Just reflecting on some of my business practices. Particularly, how generous I am with clients such as older retired folks who are on a fixed budget, church friends, or folks I just feel are closer than customers "off the street." I try to keep my pricing and charges as standard as possible, but I very often have to modify my costs based on what I think the client can afford to pay, or is wiling to pay, whether it is a fixed cost or "time and material" job, ect. If compare myself to Starbucks or BP. They have a fixed price, you either want the item and pay that price or you don't. There is no ambiguity, no personal mitigating circumstances. Besides the fact that they are multi-billion dollar organizations, another difference is that they are corporations and there is just a level of separation between "personal" and business.
I have never had that, and honestly I am not sure I completely want it. One of the things I like best about my business is the personal relationship I have with my clients. Many of them come from other areas of overlap in my life, either church, ballet class, Sarah's school, or the many different ways folks cross paths in Hyde Park. I like being able to see my clients on the street, at the park, dance recitals, ect. That means a lot to me. It also means a lot to me to have them think very highly of me. I'll admit it, my self-esteem is very tied up in all of this. Having the word out there that "Peter is the only one you would ever want!" when it comes to wiring really keeps me going. Our operation is profitable enough, but we're not setting the world on fire. But that "psychic income" has been really key to me embracing and developing my knowledge and skills as an electrician.
One issue I am struggling a bit with today is how to handle the failure of brand new light fixtures that I install for my clients. I have noticed a distinct lowering of standards and lack of quality in what had been "Cadillac" brands over the years. In particular, right now I am thinking about an exterior high pressure sodium light fixture we installed in Jackson Highlands last year. It was for one of my friends from church, a retired gentleman who I like quite a bit. He does not know exterior lighting, (nor should he) so he depended on me to recommend and furnish the proper light fixture. We picked up a 100 watt high pressure sodium fixture with the lamp provided at Home Depot, and installed it last fall. About 3 weeks ago, at church he told me it had stopped working. I asked him to install a new bulb and let me know how that worked out. Bear in mind, this is a 70-plus year old gentleman, and I am not too keen on having him on the extension ladder 10 feet off the ground changing lamps. On the other hand, I already charged him a minimal amount for the installation to begin with, and the labor cost of driving to his home, setting up the extension ladder, testing the voltage at the fixture for free would put me well into "volunteer work" territory. So that is one issue. Should I raise my prices enough to cover a given number of these unbillable visits based on an average?
I FULLY gaurantee our labor for 5 years. We do it right, and only rarely ever have to come back. It happens, but rarely. I am wonder how much, if at all, that plays into a clients decision when he compares my proposal to another guys?
But back to the fixture in Jackson Highlands. The labor cost involved in coming back, testing installed fixtures or equipment (it has only been fixtures thus far) is a different story. I think it would be very poor public relations to tell someone "I know we just put it in 6 months ago. WE did OUR job. If the fixture is broken already, its' not my problem." In reality, I have never said that. Being hyper-concerned about my reputation, I always end up "eating it." And fortunately, it has not been too many times. But last Saturday, I went to this gentleman's house, set up the extension ladder, tested the fixture, and saw it was getting voltage but not coming on, even with the new bulb he had. Knowing I would have to deal with this, I purchased a replacement fixture earlier in the week at Home Depot. So I disassembled the installed fixture, installed the new one, and into the van the defective one goes. That was about 2 hours overall labor (Travel time and gas in there) that was wasted. I can spend another half hour of my time digging through the file to get the reciept from last Fall when I bought this fixture and trying to talk Home Depot into taking it back, even though the box is long gone and it was installed for 6 months already. Either way, I lose.
How would a "tough businessman" deal with this scenario?
I was never a tough businessman; lord knows the home I grew up in was almost socialist in its admiration for the working man and contempt for corporate America. But if I'm gonna be in business, I have to figure it out.
On the one hand, I could just require clients to furnish their own fixtures and lamps, and be responsible for them. That way, they would pay me the labor to install them, and if they fail in 6 months, they could pay me again. That seems like a good way to frustrate and lose clients. Plus, in most cases they are depending on me to know what they want or need. They don't know, and are not particularly interested in spending time to learn. That's why they called me. I am supposed to know. This applies both to folks who are young professionals who are way too busy to go to Home Depot, and to the older folks who have more time, but may feel a little more overwhelmed in a big home center like that where the choices are endless. (Of course, I do not intend to be age-ist here. It could be the other way just as easily.) Another layer of frustration would come when I drive over to the job after they have picked up the materials, and discover they are the wrong ones. Then there is the issue of me charging them for "doing nothing" (hurts them) or me "eating it" and not charging them. That engenders good will, but it is threatening to a business if you don't have some reasonable boundaries. You can go broke "buying approval" in this manner.
Fortunately, I have only had a few cases where this has applied. Come to think of it, the last time was with the same fixture and manufacturer, except this one actually did cost me money, because the light was mounted on a pole in a parking lot, and I had to come back twice, squandering about 5 hours total for a job that was originally billed at about 3 hours labor plus parts. So I made my normal earnings for that 3 hrs labor ( net profit after all expenses on billable hours is about 10-15%) That means if I billed for 100 dollars for an hour, I made 15.00 for that hour. My billing rate is slightly less than that, but I used the one hundred for easy math. So you see in that case, I earned 45.00 normal profit for the original job as billed and executed, and then gave away 5 x 95.00 or 475.00 in free labor supporting these defective fixtures. I go into such detail, both of these are real jobs, to show the actual economics involved. Saying "You can go broke" is not hyperbole at all.
At this point, I have erred on the side of keeping my clients 100% happy. I think the financial cost these situations impose on me is not very obvious to them, and I feel whiny if I raise the issue. So I don't. And you may be reading this saying to yourself "Nobody's holding a gun to your head. Get over it!" Probably so. But as the recession lingers on, and margins become thinner and thinner, I have to come up with some sort of fair and reasonable method of addressing this type of situations. Perhaps an optional version of the "extended warantee." I know I want to throw up every time I buy a computer or TV and they want to sell me the warantee that I grew up getting for free. To me, it is fairly disgusting that they have built their product to such a low level of quality that they will gaurantee it for 90 days (average) or up to one year (if you are lucky.) After that, even if the thing cost you 1500.00, you are out of luck. It both amazes and disgusts me that the consumer has been trained to accept this. Should I do the same thing? It seems philistine and ungrateful to tell my clients some version of "I can provide this fixture for you, and it is brand new. My experience has been that there is a reasonable chance that it will break within one year. If so, there will be the labor cost of a service call to test it and verify that the wiring is good, but the fixture is bad. There will then be the additional labor cost of taking down the broken one and sourcing and installing the replacement fixture. I can offer you the option of either paying me or someone else the full billable labor cost at the time, in the event that should be required, or I we can add an "extended preventative labor insurance fee" of a certain amount that will cover you for the replacement labor should it be required.
I would really, really welcome anyone reading this to post e comment. I am looking for feedback.
Happy Memorial day and THANK YOU to all our brave women and men in uniform!