Minimum hourly rate?

Jamin_Mayer

Jamin_Mayer

Location
Longmont, CO
I'm wondering how many people still stick to charging their normal hourly rate even though a job may be 20 minutes. Or, simply the job will go much faster than 1 hour, but you still charge one hour.

As a business owner, I'm a softy towards old people, old widows, etc... So, I find myself cutting my hourly rate in half if I have a half hour job for those who may not be able to afford me (or any other professional tree care company).

It also can depend on proximity to the next job. I can also depend on proximity to my shop too. But, like I stated, I'm usually a chicken and I can't stick to charging my 1 hour minimum hourly rate.

However, there are times where I say I could throw in this or that to give them "more bang for the buck."

As a business owner I know I should have the discipline to charge for a 1 hour minimum even if the work takes us minutes.--That is purely looking at the monetary side of being a business owner. And I'm sure I've really let a lot of money go because of my "feelings."

What do you guys/gals do in these situations?
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Jamin,

It's all about balance. We've had many 15 minute jobs that take 30 minutes to get there and another 30 to get back. We have to account for that somehow. We've gone the route of building into a rate for time spent on site and we've gone the route of building it into site specifics.

We are presently doing the latter and finding it works better.

Usually what we do is tell the customer, "...it will cost $XX dollars including travel and set up times. But we can probably knock of $YY if we can schedule it when we have a job nearby as the travel costs would be reduced."

We then let them know that the lesser expensive option may not be done until we have another job nearby.

I understand your softness for the older folks. We do too. It does become tough to get the work done at a level we "think" is affordable to them.

Far too often I've had them ask, "You can't be making money at that pirce!?"

Much to my shame what I discovered is that they were really asking, "are you treating me as a charity case?"

In their minds they thought we assumed they needed charity and were hugely insulted by that assumption.

So, we've accepted that we should always charge enough so that when they ask, I can honestly say that our price will more than pay the bills. The margin may not be as large, but we can still pay the bills.

I also don't hesitate to ask how that price fits in with their budget and how we might adjust the scope of the work in order to get within budget. They seem to appreciate that a whole lot more than just cutting them a charitable break.
 
I agree with Rick.

Some people may not look loaded, but may be comfortable enough in their finances that they can absorb the full cost of the job/ travel.

I usually figure that a two hour minimum is what I need, unless I can coordinate it with another job, as Rick suggested, and they are flexible.

I explain it to them that there is still the same travel risk for 5 minutes at a jobsite, as 5 hours, as all day. Cleaning up from 40 minutes of work onsite is not usually 1/3 of the time as cleaning up from 2 hours.

I start out with "We have a minimum charge for a job that is somewhat based on an average hourly fee to cover all the expenses and opportunity cost of not being at another job. We would gladly prune your other trees and shrubs to round out our two hour minumum. How does this work for you?" They may have a neighbor that need a little something and they'll split the cost in half, or whatever.

I like to explain where I'm coming from, then ask how it works for them. This gives the opportunity for them to say, "I realize you have expenses and are in the business to make money. The tree on the side of house is a little close, would you be able to fit trimming that into your two hours?" or "Well, I really can't afford that."
Then I can say, "Well, you seem like a nice person. We can make an exception this time. Would you please offer our business cards/ name and number to a few people that might need some work?"
 
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Usually what we do is tell the customer, "...it will cost $XX dollars including travel and set up times. But we can probably knock of $YY if we can schedule it when we have a job nearby as the travel costs would be reduced."

We then let them know that the lesser expensive option may not be done until we have another job nearby.

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That is good wisdom Rich. I like that explanation. It is honest and showing that you can work with them a little if they are willing to be patient for the work to be done. A very valuable strategy.
 
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Some people may not look loaded, but may be comfortable enough in their finances that they can absorb the full cost of the job/ travel.

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Totally true. It is difficult to judge. I did a bid for a widow yesterday. From outward appearances (her home and clothing) I thought I was wasting my time. After I showed her the bid for a small trim job. (And I bid my normal rate). She said, "Can you give me another bid on another tree?" She gave me more work than I expected. I was totally suprprised.

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Then I can say, "Well, you seem like a nice person. We can make an exception this time. Would you please offer our business cards/ name and number to a few people that might need some work?"

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That is a great idea as well. Do they oblige?
 
Then there is doing work for friends... How many of you all are softies for friends? I'll admit it, I lower my rates for friends. Some times they insist and pay me what my rate is...

But, once again, I don't want to discount my labor costs, but there are times when I cave in...
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there are different prices based on wether the job is done on "your time, my time or anytime."

some customers I can do cheap if I can do their job whenever I feel like it and take as long as I want to finish it.
 
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Then there is doing work for friends... How many of you all are softies for friends? I'll admit it, I lower my rates for friends. Some times they insist and pay me what my rate is...

But, once again, I don't want to discount my labor costs, but there are times when I cave in...
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For me, this is a sliding scale based on many factors

-ability to pay

-are they going to help with the clean-up, bonus for them if they are going to get their hands dirty versus not

-risk of damage/ loss, if they want work over a greenhouse, you have to figure that into the equation (like with regular customer work, hourly rate will vary).

-rental equipment, if needed.

-does it mean a lot of wear and tear, like chipping on gravel, stump grinding in rocky ground, or is it just a little easy climbing/ pruning and chainsaw work.

I give my neighbor's discounted rates because they have to look at my log pile, chip pile, etc, occasional chipping and saw noise (we live on a private road with some of the neighbors having fancy houses and stables, 1-10 acre parcels). Free chips for their animals/ trails.

You can't price it such that you might as well just give them money out of your wallet and have someone else do it for them.
 
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there are different prices based on wether the job is done on "your time, my time or anytime."

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Nice.
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The problem is this: most customers want the work done last week.
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In many ways it really comes down to what is your market.

You need to set your business up to serve that market and if, in the process, you can serve other markets then great. But that is not always possible.

Working for friends and neighbors is a different matter all together. Though not explicit, there is an implied expectation of getting a better deal than the general public.

Consequently I seldom, if ever, consider doing work for people I know unless I know them well enough, or not enough as the case may be, to tell them they will get my best pricing, which is the same I give everyone else.

Only my mother gets cut rate prices
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Our prices are based on a formula that considers time on site. So if the customer wants to save $$$ we give them several options from disposing of debris to dragging brush to raking up. All of that decreases time on site thus the proposal.

When it comes to older folks though, I find it frustrating when good ole Hiram and Edna want "that old butter nut" down and Hiram says he'll take care of the wood and brush.

Edna of course is giving Hiram hell because he's too old to do the brush, and just looking at him you know he'll bust an artery if he tries.

It is times like these when I know it ain't a matter of money but of pride, self reliance and perhaps his last sense of being a providing man for his family. But Money is the excuse he gives Edna so that he can do that part of the job.

Of course Hiram tells me in no uncertain terms he "Ain't paying for something he can do hisself" and a few moments later Edna pulls me aside and asks, "when the old fool settles down and realizes he can't do it, how much will it cost to have you take it away?"

At that point I'll tell them, "here are the prices to do each part of the job. Why don't you to take some time to talk it all over and we'll check back later. And Hiram, we'd love to have you give us a hand when we do the work."

Very seldom do we not get the whole job, and even more seldom does Hiram actually give us a hand other than to "supervise."

And Edna is happy, Hiram is smiling, and we have added another family to our list of repeat customers.
 
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In many ways it really comes down to what is your market.

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And that's what I'm aware of. Because, I typically can read a person well. So, many times I'm confident that my pricing fits my service area. But, there ar the tight wads I'm bidding for as well.

Some people will bid the person not the job. In other words, if your bidding in the area code 90201 you may bid much higher than if you were bidding int 48234. Why would we do such a thing? Because we know that different neighbor hoods have different income levels. And therefore, there may be more opportunity to make more money in higher income areas.

So, am I much more comfortable to charge a full 1 hour minimium rate in a higher income area verses a lower income area? Absolutely.

But, should I see people/jobs as the same opportunity or not? Should I bid my rates the same for all people?

And let's turn the table to all of us: Should we keep our rates the same for all people? Especially, for those quick jobs that are well under 1 hour...
 
For us it is all about the cost of doing business.

We don't take advantage of socio-economic differences when bidding a job. My expenses don't change just because we are working at a $1 million dollar house or at a $20 thousand dollar mobile home.

So we we bid apples for apples. A 30 foot single stem Picea Abies with plenty of work room will be bid the same no matter how much the house is worth.

What there will probably be, though, are specification differences that alter the final bids such as, the trailer owner may want to dispose of the debris themselves while the $1 mill house wants it all hauled away plus the lawn vacuumed.

There will also be differences based on the travel time from our parking facility. If one is farther away from the yard then the bid will be slightly higher.

Again, my costs of doing business don't change based upon the customer's financial resources. Our fair price guarantee is that every customer will get our best price the first time.

To charge more simply because the customer appears to have more is just not right in my mind.

Think about it. If you own the company you work for, many people would consider you to be pretty rich.

Would you accept having to pay twice as much for a Mickey D's burger than your employee would simply because you look like you have more money because you own the company?

If not, then why would we feel that it is OK to "put it to" somebody just because to us they look like they have gobs of cash?

What we should do, again, no matter who the customer is, is up-selling.

As sales people our job is to find the customer's needs first, then find solutions from our product offerings. And when we have found a solution to that need we should be offering other solutions to potential, or missed needs. That is up-selling. And that is where the folks with more disposable income are more likely to buy.

Fair price, solution oriented, looking out for the customer first. That is what builds a strong, and repeat client base.
 
Yall have made some very valid points. My answer to the original question is: your minimum hourly rate is just that, your minimum rate! We should all be takeing notes from Rick, as it seems he has it figured out. Jeff, I think your family planning should work out great for ya! Lmao!
 
The only reason to lower standard pricing should be if it's better to work than sit. I took it a step farther when I started and didn't have confidence in bidding. If a job went well and was done quicker than I thought I'd lower the price and explain why. Big mistake. They'd never smile, barely say thanks. I'd get the feeling they were thinking what were you doing in the first place overpricing, ripping us off etc. I rarely allow the client to help. I spend to much time worrying about their safety.
 
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If a job went well and was done quicker than I thought I'd lower the price and explain why...

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We do this on a regular basis. We'd rather give the customer a bill at exactly or less than we bid than to hand them a bill higher than expected. And we have yet to meet a customer who didn't appreciate that in the end.

Customer's will remember such things and know that they can trust us to treat them well.

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I'd get the feeling they were thinking what were you doing in the first place overpricing, ripping us off etc.

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Have never had this as an issue. We have lost many bids because they were higher than others. And we'd rather lose one making sure we had all the bases covered than to get the bid and find we are short.

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I rarely allow the client to help. I spend to much time worrying about their safety.

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Agreed! Very few of our clients are allowed to help and all are told they cannot. However, folks do like to handle some of the work themselves and we make it clear they have to do that when were are not on the site. Even when they are just watching we spend inordinate amounts of time watching out for them.
 
Definately increase the rate for ultra-high-end clientle here, who have shown statistically to prolong, defer, or manipulate the invoicing process. It's high risk to accept the payment on 90-day increments or through distant city corporate accounts or administrators of trust accounts...last mega-buck project we sweated on filed Chapter 11 protection five months after our completed work - more common with the corporate accounts than any one working family.

So I jack those bids up astronomically in the hopes of not getting the work - and finally do, because I take those chances and again - the rich are loath to pay and my costs in working for them - are then extreme.

Price reflects experience.
 
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