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Author Topic: How do you establish your labor rates?  (Read 4426 times)

Scott Carneval

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How do you establish your labor rates?
« on: October 10, 2011, 04:33:25 PM »

A little background on me first:  I've been in the sound industry about 8 years, started out installing home theatre, then moved into corporate AV work which had me traveling a lot, then started my own production company.  A few years back I took on an install job at a nightclub, which led to more nightclubs, which led to today where just about every bar, restaurant, or nightclub in town calls me for installs, repairs, and maintenance.  Right now I'm busier than I would like to be, and I'm on the fence about bringing someone on to help full time.  I have a helper for larger installs, but I'm having trouble keeping up with the service calls.  It's making it harder to focus on other aspects of the company.  If I bring someone on full time I need to make sure not only am I charging enough to cover overhead, taxes, etc., but also to pay their labor rate and still make a profit. 

My question is, what are you charging and how did you arrive at this figure?  Do you charge by the hour or flat rate per job?  Do you charge one rate for cabling and hanging speakers, and another rate for tuning the system (which arguably requires a higher skill level)?  Is there a minimum service call fee?

I want to remain competetive but also need to maximize my bottom line.

Thanks for your input.
« Last Edit: October 10, 2011, 06:46:50 PM by Scott Carneval »
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Ivan Beaver

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Re: How do you establish your labor rates?
« Reply #1 on: October 10, 2011, 07:12:20 PM »

A little background on me first:  I've been in the sound industry about 8 years, started out installing home theatre, then moved into corporate AV work which had me traveling a lot, then started my own production company.  A few years back I took on an install job at a nightclub, which led to more nightclubs, which led to today where just about every bar, restaurant, or nightclub in town calls me for installs, repairs, and maintenance.  Right now I'm busier than I would like to be, and I'm on the fence about bringing someone on to help full time.  I have a helper for larger installs, but I'm having trouble keeping up with the service calls.  It's making it harder to focus on other aspects of the company.  If I bring someone on full time I need to make sure not only am I charging enough to cover overhead, taxes, etc., but also to pay their labor rate and still make a profit. 

My question is, what are you charging and how did you arrive at this figure?  Do you charge by the hour or flat rate per job?  Do you charge one rate for cabling and hanging speakers, and another rate for tuning the system (which arguably requires a higher skill level)?  Is there a minimum service call fee?

I want to remain competetive but also need to maximize my bottom line.

Thanks for your input.
It varies quite a bit depending on location-and local rates.

I think the "general" rate for install of gear/sevice calls is $70-80/hr.  System alignment is around 125-150hr-sometimes a flat day rate-1000-1500 is kinda "standard".  Some will be higher-some lower.

Sometime the labor is a fixed amount for the particular job (based on the estimated number of hours for the install-or a certain percentage of the equipment costs-sometimes both.  Other times it is time and material.  It depends on the particular job and what it entails.

Remember that there are all the fixed costs for somebody else doing the work.  But you ALSO have to be to make money on top of that.  What if there is a problem?  Where does the money come from to take care of it?  You HAVE to make money in order to stay in business-or you will not be around to take care of your customers.
Sometimes special rates are available for repeat customers.
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A complex question is easily answered by a simple-easy to understand WRONG answer!

Ivan Beaver
Danley Sound Labs

PHYSICS- NOT FADS!

Hal Bissinger/COMSYSTEC

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Re: How do you establish your labor rates?
« Reply #2 on: October 10, 2011, 08:17:59 PM »

Well, you've been running your business, what have you been doing up to this point? Adding a full time employee would add his salary, workers comp and disability, FICA and the cost of any benefits to your bottom line. It may also affect your general liability policy cost. Add these to all your other overhead costs plus your salary and you should have the cost of doing business. Add to that what you would like in profit. Base your calculations per month and divide that number by the number of hours you can reasonably expect to bill per month and you should have a good idea what you will have to charge your customers per hour.
 
As for service call charges, they are always time and material. We (here in Westchester, NY) have a minimum charge of $150 that covers up to an hour   After that it's $120 rounded to the next 30 minutes. We don't charge for travel unless it's over 45 minutes either way- 90 min total. More then that and the service call time starts ticking. This is for one technician, non emergency, normal business hours and days.
 
Anything over one thousand dollars (labor+material) requires a written contract. If the customer wants a "firm" (flat rate) price instead of time and material they will have to sign a contract also. Contract labor prices are estimated from the above rates (usually on the + side) and with a cap of $1200/day for one tech. So for small jobs T&M is the way to go.
 
Since we pay our techs the same, my salary is the same and the overhead is the same regardless of the work, we do not charge differently for different types of work. If you were a big shop and could afford to hire lower paid "laborers" then you could have lower rates for the work they would do.
 
-Hal 
 
 
« Last Edit: October 10, 2011, 08:31:30 PM by Hal Bissinger/COMSYSTEC »
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duane massey

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Re: How do you establish your labor rates?
« Reply #3 on: October 11, 2011, 12:36:18 AM »

Around Houston the standard rates don't really exist. I've seen quotes vary from $35 TO 120 per hour for installs, and service calls carry a minimum that varies from $75 to 175.
I am an independent contractor, so my rates are based solely on how much I feel the job is worth, but I do have a standard rate for a few companies that I do sub-contract work for.
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Duane Massey
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Brad Weber

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Re: How do you establish your labor rates?
« Reply #4 on: October 11, 2011, 07:53:42 AM »

A few years back I took on an install job at a nightclub, which led to more nightclubs, which led to today where just about every bar, restaurant, or nightclub in town calls me for installs, repairs, and maintenance.  Right now I'm busier than I would like to be, and I'm on the fence about bringing someone on to help full time.  I have a helper for larger installs, but I'm having trouble keeping up with the service calls.  It's making it harder to focus on other aspects of the company.  If I bring someone on full time I need to make sure not only am I charging enough to cover overhead, taxes, etc., but also to pay their labor rate and still make a profit.
Are you a registered, licensed business?  Do you, or the person you hire, have any related professional licensing or certification?  Do you have all of the related liability insurance and how would that be affected?  Are you always going to have 40 hours of work for this person or might you have to address times that you have to pay them even if you have no work for them?  Conversely, how are you going to approach overtime?  Do you have to address workers comp?  Are you going to provide any tools, transport, etc. for this person?  Are you going to invest anything in this person's professional development?   Might another person, and thus hopefully the ability to to do more work, relate to having to have greater hardware and parts stock?  All of these and other issues could affect your costs and thus what you charge.

My question is, what are you charging and how did you arrive at this figure?  Do you charge by the hour or flat rate per job?  Do you charge one rate for cabling and hanging speakers, and another rate for tuning the system (which arguably requires a higher skill level)?  Is there a minimum service call fee?
When I was on the contracting side of the business we usually quoted jobs on lump sum basis.  Most subs I know also preferred to work that way and everyone liked that it gave them an incentive to do the work quickly and right the first time.  That also avoids the issue of different rates associated with different tasks as that should be accounted for when developing the lump sum fee and not be an issue later on.  We would sometimes sell hours of labor but typically as someone buying a number of hours of specific personnel or certain roles (install tech, senior install tech, programmer, etc.) in advance.

Field service was always hourly with a minimum fee.   As Hal noted, I have seen many people use a sliding rate, e.g. up to some minimal time at $X per hour, then the rate drops.  That addresses that just going to a site has a cost associated regardless of how long you are then on site.


The actual rates charged seem to vary greatly based on the capabilities of the company and the geographic location.  I just quoted some work as a subcontractor to a large firm in the New York area and my hourly rates that are competitive here were less than half of what they would charge for my time if I were an employee there, a reflection somewhat of the overhead associated with a large firm but much more of the difference in the cost of living and salaries.
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Scott Carneval

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Re: How do you establish your labor rates?
« Reply #5 on: October 11, 2011, 10:56:52 AM »

Thanks for the replies everyone.  Right now I'm between $55/hr and $75/hr, depending on the job and their budget.  It sounds like it's time to raise my rates!  Someone asked, and yes I have gen liability, registered with the state, pay taxes, etc.  I think I'll work on raising my rates to see if things taper off before I bring on someone full time.  Maybe a part time person makes more sense right now, or even building a stable of sub-contractors.  It's tough to find GOOD people, and I'm not willing to risk quality of service just to make a few extra bucks. 
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Brad Weber

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Re: How do you establish your labor rates?
« Reply #6 on: October 11, 2011, 12:25:35 PM »

Maybe a part time person makes more sense right now, or even building a stable of sub-contractors.
Just be careful for the issues regarding part time versus full time and subcontractors versus employees, it's easy to cross lines in terms of how the taxing entities, your insurers, the DoL, etc. may view those distinctions.  I've seen some companies get hit hard when months or years down the line one of those entities determines, or the people involved claim, that those you approached as part time employees or subcontractors were actually full time employees.

I still remember one rental and staging company here that would routinely demand that employees work 60 to 80 hour weeks and then take 'comp time'.  A friend of mine was a 'part time' employee there and had times that he would be required to work 80 hours one week and then not work again for three or four weeks.  That practice came back to bite that company big time and they were apparently forced to retroactively pay overtime for any employees that had not agreed to a 'comp time' arrangement when they were hired.
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ProSoundWeb Community

Re: How do you establish your labor rates?
« Reply #6 on: October 11, 2011, 12:25:35 PM »


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