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The Problem with Getting Good
There is a certain issue that will effect just about every self employed computer technician. It can slowly sneak up on you and may technicians don’t even realize it has happened to them. So what is this sneaky little issue I am talking about?
Once you have a year or so of experience under your belt, you will probably raise your prices from “I am just starting” prices to a middle of the range price that you are happy with. You will also most likely leave your prices at this rate for a few years and this where the issue can sneak up on you. As you become more experienced, you begin to make less money than you used to when you were less experienced. Why? because as you gain more experience, you can solve problems quicker than you used to in the past and if you charge on an hourly basis, this is a bad thing.
For example, if a client had virus that used to take you 2 hours to fix at $60 per hour and you can now do it in one. You just cheated yourself out of $60 for being good at your job. Doesn’t seem right does it?
The solution to this is to evaluate your rates every year or so, look at how much you are making per job and keep raising your rates as your experience grows. In the example above, you would need to double your prices just to remain at the same level you used to be as an inexperienced technician. Additionally, the cost of living usually rises so you are often forced to raise your prices just to keep your head above water.
You may be thinking that you might lose clients when you raise your prices. However, you will find that if your clients know you and trust you, they won’t care about a small price hike. They are often just glad that they have found a technician that knows what they are doing and can trust. I talk about raising your prices in more depth in this article.
Don’t let this sneak up on you, keep raising your rates as your experience grows or your income will decline.
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How appropriate. Thanks for this article, because it is true. After a while you start thinking like a gov’t worker (no offense)– “Slow down or they’ll start expecting more productivity all the time from everyone” :)
“For example, if a client had virus that used to take you 2 hours to fix at $60 per hour and you can now do it in one. You just cheated yourself out of $60 for being good at your job. Doesn’t seem right does it?”
Cheated yourself? Really?
Perhaps you were overcharging the client by taking two hours to do the work that should have been completed in one hour all along? After all you acknowledge that it would be possible to do the work in half the time, if only you were more experienced. Maybe you should have been charging $120/hour from the beginning?
Or perhaps you should consider charging flat-rate like auto dealers in the USA do? The book says a job takes 3 hours. If you finish in 1.5 hours, then you still charge for 3 hours, pocketing the difference. If the job did happen to take more than 3 hours (extremely unlikely), then you would eat the amount over three hours.
Here in the SF Bay Area of California, the poor economy and less people working has reduced government sales tax and other revenues (such as bridge tools, bus fare collections, etc.) across the board. So what does the government want to do in response? Raise prices, of course!
Methinks your logic/rational leaves something to be desired…
“…keep raising your rates as your experience grows or your income will decline.”
Sounds like a good argument for flat rate pricing for routine things like virus removal.
Most customers prefer a flat rate and it eliminates the “moral risk” of inappropriately stretching out an hourly job for personal gain.
Sure you’ll occasionally get a nasty virus that takes longer than the norm. But overall you’d be ahead and the customer (from their perspective) always pays the same amount for a given service.
They don’t know (or care) that you’ve given yourself a raise by getting better & quicker at what you do.
@Jojo – Whoah buddy calm down there. Step off that high horse just for a sec, bub….
I have to agree with Mathew, I think that by setting a flate rate pricing structure, you allow yourself the liberty of (1) being upfront with your pricing,(2) allowing yourself to make more money as you gain more experience, and (3) motivating yourself to practice and hone your skill instead of being slothful.
There is a tendency to be a little lazier when you charge by the hour because you know in the back of your mind that the longer it takes, the more money you’ll make. You eliminate that temptation by changing to a flat-rate pricing structure.
Jojo, going to flat rate is a good idea. Some people on the Technibble forums were talking about it as well.
As for the economy, Australia hasnt been hit anywhere near as hard as parts of the US. Many of my American techie friends are also as busy as ever. I guess it comes down to where you are.
If you are in a place that has been hit hard, then its obviously not a great idea to raise your prices at this point.
I don’t see what the big deal is … if the work takes you half the time, then your customers get their computers back twice as fast, and you can fix twice as many computers in a day, resulting in twice as many happy customers telling their friends about you.
We are busy enough in our shop that we don’t have to worry about temptation of stretching out our work to increase billable hours. There’s almost always another computer waiting to be worked on.
I live in Utah and increasing your rates isn’t a good idea in these parts. We’re absolutely flooded with amateur techicians charging low wages. Even some shops have gone down to $35 an hour though the bigger shops are still hanging around the $65 – $75 mark. I dont like to fudge the numbers but I know a lot of the shops out here do and their work is subpar at best. It’s incredibly cut-throat in Utah right now.
I read this article and the biggest thing to realise that that this is a very general post with a simple example.
The reality of the matter is that as an independant tech you have a bit more flexibility on pricing than when you have employees.
From a business standpoint I recomend having a very predictable pricing structure for your clients and customers and reserve productivity figures such as rev/hr as a performance measurment.
We do this with flat rate pricing which is quoted to the client after an assessment is performed. I then measure my employees productivity based on the amount of revenue paid divided by time (Rev/hr)
This gives me a very real way to determine how profitable we are and does not impact our customers should a tech be less experienced or should they run into a more difficult problem than expected.
Interestingly this is the best way to compete against the budget tech with low rates. There are just so many ways you can position your marketing against the budget tech.
I stongly caution against frequent price changes. Once a price is set with a client then you have a precident with them and a future increase will not be taken well.
By publishing hourly rates you open the door for the budget tech to undercut and the services performed becomes less important than the time taken.
Thanks
Phil Jones
CEO
Site Tech
Hmmm, All kinds of solutions, fixed pricing, raising prices, providing reliable, trustworthy support.
I have one client who doesn’t even look at the bill. He just thanks me for showing up quickly, fixing the problem and briefing him.
It seems that there are a lot of new “Techies” out there in my area also but my business has increased during the last year. These new techs drive total beaters that they then put decals on to advertise their business, they do dumb stuff like call there business Komputer Klinic, and generally don’t know one end of a parallel port printer connection from another. Every now and again I call one of them to see how they sound. I am rarely impressed and spend no time worrying about it. I figure worrying about competing with them is like worrying about competing with WALMART. Nothing beats knowledge, reliability, honesty and a history of solid support. Most of my clients had one of these “techs” before they called me.
I think that many of us who call ourselves techs are actually more on the consulting side. We research solutions, we recommend alternatives and we listen to our clients needs and find a way to serve them. We know there is more than one way to skin a cat and that a solution that works for one client may not work for another. That is worth more.
I constantly struggle with this one and suspect that I should be charging more. I am already more expensive than most techs in my area. I am not sure what the solution is but charging less is not it. Time to head to the forums and see what everyone has to say.
We use Flat rate pricing. It gives the clients a predictable clear cut price they will deal with. And since we offer discounts based on the type of combination work we do. We end up getting more work this way and our chances for add-ons increases. Because the original bill didn’t hammer the client to start with.
Your time is your time, and has to be billed for accordingly. Now if you’re able to complete tasks faster as your experience and expertise grows this means that you’re able to do so much more in a day. Here a flat rate will benefit you from all sides, as effectively you’ll be able to squeeze more hours out of the day. If however you choose to charge per hour, and have enough work, you’ll still be benefitting by being able to get more work out in a day.
For my opinion, I use a decrasing hourly rate; 1st hour $40 (minimum on site) second hour 20 and others hour 15$–… and people are very happy to see problem(s) solved in average of two hours…with a lot of explication,tips… they love to learn…
They easily refer me to their relatives…
in the small (2 persons) shop i used to work at, we done mostly in shop work, with free pickup and delivery. that flat rate virus recovery taking forever cause they have a terabyte of crap on thier 486? move over to the other spot on the bench and do something while you wait. get ten computers going, you can be turning about $300 an hour on a busy day just rolling back and forth across the bench setup