat rate pricing

As a general rule, flat rate pricing is determined by combining the electrician's hourly wage with the cost of parts required (service calls and/or mileage fees are typically included as additional costs). Flat rate pricing for residential customers is presented on-site, so many prefer it.

Billing projects with unpredictable costs are typically handled with time and materials pricing. It is more flexible to use time and materials pricing electrical contractors when dealing with complex jobs, as flat rate pricing cannot accommodate unforeseen costs.

Using flat rate pricing

Flat rates differ from one service to another, not from one electrician to another. Due to this, you will not have to charge an hourly rate afterward. (To further understand which pricing model suits best for your organization, you can check the detailed comparison between flat rate pricing and hourly rate pricing.)

There's no need to be intimidated by flat-rate pricing. Maintained set equipment and task pricing system to ensure every job was profitable. In this way, you can estimate more quickly.

Service calls and trip fees

Electrical companies do not often charge a minimum of two hours for service calls. It is possible to revert to flat rate pricing if the job lasts two hours. A task labor bill will be issued to the customer in this case. The service call fee can either be waived, or you could offer a discount if the job takes longer than expected.

However, the trip fee is typically a set amount. Traffic in your area should also be considered. There may be a lower visit fee for a customer in a low-traffic area as opposed to a higher visit fee in a high-traffic area. Don't disregard rural areas because there isn't much traffic in them. As a result, a more significant amount of drive time should be considered.

4. Estimate the cost of a project

As soon as you select a pricing model for electrical projects, you will calculate project costs to determine an average price. Set projects can be calculated based on typical on-site costs.

5. Make profit goals that are attainable

To determine your electrical pricing, you will need to calculate the project costs and set an achievable profit goal per project. Here is how it works:

Step 1: Determine net income

The first step to setting the right profit goals is to calculate the Net Income:

Net Income = Total Revenue – Material Costs – Labor Costs – Overhead Costs

By including the previous calculation, find the profit margin:

Profit Margin = Net Income / Total Revenue

Step 2: Calculate the profit margin based on the total price

Testing different profit margin goals are the best way to discover which will work for your electrical business. However, profit margin goals are more important than sales goals. Aim high, but be realistic, as well.

Step 3: Research the competition's electrical pricing

Comparison of electrical pricing is crucial to ensure you're within reasonable limits. Also it can help solve your worry on how to get more electrical leads as you can work on the areas where your competitor is weak.

6. A trusted CPA can verify adjusted electrical pricing

Before you finalize electrical pricing, you should consult a trusted Certified Public Accountant (CPA). CPAs are good at catching errors and oversights. Electrical businesses need a strong financial foundation to succeed.

7. Make use of an electrical flat rate book

Using the flat rate pricing model, use an electrician price book to communicate detailed information about services and prices to prospects. It is essential to provide customers with a book or digital tool to explain costs, prevent repeated questions, and more.

The electrical pricing process can be improved by taking action that collects customer feedback, such as:

• Review happy customers (but do not incentivize them)
• Call or ask for feedback if a positive experience has been had
• Emails and texts to follow up on text surveys

8. Improve electrical pricing through customer feedback

Prices must be raised for more profitable customers while keeping unprofitable customers in mind. Consequently, you should start increasing prices on your least profitable accounts first. Once they have had service from your electrical business, send them a survey to find out what they think of it. Using the feedback, you can make the process more profitable for future customers.

Disadvantages of Time and Material Pricing

It is common for electrical contractors to charge their customers for labor and parts, along with a markup, which is usually between $90 and $140 per hour for time and materials pricing. Time-and-material contractors don't typically use price books, which is generally considered standard in the construction industry.

There are several shortcomings in time and materials pricing from the perspective of basic financials. The markup margins and hourly rates of shops that employ this pricing model are usually smaller than those that use flat rates. Typically, contractors who estimate using a flat-rate model factor in $200-$250 an hour.

Several factors can reduce the revenue an electrical contractor generates. An electrical business's efficiency and competitiveness can negatively affect time and materials pricing, resulting in lower profits.

Conclusion

The complete electrical pricing manual provides you with the strategy to maximize profits, minimize stress, and meet your goals. Ensure all factors are considered when adjusting your prices and implement them properly with these easy-to-follow strategies. Now is the time to implement these top electrical pricing strategies for real, long-term success!