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Lost Money in the Garbage

How I Lost $52,743 In My First Year As A Handyman

Some people say that what you don’t know can’t hurt you.  I’m gonna call BS on that one.

Often, it’s the things that you don’t know that can hurt you the most.  At least I find this to be true when it comes to business.

I’ll explain.

When I first started my handyman business, I did a lot of things right.  I spent gratuitous amounts of time making sure I looked professional and on marketing my services.  I also made a strong effort to provide great customer service, do what I said I’d do, and always provide quality work.  This focus on marketing, quality, professionalism, and service is what led to my current success as a handyman.

However, I also did a couple of things completely wrong.  For example, dropping a customer’s brand new 50″ plasma on the ground and shattering the corner was a clear mistake.  Answering the phone and showing up to contractor board sting operation was another experience I’d like to take back.

Yet, neither of these two mistakes ended up costing me all that much money.  My biggest mistake ended up costing much, much more.  Over $50K in my first year in fact.

My biggest mistake was under pricing my services.

A couple weeks ago, I released my latest product to help empower handymen with their businesses.  It’s a pricing guide called “The $100K Handyman.”  It was a huge success and I’m stoked at the opportunity to help others succeed.

Since I released this guide I’ve been wondering….How much money did I leave on the table in my first year in business?

If I knew then what I know now about pricing for home services, how much more money could I have made?  I knew I should have made much more, but I wasn’t sure how much.

So, like any other engineer or math geek, I ran some numbers, and probably enjoyed the process more than I should have.  Here’s what I found out.

Over the last 3 months, my average billable hourly rate was $95.66/hr.  This is pretty typical for me now as I usually average between $90 and $100/hr.  Just keep in mind this is for billable hours.

For the entire year of 2012, my first year in business, my average hourly rate was just $39.64/hr.  In that first year, I worked a total of 942 billable hours (~18hrs/week) and generated ~$37,340 in revenue from labor.  Not bad for my first year and having very little experience.

However, here’s where it gets interesting.  If I would have charged what I do now and still worked the same amount of hours, I would have made over $90,000 from labor!  ($95.66 x 942 hours = $90,111)  That’s $52,771 that I left on the table in my first year! What!?

I knew I made a mistake with my pricing, but I had no idea that the impact was that high.

Here’s a quick summary:

Average rate for billable hours for the last three months:  $95.66/hr
Average rate for billable hours in 2012:  $39.64/hr
Billable hours worked in 2012:  942 hrs
Revenue generated from labor in 2012:  ~$37,340
Revenue left on the table by underpricing my services in 2012:  $52,771

That’s a lot of money.    I mean, it’s over double my revenue and it would been all profit since my expenses were already covered.  It’s almost painful to think about.  It is just money, but still, that’s a lot.

Now, I know what you are probably thinking and I’m right there with you.  Would I actually have been able to charge $95/hr in my first year and still got all of these jobs?

Honestly….probably not.

I’m much more skilled than I was when I first got started.  I also have a stronger reputation, an existing client base, and more jobs to pick and choose from than I did in my first year.  So, charging an average of $95/hr and actually landing all of those jobs isn’t realistic.  I would have priced myself out of several jobs.

But, looking back, it’s very clear to me that I could have charged much more than I did.  Had I been able to average just $75/hr for example (which I think is totally reasonable), I would have generated an additional $33,291 in profit!  That’s still more than double my profit in my first year.

It’s hard to predict what could have happened and there are many more variables involved here than I’d like to entertain, but one thing is very clear to me, I left a LOT of money on the table no matter how you spin it.  And that was just my first year in business.  I underpriced my services in my second year as well.

How did this happen?

Just like any other inexperienced handyman who lacked confidence in my services, I way under-valued my time.  I set an hourly rate that was ridiculously low, underbid jobs when I quoted, and gave unnecessary discounts to my customers.  I also over-estimated the competition.

I didn’t have a guide or mentor to show me the ropes and guide me through the process of pricing my services.  I had to rely on advice and insight from people who had no business giving me advice.  I had to learn the lesson the hard way, and lose tens of thousands in the process.

The sad thing is that I’m not the first to make this mistake.  In fact, it’s very common.  Whether you are a handyman, web designer, photographer, contractor, or even a masseuse, it’s likely that you will fall into the same trap.

How Can You Avoid This Mistake?

The best way avoid this mistake is to be very careful who’s advice you pay attention to.  Everyone is going to have an opinion on how much you can or should charge, but most of them don’t know a thing about this business.

Instead of listening to your cousins friend who used to work construction, find a handyman you admire who is successful in this business and learn as much as you can from them.  Even better, find several successful home service providers and learn from all of them.

If you’d like to learn everything I know about pricing which I learned from experience, research, and interviewing several of the most successful home service providers, be sure to check out “The $100K Handyman” (my complete pricing guide).  

Who knows, maybe I can help save you fifty grand.

Click Here to learn everything I know about pricing handyman services.
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  • Wade Kulesa March 5, 2015

    Hey Dan, great article. I’m not really a numbers guy, so to see you break it down like that really opens my eyes to the potential I have in my business. Keep up the good work!

    • Dan Perry March 6, 2015

      That’s what I’m here for, Wade. Thanks for reading!

  • Randal DeHart March 6, 2015

    Dan,

    Great posting and very timely. You are a great resource for handyman contractors and all other contractors as well.

    Warm Regards,

    Randal

    • Dan Perry March 6, 2015

      Thanks Randal! I always appreciate and value your input.

  • lata porecha March 6, 2015

    Hi, i just need advice how much i should pay to install recirculating pump over water heater in garage?
    i have bought watts pump.

  • Miguel March 8, 2015

    Dropping a customer’s brand new 50″ plasma on the ground and shattering the corner was a clear mistake.

    Oh, Dan, please tell us more about this. How did it happen? How did it make you feel? How did the customer react? How did you fix the mistake? Did it ruin your day/week/month?

    This is one part of the job that makes me fearful: making an error that causes significant damage. Do you have that fear also? How do you handle it?

    • Dan Perry March 9, 2015

      So I was mounting a TV to one of those fireplace units where the TV’s raise and lower mechanically in and out of the cabinet. I had the TV set on top of the box and had to reach down to pick up a screw driver and was balancing the TV with my other hand. When I reached down, the bottom of the TV slid on the smooth surface of the cabinet. I tried to catch it but it was too awkward and one of the corners ended up hitting the ground and totally screwed the TV up.

      How did it make me feel? I felt like shit. LOL. Similar to the feeling of getting pulled over or getting in a car accident. But, I didn’t let it bother me because the worst that would happen is that I’d lose $1,000. Not cool, but not worth stressing about and shaving years off my life doing so.

      I immediately told the customer what happened. She was totally cool about it. I mean, she wasn’t stoked, but she understood that shit happens. Plus, I let her know that I’d take care of it because it was clearly my fault. It ruined a couple hours of my day, but that’s it. If the customer would have been negative about it, I’m sure it would have ruined my week.

      I typically don’t fear messing up a customer’s house because I don’t do things that are outside of my abilities and knowledge. If I’m not absolutely confident that I can complete a job without screwing up the customers house, I don’t do it. Of course there are always things that can happen unexpectedly that could cause damage, but that’s life. Shit happens no matter what you’re doing.

  • Blair Wilson April 21, 2015

    Dan,
    You have a wealth of knowledge ( not to mention a great writer).
    Thank you for your knowledge, insight and great articles!
    Keep up the good work and thanks again for paying it forward.

  • Dan Thomas June 23, 2015

    Hi Dan,

    I am just starting out in this business doing it on the side. I have a full time job (not handyman related) and I am just trying to earn some extra cash. I know enough about varioes things to be dangerous, but no real knowledge. I just finished a tile job (my first ever) on an out side walkway, 1 stair, and a landing up to the front door. I used over 75 12″ tiles and several cuts. It took me 26 hours to complete. I made the mistake of just quoting to the lady my hourly wage ($35/hour) and didn’t give an estimate of final cost because I had no idea how long it would take me. I ended us charging for 20 hours, as I was “advised” that that would be the average amount of time to complete this. With what you’re saying, I should have charged a lot more and for the full billable hours? How do I determine what is reasonable when first starting out?

    • Dan Perry June 23, 2015

      Hi Dan,

      Great question. Unfortunately, I can’t answer that in one paragraph or even one page. That’s why I wrote “The $100K Handyman” which is over a 100 pages answering your question (and several others) about pricing.

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