WHEREVER POSSIBLE, ELIMINATE HUMAN ERROR “To err is human” – Alexander Pope Electrical estimating is an intense, all-consuming task that is only made more difficult when adding distractions.  When you consider the constant bombardment of communication about  jobs past, present, and future…it’s amazing we ever get anything done. Inevitably, errors find their way into an …

Vision InfoSoft Corporation, the industry leading developer of integrated estimating software solutions for the electrical contractor and plumbing contractor markets, announced that veteran software industry executive, Colleen Stempien, will join the company’s management team as President.  Ms. Stempien brings more than 20 years of experience building successful software companies, including  RefWorks, Material Express, and Research …

Our electrical estimating software suite, Electrical Bid Manager Enterprise, was recently recognized by Contructech Magazine as a 2011 Commercial Top Product! Each year,  Constructech Magazine honors “technology solutions” that have demonstrated the greatest innovations geared toward the construction market.  Winners of the top product award are selected based on various criteria, including the product’s overall usefulness and uniqueness to …

We just released an update for Time & Material Billing Manager Plus (T&M) for Windows, Version 5.32. This version contains minor enhancements which were requested from our growing community of users. Time & Material Billing Manager Plus Version 5.32 Updated Profit/overhead percentages calculation. Updated inactive jobs editor. Updated Markup for Flat Rate Items function. Added …

Generic / Commodity Materials

One of the peculiarities of the electrical and plumbing industries is the fact that a number of manufacturers provide nearly identical products. Many products in the industry are relatively generic. For example, over a dozen companies make conduit fittings for electrical and plumbing, at least a half dozen make electrical wiring devices, and several companies also make a number of the supports and other materials which are used in both industries. For the most part, contractors perceive the different brands as interchangeable and don’t usually specify the brand when ordering these materials.

Other products are virtually true commodities. Conduit (or Pipe) and Wire are rarely listed or specified by brand. The industry standards for these products are well established and it would be rare for a contractor to care of even be aware of the brand of pipe or wire they purchase.

Unique Materials

And then there are unique products that are essentially available from one manufacturer. Many fixtures for electrical and plumbing are relatively interchangeable, but for specific styles and features, there may be only one choice. And even when there is more than one choice for a component, the owner or engineer may specify a limited number or selections. In this case, the contractor will purchase a particular brand and catalog number.

Your Pricing Strategy

Specifying specific material brands usually complicates estimating and billing matters for the contractor, depending upon the approach. In all of the major estimating software and billing software programs for electrical and plumbing contractors, the vast majority of items are treated as generic or commodity types of items. This simplifies pricing for the supplier, contractor and end customer because there is no need to select the manufacturer or catalog number. For contractors and customers who want to select and price the brand of specific items, this makes matters more complicated. Most people try to avoid this level of detail because all parties involved: supplier, contractor and/or end user; may need to reference or provide this information in any pricing reports or quotations.

So the question is why do some contractors insist on using specific products rather than the generic ones and does this make sense from a business point of view? The desire to price specific rather than generic or commodity items seems to be driven by the need to have very accurate pricing.

Target Price

In all of the Vision programs for estimating, billing and pricing, the Target price generally provides enough cushion so that the contractor won’t under price any item, whether he uses a generic, commodity, or manufacturer/catalog number specific item. For bidding, the concern is that overpricing an item or items can result in a lost bid. For Time and Material work, the concern is that overpricing some items could result in a disgruntled customer. Occasionally, I run across contractors who are nearly obsessed with pricing from their true cost and are therefore forced into pricing specific items. This not only requires a tremendous amount of time to set up and maintain, but it seems to result in a much less profitable pricing strategy.

Meeting Customer Pricing Demands

Of course I cannot claim to understand a contractor’s knowledge of their type of market or its local demands. But I have trained literally thousands of contractors over the years and while the desire for super competitive pricing isn’t unusual, it certainly isn’t the norm to take it to the extreme of obtaining true cost on all items. My observation is also that the contractors who use the “generic” pricing and markup on the Trade price (or even use Retail) pricing are the ones who are the most successful and profitable at service work. Sometimes, contractors get so caught up in trying to provide accurate and fair pricing that they lose sight of the whole process. I know from personal experience and feedback from our customers I have trained, that most of their customers only inquire about the hourly rate when they need service; they rarely ask how the material is priced.

There certainly are end customers who are extremely price conscience. But normally, they are the minority and my suggestion would be to either give them a lower hourly rate, a lower markup on the highly visible items, or just don’t do business with them. But don’t spend endless hours trying to devise a pricing system that is totally fair to the highly cost sensitive customer, yet less profitable for the other more reasonable customers. The price sensitive customers won’t care what you charge anyway; it will always be too much.

To learn more about our Time & Material Billing Manager software, click here.
To learn more about our EPIC Pricing System software, click here.

written by Brian Hoffelder – Vision’s Software Training Professional
1-800-258-7752 x120