In the electrical contracting industry, reliability, hiring, and termination costs are chronic issues. Reliability difficulties can be avoided with thorough screening, testing, and interviewing processes. Do you have time to do all of these things while remaining focused on the job site?
To begin, make a list of the functions that your organization must perform in order to hire, maintain, and retain an employee. Put a price on each item based on the time value of the person who will be handling it. Your office manager, for example, earns $15.00 per hour and spends a half-hour each day dealing with staff difficulties. The cost of doing the function is $7.50. Do this for each item on the list below to arrive at a daily total. Divide the sum by 8 to see if you can perform the responsibilities for less money than the staffing firm. Most electrical contractors are unable to do so because they are organized operationally rather than administratively.
If you need a benchmark to evaluate expenses, most staffing firms impose a little fee on top of each hour billed; a good rule of thumb is 5-7 percent. Keep in mind that this covers all labor-related expenses such as state and federal payroll taxes, workers’ compensation, liability insurance, and payroll processing (see list for the rest).
Outsourcing your human resources function eliminates the need for:
Placing job ads, answering phone calls from ads, processing job applications, checking references, conducting criminal background checks, scheduling and paying for drug testing (if necessary), scheduling and conducting interviews, controlling worker’s compensation insurance costs, maintaining liability insurance on employees, and paying for office staff human resources training
Payroll administration, mailing checks and setting up direct deposit accounts, payroll tax accounting – weekly payroll and annual mailing of W-2s, employee handbook development, safety program development, administration and injury reporting, payroll administration, mailing checks and setting up direct deposit accounts, payroll tax accounting – weekly payroll and annual mailing of W-2s
Time tracking for field employees (electricians), offering and administering health and savings plans, processing worker’s compensation claims, processing unemployment claims, handling court-ordered garnishments, paying attorney’s fees if your company is sued, addressing and processing NLRB issues, and dealing with and paying for other post-employment obligations (wrongful termination s). And all of the other time-consuming expenses not mentioned above that eat away at your profits!
Many electrical contractors overlook the amount of time their office staff spends finding, employing, and maintaining each employee on the payroll, as well as the time they spend away from production. This is a problem that exporting labor with a variable cost solves.
Returning to the figures, variable costs are expenses that may be adjusted as circumstances change, such as the number of electricians you need on your payroll at any given time. The argument here is that labor is a lot more adaptable resource than capital. Outsourcing labor allows you and your team to be free of time-consuming human resource tasks. The time you save will be better spent elsewhere.
Calculate the time and expense of the above-mentioned functions when recruiting and keeping electricians. Request a cost breakdown of the hourly charge for each electrician’s skill level from a staffing firm. Keep in mind that staffing firms pay all of your expenses and charge a small account administration fee (the fee is normally much less than what companies spend on the list of HR functions). Costs should be compared. Remember to factor in the intangible advantages of lower liability, time savings, and more time to focus on your customers.
Most contractors will agree that outsourcing is cost advantageous for any given electrical contracting project. One important element to remember is that outsourcing labor is not a “one-size-fits-all” option for reducing variable expenses. Businesses that are content with their current situation are not suitable choices. A company that wishes to expand while keeping variable costs under tight control, on the other hand, is a good choice.
We can never foresee when an individual will leave a company, but we can manage how much it will cost to replace that person by using smart outsourcing tactics. The key to reducing the most expensive variable expense in our sector – labor – is to maintain the correct mix of permanent and temporary staff. You can control variable expenses by outsourcing electrics, as mentioned in the following paragraphs.
Variable expenses in electrical contracting are, as you may know, costs that are directly related to the tempo of operations. They’re named variables since their value varies depending on the size and workload of the company. This means that when more projects are tendered and won, labor, material, and other prices will increase. Employee-related administration costs rise in lockstep with labour prices.
This is in contrast to fixed or overhead costs, of course. These are expenses that occur regardless of whether your organization completes one or ten jobs. Unless there is a significant change in the pace and size of your operations, these costs do not change. Fixed expenses are related to the entire organization, whereas variable costs are project-specific. No matter what is produced or in what quantities, office leases/mortgages must be paid. As a result, a fixed expenditure such as rent or a mortgage exists.
Consider a scenario in which your electrical contracting service generates a 25% contribution margin. Your figure can then be used to see whether any of your project’s variable expenses can be decreased. You have the option of raising material prices and/or lowering labor costs.
The simple step is adjusting material pricing. Labor expenditures aren’t included. You must pay more than the competition, provide benefits, and provide training to attract and keep qualified electricians.
Remember that how you spend each penny of your contribution margin on fixed costs determines your bottom line or net profit. We know you can keep your fixed expenditures under control by selecting how much to spend on vehicles, equipment, tools, phone service, and anything else your company requires. However, what is the true cost of attracting, hiring, managing, and retaining a qualified electrician for a three-month assignment versus hiring a permanent/full-time employee? You most likely already know the answer: the price is the same. After you’ve completed all of your human resource or human capital management functions in-house, the replacement cost of the employee will eat into your bottom line. And how much do you value the cost of bringing someone fresh into your company? And how much would it cost to replace that person? The cost of time – your time, your staff’s time, and all-time spent away from project-related tasks – is the simple answer.
Working as an electrical contractor for the past 20 years has provided me with a wealth of knowledge and experience in the sector. I’d like to share some of these ideas with you when it comes to choosing your next electrical contractor or electrician for your project so that you can make an informed decision. So let’s get this party started.
One of the first topics I discussed was online reviews. I’ve learned a few things about how to find an electrician with the qualities I’m seeking because I hire electricians on a frequent basis. It was aggravating throughout the years when electricians would come into my office and tell me what I wanted to hear, only to discover afterward that they were absolutely deceiving me. I considered it and quickly decided that the greatest approach to learn about someone’s character is to ask someone else. If you have a negative reputation, it will be tough to find someone who can speak wonderful things about you.
Electricians and businesses such as electrical contracting companies are in the same boat. Online reviews are a terrific method to find out what your neighbors have to say about the electricians they’ve used. I’ve had customers who were dissatisfied because we were late or because the electrician made a mistake. These clients, on the other hand, rarely leave a negative review online. That tells me that if someone gets a negative online review, it’s usually because they did something to anger their customer. These are the types of people you should avoid at all costs.
On the phone or over e-mail, you must be present. Over the phone, how does the electrician or electrical contractor you’re considering employing sound? Do they appear to be professionals? Are they familiar with your profession and the goods you’re looking for? Do they appear to have done this a hundred times and had this conversation a thousand times? Do they insist on seeing the job first before telling you how much it will cost?
If you answered no to the first question but yes to the second, they are most likely someone you should avoid. People who become irritated by simple questions and are nasty to their clients are probably not the people you want to deal with. The importance of first impressions cannot be overstated. If someone answers the phone with a hello instead of hello, how can the man help you? You’re probably thinking of someone who works out of the back of a pickup truck. Even worse, if the phone is answered by someone who says what. Simply hang up.
There’s no reason to conduct business with someone who can’t even properly answer the phone. It’s quite improbable that they’ll be able to do your electrical work professionally if they can’t answer the phone professionally. I’ve phoned electricians whose resumes had been listed on my site, and they either don’t answer the phone or have some strange music playing when the phone rings. While I don’t necessarily rule them out as a result of this, I find it fascinating that when they realize it’s the same person they called and left a message with about a job, their entire mood shifts. This basically means that they don’t write to individuals unless they believe the person wants something from them.
Do they have a substantial marketing budget? When I pose this question, my skin crawls. Many of my customers have received job bids ranging from $3000.00 to $4000.00. They approach me and inform me that the firm has become adding quotes, but they do not provide me with the dollar number that they have mentioned. I’m already familiar with the large franchise corporations that operate in my community and have large advertising budgets. As a result, when they tell me the name, I already have a rough idea of how much they’ve been quoted. As a general rule of thumb, we complete the jobs that franchise businesses quote for 50% of what they quote. The reason for this is because advertising is quite costly.
It might cost tens of thousands of dollars every month to run commercials on television or radio stations. Literally. I’m not kidding. Yes, it costs that much. Marketers and advertisers are well aware, in my opinion, that what they deliver is frequently not worth the price they demand. Despite what they may claim, they have little or no interest in you staying in business. The truth is that if you sign a one-year or even a one-month contract to run television or radio station advertising and it does not work out, you will not be refunded a dollar.
If you join up for the Yellow Pages and decide to spend $6000.00 per month for a full-page ad and your phone doesn’t ring enough to cover the cost, they won’t refund a penny of your money. They will also file a lawsuit against you for the sum of the contract. Thousands of businesses fail every week in the United States, so if you go out of business, you’re not alone. In addition, thousands of people are launching new firms.
The cycle continues as the marketers and advertising move on to the next person. The fact about advertising is that its efficiency is entirely reliant on your company, the market you’re targeting, and the type of advertising you’re employing. Your profit margin is extraordinarily high if you’re a major soda pop bottling company selling glorified sugar water. You have the financial means to plaster your name all over town. The profit margin for tiny brick-and-mortar firms is quite low. You can sure that if they spend thousands of dollars on advertising, their customers are footing the bill.