Don't fool yourself before quoting prices

As Jack Frost prepares to nip at our noses, it’s time for PHC contractors to set their prices for annual heating checkups. Some of the prices I have seen in the past for this service (especially those for less than $100) are laughable. It’s obvious those prices are based on ignorance turned into stupidity, rather than logic and the fundamentals of mathematics.

Intelligent contractors, like Tom D. on Long Island, N.Y., realize the importance of calculating prices correctly. Tom goes one step further. He tries to inform his colleagues of the error of their ways. He recently sent me the following copy of a letter he sent to a fellow contractor he met at a barbeque. (You’ll note a sentence in Tom’s letter inspired the title of this writing.)

Hey Frank,

It was good to talk to you last week. With regard to our conversation at John and Linda’s, enclosed are some articles I printed that I thought you would find interesting.

I started reading Rich DiToma’s columns about 15 years ago and found his advice to be priceless like so many other plumbing, heating and cooling contractors have. I have heard him speak at seminars on Long Island several times. You can also find his articles at www.phcnews.com.

It seems that many plumbing, electrical and other various types of contractors are starting to follow Mr. DiToma’s lead. There certainly has been a change for the better in the PHC industry over the years. They are starting to realize that the numbers don’t lie. Don’t fool yourself; do the math.

We all need to do ourselves a favor and educate our colleagues as well as consumers. This guy (Rich DiToma) loves when people call or send emails for advice. Don’t be afraid to spend a few bucks to take one of his classes. It will pay you back 10-fold very quickly.

Tom

Thanks Tom for your kind words and the time you take to help in the cause of informing our colleagues and clients about contractor costs. In the interest of further enlightenment on my part, this article will address the minimum cost that contractors incur to perform an annual heating inspection for a residential hot water heating system. Let’s start with a list of issues that should be addressed in the inspection.

As with all services, there is paperwork: Speaking with the client, answering their questions, writing the contract/invoice, receiving authorization to perform the inspection as well as their approval of the price being charged for the service, and getting paid for the inspection. It takes about 15 minutes.

Taking a look at the obvious condition of the boiler takes at least 1 minute. Inspecting the pilot sensor, pilot safety, pilot assembly, flu damper, and burner for proper function can minimally take 5 to 10 minutes.

Checking the condition and functionality of the water supply controls, low water cut-off, and thermal expansion device takes about 15 minutes (after all, you must run the system through cycle).

The relief valve waterway clearance takes at least 1 minute, if there are no problems.

Rrelay, gas valve, Btu firing rate, high limit control, thermostats, circulator, zone valves take 10 to 20 minutes; adding up to 32 to 47 minutes at a minimum.

Checking for the presence of carbon monoxide outside of the boiler adds 5 minutes minimum.

Since instant transportation has not been invented yet, travel time to the client must also be factored in. Although some contractors may experience travel time of less than 15 minutes or more than 30 minutes, I believe the average range most incur, and for purposes of this example, is 15 to 30 minutes.

The times I have included are minimal times (see Figure 1 summary) that are close to accurate when considered in the totality of the inspection. Therefore, the total minimal time to perform the aforementioned service inclusive of travel time ranges between 67 minutes (1 hour and 7 minutes) to 97 minutes (1 hour and 37 minutes). This inspection service could, and very probably may, take longer.

Using these minimum times, a minimum technician labor/overhead hourly cost range to the contractor of $100/hour to $250/hour in $25 increments. And, taking Tom’s advice to not be foolish and do the math, Figure 2 shows the minimum cost contractors incur to provide this service to the public.

(NOTE: If you think the cost a contractor incurs for one qualified tech with a service vehicle in the U.S. is less than $100/hour, you need to be enlightened. Call me.)

Dependent upon tech labor/overhead costs, the lower time expenditure of 67 minutes costs contractors $112 to $280 while the 97 minute time expenditure costs contractors $162 to $405. If you are wondering why any contractor would advertise this service below $100, as many do, the answer is one, or any combination, of the following: 

• The contractor doesn’t know his/her true cost. In which case, you might wonder if you could trust their inspection techniques since he/she obviously implements poor business techniques.

• The contractor is using the inspection as a loss leader in hopes he/she will be able to sell profitable services which can absorb the loss for the inspection while also making a profit on the additional services. This seems shady because it tempts the contractor to be less than honest.

• The contractor is suckering in consumers with the intention of selling consumers services they really don’t need.

The cost to contractors for forced air and steam heating systems may vary from the times mentioned. To adjust times, just use logic and the fundamentals of mathematics.

Don’t fool yourself. Know your true costs. Always be honest and deliver excellence to consumers. Enlighten your competition, like Tom does. It will pay you well in the long run and give peace of mind to your customers.

If you need help doing the math in a mathematical and logical manner, call me. I’m as close as your phone.

Richard P. DiToma is a contracting business consultant and active PHC contractor with over 41 years of experience in the PHC industry. To receive more info about his contracting business coaching, consultations, business books, seminars with solutions, customized price guides, business forms, etc., contact Richard by phone at 845/639-5050, email richardditoma@verizon.net, fax 845/639-6791or write R & G Profit-Ability Inc., P.O. Box 282, West Nyack, NY 10

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