Contractor service rates continue to climb

July 1, 2000
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As pay rates for employees increase, contractors are charging more for their services, a recent News survey shows.

  According to the survey results, 59.5% of News contractor-subscribers have a basic charge-out service rate of at least $50 per hour. When the survey was conducted in 1995, only 39% of contractors said they charged that much.

Conversely, fewer of today’s contractors charge a basic service rate of $30 or less — 9.1% now, compared with 13% four years ago.

These rates are not the only charges that most customers can expect for a service call, but they are the foundation for the other expenses, and they provide a starting point for the inevitable question, “What will it cost?”

Now, almost one-quarter (22.1%) of contractors charge more than $60 per hour, and 21.6% charge $55 to $60.

Almost one-third of contractors surveyed (32%) use flat-rate pricing for service work. (This question was not asked in 1995.)

The importance of service contracts has barely changed in the past four years.

Today, 75% of News contractor-subscribers said that service contracts are “somewhat important” or “very important” to their profitability. This compares to 74% in 1995.

The contractors surveyed said they are involved in residential work (31%), light commercial (29%), large commercial (20%), industrial (11%), and institutional (9%).

More than one-third (37.1%) own six or more service vehicles, while more than two-fifths (42.8%) own three or fewer vehicles. Almost half (48.3%) keep between $2,000 and $5,000 worth of inventory on each service vehicle.

Wholesalers remain the primary source for most contractors when buying parts. Almost three-fifths (59.1%) of contractors said that they buy more than 75% of their parts from wholesalers.

How many parts do they buy directly from manufacturers? Two-fifths (41.1%) of contractors said they buy less than 10% of their parts from producers.

Contractor comments

What do contractors think about the rates they and their competitors charge? Here is a sample of comments from the survey.

  • “Heavy competition seems to keep the rates lower than they need to be.”

  • “The industry is undervalued, considering the tools, training, trucks, liability, etc., compared to appliance, computer, or TV repair.”

  • “Industry revenue in our area is too low. We have trouble competing with unlicensed and/or uninsured competitors.”

  • “Labor and service rates need to go up in the hvac industry. It’s about time.”

  • “My hourly start rate is $100.”

  • “Average service rates (in the Fort Worth, Texas area) are 50% below cost. Why can’t they wake up and charge a profitable rate, rather than go bankrupt and be replaced by another lowball company?”

  • “The majority of hvac contractors don’t know their true costs and therefore don’t charge enough — poor business.”

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