How we set our labor rates - what our time is worth.
August 31, 2013
Today I'd like to talk about how to set labor rates.
This sees to be incredibly polarized – older technicians often do not mind charging whatever they can get, whereas younger technicians price jobs based on how easy the job is to them. I will have to plead guilty to the former for a good part of my career.
The way my current system works; every slot of my time has a price. It is not based on what I am doing for you – it's based on what I COULD be doing for somebody else! That price is based on what somebody else is willing to pay me for that block of time.
For example, virus removal. I do not offer this as a service. It just never fucking works enough of the time that an hour or two hours were wasted cleaning a destroyed Windows installation.We offer reinstalls, for $100 using the license key on the bottom of the laptop – and data transfer for $20-$50 depending on the amount of data. People will occasionally say “gee, that's EASY – even I can do that!!!”
The proper response to this line of questioning is not to lower my price, or feel guilty. The proper response is for me to ask them why they're asking ME to do this work if they find it easy? What a waste of time to walk down here only to complain that you can do it yourself.
I am going to charge that rate for a good reason. During the hour I spend installing windows, half hour installing updates, ten minutes hunting for drivers, 10-20 minutes I spend transferring your data back and forth, I could have made $200.$300. $400 replacing Macbook Air polarizers or doing motherboard microsoldering. I'm not going to do an “easy” job for $20-$30 because it's taking up time I COULD have been using to make more.
My time is worth what someone is willing to pay for it. If I do work for less, I am robbing myself of money because I am not using that time properly. It has nothing to do with what I am doing. If someone wants one hour of my time operating a cash register and this requires I leave work to do so – I am going to ask $150 to operate that cash register for an hour.
Also, let's move onto the “but that's easy and I don't want to rip them off” line of thinking. The fact that a job is easy to you, does NOT mean it is easy to others. When pricing a job, do not price it in terms of how easy it is to YOU – price it based on the difficulty the first time you ever thought about doing it. That feeling you had when it was new and you had to waste time doing the research to figure out what tools, what procedures, were necessary so the job would be done properly. Don't base the price on how easy it is NOW, because that isn't how they see it. That isn't fair to you.
The reality is, it may be very easy to you. It may take less than ten seconds. You may be afraid that someone is going to say “that's easy!” You might agree, because you find it easy. When someone opposing us is correct on a point they are making and we agree with them, it triggers a switch in our brain. Once triggered, we cave in; we agree with them and do as they please.
What we SHOULD focus on is not us, but rather their request. You're not being unreasonable in asking $75 for an hour of your time. They are being unreasonable in asking an experienced technician to do something and lower their ate just because they perceive the job as “easy.” You wouldn't ask a master surgeon to apply a band-aid. You wouldn't ask Kobe Bryant to teach you how to pump up a basketball with an air compressor. It seems silly, right? Just as well, someone shouldn't be asking me to put a USB connector on their heart rate monitor for under $30. That seriously happened today. Can I do this? Probably, but the time I am going to put into doing it properly and looking up what I need to look up to do it and finding the wiring & connector is going to cost you some serious fucking money – money I know you aren't going to want to put into charging your heart rate monitor via USB, so why the fuck are you even here?
You need to price services by the highest common denominator. This means you price your time according to the HIGHEST amount someone is willing to pay you, on average, for you to work on whatever project it is they have for you.
Let's say your skillset allows you to make $100 per job, where a job takes 15-40 minutes. You should not take on work where you make $20-$30 for a similar potential amount of time invested. If there is even the slightest chance the job is going to take you that amount of time, you have to charge your standard rate or turn it down, because it is going to interrupt REAL work.
My biggest problem in my day is not having enough time. Too many people want things done, and it can't wait until tomorrow because they want it right now! As such, I need to focus my efforts & concentration on my core business. You may be thinking that simply prioritizing the lesser paying job will work. Put it off until tomorrow.
What happens tomorrow? You think you'll do the lower priced job? Fuck no! Five other people will walk in for the $100 profit jobs for the $200 profit jobs, and the $20 job will get pushed to the side again. You 'll put the lower priority job off until tomorrow, apologize, rinse & repeat until you beat luck or your pissed off customer leaves and tells everyone not to use you.
The business reality is that you need to charge a specific amount for your time, regardless of what you are doing. This rate is not set by the difficulty of the job. It is set by bids – how many people are out there hounding you for your time? What are those other people willing to pay?
If the average person is willing to give you $100-$200 for an hour of your time, a job that is easy still needs to make you at least fifty bucks. Just because it doesn't make business esne to take n lower paying jobs in place of higher paying ones.
You may feel guilty doing this, because “it's so easy.”
CUT IT OUT!
As I have said many times before, put the ball back in THEIR court. Why is someone coming to you to add icons to their start menu? Why is someone coming to you to clean programs off their Android device? Let them ask their 9 year old nephew who's computer savvy to help them with that, because chances are there aren't 30 people a day beating the door down to give him $100-$300 for other jobs. He has the TIME and the LUXURY to fulfill this request at a price within your budget.
Keep in mind that we do not live in a society in which we're forced upon people as their service provider. Anyone can do anything we are doing themselves. We are no monopoly. You should not feel badly if you charge a rate that someone finds objectionable so long as that person has a choice, and as long as you are candid about the reasons behind your rates.