Mick Sagrillo January 15, 2018
Striking out on your own to start your own renewable energy (RE) installation and service company can be daunting primarily because of two unknowns: who will hire you and when. More difficult still is the discipline that it takes to keep track of bills for various jobs and making sure that you indeed invoice people in a timely manner before they forget who you are. And then there’s the agony of actually telling someone what a particular job is going to cost.
For whatever reason, putting a price on our work when we first start out in business is not only dreaded but also blundered through. Price a job too high and you may not make the sale. For this reason, all too many first-timers lowball both the RE equipment as well as the installation. Many entry level companies do this intentionally just to get into the trade. As one established installer once said, “any idiot can give away equipment.” Unfortunately this has negative ramifications for the entire industry. All too many in the buying public already have the idea that renewable energy is “free energy.” And that includes not only the equipment but also the cost of the installation.
Another fatal mistake is quoting a price range. When you tell someone $10,000 to $15,000, you are likely giving yourself some cushion for unforeseen problems. Unfortunately, they heard $10,000—it never fails. One cent over that amount will create resentment and probably a bad referral no matter how good of a job you do.
On the other hand, pricing and billing a job too low and you feel cheated, taken advantage of. Your potential customers slog off to work every morning to earn a living for which they expect to be justly and fairly compensated. If not, they move on to greener pastures. Why should you be any different? Just like your customers, you deserve to be adequately paid for the work you do. If you are not, you are not going to be in the RE industry for long.
So you need to know what others in the field charge. This might be tough if your area is ripe for RE installation and service and there’s a void to fill. However, there are other comparable trades that you can poll. I was stunned to find out that the local furnace repair guy charged 50% more per hour than I was and he was working in warm basements while I was dangling from towers in cold winds. My rates changed immediately after that. Others to consider besides HVAC include plumbers, electricians, concrete contractors, builders, and any other comparable trades in your area that you can think of.
Another really good source of input is the corps of installers that are doing similar work. In the small wind installation and service arena, my colleagues across the country do not consider me competition. Indeed, we are all more than happy to help each other out with all manner of information, from how to tackle an installation on a difficult site to what manufacturers or customers to avoid to what to charge for various jobs. Keep in mind that labor rates in the Midwest are not going to be the same as labor rates on the East or West coasts. This is where polling comparable local trades becomes valuable for comparisons.
A novice installer, however, really cannot justify charging what a well-seasoned installer charges, depending on how you charge for the job. If you are billing the client on an hourly rate, it’s difficult to justify charging for your on-the-jobtraining or for all the little things that you inevitably have to redo until you get them right as you learn the trade. This labor should be on your dime, not the client’s. In asking around to your peers you may find that a certain job averages about 20 hours. You quote that only to find it takes you 60 hours. Chalk it up to what it is, “professional education.” You’ll get to the 20 hours as you learn the tricks of the trade and become more proficient at what you do. If you quote it at the 60 hours, you likely will not get the job, unless you bill at a reduced hourly rate.
Which brings up another area about how to invoice. I have found that customers don’t mind at all paying for equipment or hardware but really resent paying hourly labor rates. They just don’t like the idea that you are “taking home” $75 or whatever an hour. What they don’t see is what’s built into that $75 per hour in many companies: hourly labor, perhaps travel and mileage, perhaps workers’ compensation, your entire amount of employment tax and social security, insurance, overhead, and perhaps items like consumables. Notice that while various major tasks are segregated, equipment, components, and labor for those major tasks are grouped into their own general category. This gives nit-picking customers much less fodder for trying to bargain you down in your price. You want the client to focus on the project, not individual items in the quote. Listing broad equipment/labor categories avoids the “you can buy ground rods on the web for a lot less that that!” discussion that has no resolution if you want the job with that particular customer. This is a business transaction, not a flea market.
If you start second guessing yourself and the bids you come up with, run them past a few of your peers. If you are concerned about competition, pick a couple of friends in the business that you can trust or that are far enough away or busy enough that they are not going to steal your leads. It’s a small industry, and if you’re that paranoid, perhaps you’re better suited for another trade. You need your peers.
Being paranoid, however, is not only perfectly fine with customers, it is advised. This means that you absolutely need to sign a contract with the clients for the jobs you take on. In small wind at least, there are several horror stories of installers who nearly lost everything including their homes when the installation relationship went sour. Keep in mind that the customer has a contract with you, not with the manufacturer, supplier, shipper, subcontractor, or anyone else in the supply chain. If anything goes awry, they are going to sue you, first, foremost, and probably only. Customers, no matter how nice they are, are customers and are ultimately concerned with their bottom line, not yours. Whatever contract you come up with needs to be fairly comprehensive. Again, this is where your peers are invaluable.
Insurance is another area where a dose of paranoia is not a bad thing. Unfortunately, with small wind at least, there are few insurance carriers with any experience at all with the trade. Again, peers are helpful. One installer found out that he could get a substantial discount in his “high erection” insurance for tower installation and wind turbine service by documenting the amount of time his team actually spent on towers. It turned out that they spent about 4% of their actually payroll time atop towers. The insurance company was willing to write them a completely different lower cost policy when given this information.
A couple of final items about billing customers. Summer and fall are great times to dangle from a tower: gorgeous weather, beautiful landscape views, no better place to be in the world than atop a tower. Winter, well, not so much. Unfortunately, wind turbines collude to break down in the winter time, when it’s very cold and very windy. And it’s almost impossible to climb a tower because of all the clothes you have to wear to keep warm, let alone do actual work. No matter what you say, clients will put off annual service until something NEEDS attention (read: the winter and it’s broken). I got tired of this so simply raised my winter tower rates three-fold and let all of my clients know. It’s amazing what an increase in labor rates will do to get a customer’s attention.
On quoting versus billing, one great way to generate good will is to bill slightly less than you quoted. Other than the occasional look from a customer that you might have three heads because such practice is actually counter to what they are used to, there’s just about no better way to assure good referrals. Just make sure that you point out the difference in the invoice.
Finally, there were a number of situations where, for whatever reason, it was not worth billing a client for a service call. It could be a second commissioning, meeting with a utility inspector, checking on tower guy tension or ground rods when I was in the neighborhood, listening to what the client thought was an unusual noise, other small stops-by tasks. Regardless, I always sent the customer an invoice with the mileage and labor detailed, but marked “no charge—courtesy call.” This way the client understands the value of your time, and that “free energy” does not mean free labor. It does wonders for establishing the value of you and what you do for a living.
About the Author
Mick Sagrillo (email@example.com) has powered his family’s home with all manner of wind turbines for the past 35 years.