Mechanics/Self-Employed/Etc: do you get tired of having to justify your hourly rate?

General Discussion
1

I figured my pet peeve might have some resonance here, because of the large amount of mechanics, self-employed, and others that don’t merely earn a salary for time spent “on the clock.”

I am a handyman/landscaper/whatever job I can hustle guy. I typically charge $X an hour. I am having to justify my rates to prospective customers, most/all of whom make the assumption: "You charge $X per hour. A typical year has around 2,000 work hours; you make $2,000(X) per year. That’s TOO MUCH for a job that doesn’t require a formal education!

Obviously it’s not politic to break into a dissertation with them; here it is for you guys and gals.

  1. YOU get $Y for EVERY HOUR SPENT AT WORK; I get $X for EVERY HOUR BILLABLE TO A CUSTOMER. Those aren’t the same thing, or even similar!
  • Advertsising time on Craigslist/Time spent sharpening mower blades/Buying crud at Home Depot all pay exactly $0/hr.
  1. YOU get to keep ALL you are (post tax) paid; I have to pay out expenses. (Not to mention, you can drive the smallest thing that’ll fit you; OTOH, Prii don’t handle 2 cu yd of topsoil very well.
  2. YOUR workweek is limited basically by your ability to withstand boredom and need for sleep; MY workweek is often limited by physiological constraints. (At 43, I can still channel my “inner John Henry” with a 8# sledge; I can’t channel him for 55 hours every week.)
  3. As a small business owner, I employ skills (unseen to you) like bookkeeping, tax strategy, etc…that require a college degree, were I to do them for somebody else.
  4. I have probably $7,000 tied up in tools. Were I a “company man,” I could stick 'em in the market and get 8% annually or so; as I live in a capitalist society, I ought to get something similar, over and above what I get for my labor.
  5. Your “college pay bias” is shorthand for supply and demand: if a job requires a BS, and BSs are limited, prevailing wages go up. Well (in our present, sedentary society) there are pretty few people who have the inclination, or even ability, to do what I do. My billing rate reflects that fact.

Just a word to the wise, for non-insiders who kvetch at the hourly cost of auto repair, other hourly services, etc. If your auto labor charge is $100/hour, your mechanic is deicdedly NOT taking home $200K/yr! (The shop owner makes more, yes, but most of that is return on capital investment, NOT spinning wrenches, though he might not be specifically break it down like that.)

2

I’m not in the business and don’t work for anyone anymore so just my observations for what it is worth. If you are constantly having your rate questioned, first I would question the rate itself but then the folks that are questioning the rate. Most everyone understands the need and cost for plant and equipment and overhead. If you are bottom feeding though, those folks may only be interested in the rate. I would try not to deal with them.

On the other hand things are really competitive out there and you really have to ring up a lot of hours to keep the rate itself down. I had a triple tree taken down for $250 which included the stump being ground. My neighbor is having a sprinkler system put in on two lots for $4100. I don’t know what the hourly rates would be on these but couldn’t be much.

Back to cars, like I said, we were going to be gone for a couple weeks so I decided to just have work done on my car instead of putting it off any longer. I didn’t ask for an estimate and just gave them the list and the parts I had already bought. The list was changing all the hoses and belt, coolant change, thermostat change, checking the idlers and front wheel bearing. I got an email saying the bearing was bad so told him just to go ahead. I provided the hoses and thermostat but an idler was bad as well as the bearing, and about a ten foot belt. Total price $650. I thought that was super cheap.

OTH people that are paid by the hour also have to pay all of their overhead to get to work and any other expenses. Make any sense?

3
If you are bottom feeding though, those folks may only be interested in the rate. I would try not to deal with them.
Yeah, I'm "moving up in class," as they say in horse racing. A lot of that friction is dealing with Craigslist, before I built up a clientele, and had to take what I could scrounge. My newer (and seemingly more profitable) option is to find loyal, well-off customers, get in the door, and "assume" as much of their Do It For Me work as I can vs. "be the guy who'll mow your lawn."

You get ALL types online, and you get the “Rush wanna-bes” who can’t, or won’t, comprehend the difference between “billable hours” and “hours on the job.” I also get that in casual conversation: folks don’t get that a professional’s “billable hourly rate” isn’t 1/2000 of his take-home pay: both on expenses and that a mechanic’s/lawyer’s/pilot’s “hour” is an hour actually working, NOT an hour “at the office.”

OTH people that are paid by the hour also have to pay all of their overhead to get to work and any other expenses.
Well...ya gotta get there, that's true. SOME jobs that require certification are structured such that the worker is on the hook, though most companies pay (or at least subsidize) this. I've worked low/mid skill jobs, and I merely had to get there--all tools of the trade provided.
4

meanjoe75fan:
Your opening post says it quite well.
What are people’s reactions after you explain this?
What percentage would you say better understand and accept your position?

5

Very interesting post, avoiding to fall into politics (I think this is a political subject), you should think about establishing your rates and if possoble, do not negociate it (not too much) no one should tell you how much are you going to earn, customer should only say yes I like it, or no and go to someone wo will do the job cheaper and probably with less experience, offering less quiality, that´s how it works (in a free context, again, I think it is a political discussion)

6

Bing said: “…Most everyone understands the need and cost for plant and equipment and overhead…”

I think the opposite - and that’s why the OP is valid.

It is amazing how few people understand that there are overhead costs and the idle time. When I was working, the company calculated $100.00 per hour for my services. Needless to say, I didn’t get anywhere near that amount, because the company had provided benefits, a place to work in, travel expenses, etc.

So to meanjoe75fan, my experience with Craig’s List isn’t very good. Lots of scammers and shysters.

I think the best advice I can give you is to state “The rate is the rate, and if you don’t like the rate, find someone else!”

7

You should here the reaction I got sometimes when I did software consulting. Most of the time I my jobs went through a head-hunting firm for an added 20%. My personal rates were at least 50% more then a full time employee would make. More if the contract was 3-months or less.

What people don’t understand is there’s a lot of overhead expenses. Especially for a mechanic or someone in the trades. Healthcare, travel, tools…etc. For someone to make what a full time employee makes…you need to charge at LEAST 50% over that amount…maybe even double.

8

Some people…not all, do not understand the investment and the cost of running a business.

There is the investment in tools…which seems to be never ending, as the manufactures change to the newest ideas out there. The Torx bits replaced the slotten screws and now it’s the tripple square. New and better tools are invented and so we are always having to keep up.

Then there is the fact that they…at their factory/office job…get paid sick days, personal holidays, vacation days, and their boss may contribute to their retirement etc… In your job, you are the bookkeeper, and payrole person.

They have someone else paying for a place to work…for you it’s your shop, and there is the cost of heat in the winter, electric, property insurance, health insurance and maintenance around the shop…mowing the lawn to repairing the leaky roof .
There is also the costs of a bookkeeper, and someone who makes sure that their income taxes are paid each payday. At their job someone else makes sure the work area is clean (housekeeping) and someone else who keeps them well stocked with the parts they need, weather it’s bolts and nuts of typing paper.

I prefer to explain it a little simpler to the client though,

1/3 goes to paying the taxes .
1/3 pays for all the overhead (shop, tools, bookkeeper, insurance, etc…
1/3 I get to keep for myself and my retirement, sick days, and down time has to come out of that too.

I’m not only doing the work, I’m the parts runner, the landscaper, the maintenance man, the bookkeeper, purchasing agent, sales manager, and housekeeper (mainly I keep the toilet clean) etc., etc…

Yosemite

9

I used to work at a large corporation, the charged out their R&D to subsidiaries. The rate was typically 3X the employee’s salary, the rest covered all the overhead of a large company. So take that down to 2X for an independent mechanic/consultant. But folks don’t want to deal with ‘overhead’.

10

I’ve worked both for big companies and for myself. At the big company, I managed people and had direct info on what they COST to keep them in the building. Wages, taxes (the 6.25% of Social Security employees don’t pay but an independent does!) and bennies drove costs to about 130% of their wages.

I also managed a building we rented for a specific project with 11 people in it. Now double the amount you are paying in wages to support rent, utilities, maintenance, computers, internet, ect. Now we are at 260% of the pay. Zero profit here, were were engineering, not sales. 2.6 times the hourly rate.

If you don’t charge 2-3 times your actual hourly rate, you lose money, clear and simple but most people who haven’t worked for themselves or have seen the actual numbers have NO understanding of that!

I wish I could help you explain this to people in simple enough terms that they can understand but the world seems to be creating simpler people faster than we can teach them!

11

Educating the public regarding pricing is an agravating waste of time and it’s time that cannot be billed out.

12

I’ll say this; I work in in I.T. I also build computers for people on the side, maybe 5 or 6 a year. I don’t advertise, everything is word of mouth, and I’m selective in who I take on as a customer. I don’t mark up components, I don’t charge for the time it takes to research what parts best suite the customers needs and budget. I charge a flat rate of $20/hr in labor for assembly and initial setup, and during the setup I only charge for “touch time” (if there are 125 Windows updates that need to be downloaded and installed, I only charge for the time it takes me to get the update process started. I don’t bill people for having me stare at a screen for 45 minutes).

Usually I only make around $60 plus whatever mail-in rebates are available per computer, So maybe around $100 per computer profit. I’ve never had to justify my costs to anyone. Of course this is just a side business to fund my own computer hardware upgrade addiction. I’m not making a living off of it or anything.

13
...you get the "Rush wanna-bes"...

People who wanna be a Canadian rock band?:

14

Just have your spiel ready for the people that would complain no matter what you charge. If they know the competition, they would recognize a good price when they hear one.

15

Print THAT on a card or flyer you can simply hand out to the nay-sayers !
You’d have to be very .pcp about how you state your case but I think it can be done.
Like comparing how the hourly worker gets paid by a business that, not only pays that wage, but ALSO pays the ; overhead, insurance(s), utility bills, vehicle purchases, tools, training, taxes, licenses, vacations, warranty re-work, etc, etc, etc.

16

I remember one contract job I did a few years ago, the manager who hired me to do the 6-9 month job they needed done for them, and fast. Well, he got fired at about 3 months in. And the replacement manager, a younger fellow, he thought my hourly rate was too much and was giving me a hard time about it. So I said “Hey, if you are not satisfied, let’s agree to end this contract. You draw up another with the rate you prefer, and I’ll check with my other clients, see what work they need, and consider your offer.” … no further mention of this issue … lol …

17

^+1. This is one of the lessons from the book ‘Winning Through Intimidation’. It’s a much better book than the title, I read it about 30 years ago, and it has lots of good ideas for independent workers. Written by a realtor, it lays out how to deal with clients, how to use one’s worth to best advantage.

18

Hi, I sat back and watched where this one was going to go. I certainly don’t want to minimize how difficult or irritating this is for people who run their own shop. That said, I think the route it’s gone is rather less car-related than other discussions.

19

Two points regarding car repair expenditures.

  1. Many (far too many) people just flat do not like spending any money at all on the tool they use every day; their personal vehicle. Two hundred a month on the cell plan? Not a problem.
    Two hundred bucks for fake Chinese made flowers at the home decor store? Not a problem.
    Two hundred in preventive maintenance on their car? NOW there’s an issue…

  2. Far too many people have this misguided notion that all of the money is free and clear with every penny going into the pocket of the mechanic.
    If the repair is 500 bucks total for parts and labor many have the perception that the mechanic has netted 500 bucks and is on a roll into the good life. It doesn’t work that way.

20

There’s a photo I’ve seen somewhere on this Car Talk web site of Tommy wrestling with a transmission, and boy does he look tired and worn out. The mechanic’s job, besides needing particularly good technical diagnostic skills, it’s really hard demanding physical work. That’s the reason car owners don’t want to do the job themselves. So it’s sort of hard to understand why they’d balk at paying an expert to do it for them. I mean while they don’t balk at paying another type of expert – a dentist say – to fill a cavity in their tooth.

I suppose the car owner figures they can buy a new car, but can’t buy a new tooth, so the economic decision points are different. The car owner is always wondering if the cost to repair their car would be better spent purchasing another car instead.