The cost of business??

Just thought I'd throw out a recent experience of mine for comments and thoughts.....

I run my own small Audiology business [hearing assessments/hearing aids etc] (one practitioner (me) and one receptionist) - last week I had a patient book in for a 15 minute appointment for a hearing aid repair/adjustment (the aid was supplied and fitted by another provider).

Anyway, to keep this short and not rant, they needed a major repair (more $ in parts) as well as taking 45 minutes as they only noted ("I just need a quick adjustment" when they made the appt and were therefore quoted $30 for that 15 min service). After 45 mins ($90 for clinical time) plus $45 in parts they were most upset when they had to pay for the 45min appt plus parts - they couldn't believe that I'd charge them "so much" for something that they were "quoted $30 for" (no we don't quote on repairs, only on the cost of clinical time). I had to justify my cost to them explaining why I charge my set hourly rate (broken into 15min blocks) including overheads like rent (westfield shopping centre - ouch), staff costs (salary, workers comp, super), outgoings, consumables, equipment etc etc etc

So it got me thinking, for any of you who run a business, or more importantly any of us "consumers" of services - how much do you think about what it costs to run a business when you utilise a service (be it beauty treatment, accountancy fees, electrician charges - you get the drift)?

For example you go to the mechanic (just an example - numbers are arbitrary) - and you get charged $80/hr + GST + materials. I know I used to automatically think wow he must be doing alright to take home $80/hr.....until I realise he may only see around $30/hr after overheads (remember numbers are just an example).

So what are your thoughts, would you want a cost of a service justified, or do you just accept it and not think twice?

Cheers
Alan

Westfields nows theres a multi billionare

I have a small business and know exactly where your coming from, $27,000.00 annualy yellow pages alone, however while I am in a completely different field to you I do believe it's imperative that the client knows the cost of the service that they are getting, in this case I would have explained up front that the $30 fee wasn't going to cover what had to be done, an informed client usualy has no complaints unless the service / product is faulty. But then I wasn't there so do not understand the full situation.

donn wrote:I have a small business and know exactly where your coming from, $27,000.00 annualy yellow pages alone, however while I am in a completely different field to you I do believe it's imperative that the client knows the cost of the service that they are getting, in this case I would have explained up front that the $30 fee wasn't going to cover what had to be done, an informed client usualy has no complaints unless the service / product is faulty. But then I wasn't there so do not understand the full situation.

I totally agree. I think in this instance they were not so worried with the extra time it took (as you are right, once I got about 5 minutes in I informed them that it was going to take a lot longer and there would be an additional cost - so they had an "out" before I just went and did the work).....but they were moreso questioning the hourly rate I charge, so I guess that is where this rant was going - they were upset I was able to charge them the equivalent of $120/hr. I guess they either didn't think my time was worth that much, or didn't understand the multitude of other costs in running such a business.

So that is what I am keen to hear about - justifying a service charge (say an hourly rate) - maybe the above example gets off the track of my intended discussion but I appreciate any comments regardless.



Dave you are right, Westfield certainly is there to make lots of money (especially from its tenants).

PS I know income etc is usually taboo but I thought using actual figures helps with this discussion - like the mechanic example I use, I see far far far less than $120 coming into my pocket after overheads, especially when I am not booked up all day every day (far from it).

Being a small business owner like i used to be people throw up some funny reasons as to why they shouldn't pay what you charge for your time. I was a full time professional car detailer specialising in marque cars, show cars, hot rod and vintage. You get the drift.

Here is how I justified the price charged for a particular job.(mind you genuine car enthuisasts never complained about the price of my work as they generally know how hard and time consuming it is.)

How much do you earn per hour??

I can do this job approximately 2.5 times quicker than you could.

Do you have all the equipment to do the job??

Do you have the time to do this job??

Do you have the experience and qualifactions to complete the job??

After asking these 5 questions people then generally realise they cannot do the job,don't have the tools, the qualifications or the time to do it.So this makes my price start to look pretty cheap.Some customers need to be reminded that you are a professional that has completed either a tertiary degree over X amount of years, a tafe course/apprenticeship or have acculumated genuine experience in the particular field over x amount of years.All of these things cost you money in some way or another and in the long run you want to recoup for the outlay.

Some of the people i have done work for(laywers,doctors etc etc) have complained about a price of a job after an over the phone quote which i always stipulated could be more or less until I have actually completed the job. They had a whinge till I reminded them how much they earn an hour and how long it may have taken them to do it and everytime i got an answer like " you win" or " never thought of it like that".They then appreciate how hard you work and the service you provide for the price you charge.

a few customers expect too much for too little, a bit off track but this always amuse me when i think about it.
i own a take away/newsagency in a north coast village when a customer wanted to by the telegraph with
an amex card, so i explained the paper is $1, to swipe his amex card automatically will cost me $1.33 by the
bank on top of a monthly rental fee, i get the paper for 77 cents so after this explaination the customer was
not that i was not going to sell him the paper via amex at a loss, so i asked him to politely leave.

Not until I started operating a consultancy did I fully understand the reasons why tradespeople and other professionals charge the rates they do.

Now I understand - having to pay for computer equipment and software, vehicle running costs, professional indemnity insurance, professional association subscriptions, etc, etc. Add it all up and then work out what rate you need to charge just to cover overheads.

The funny thing is that some clients will make some insulting wise-cracks about over-paid seat-warmers, even before the invoice has been made out. Silly move!

A little off topic slightly (well on topic when related to vw's) - this was an interesting thread on kustom coach werks site I saw recently, especially john jones' explanation of how kcw determines cost of jobs they do...just for anyone interested:
http://www.kustomcoachwerks.com/forums/viewtopic.php?t=2386

Pardon my ignorance but most of the overheads you guys have listed are tax deductable against income ? (business welfare)🥷

talk about over heads i'm a thief and with bribes backhanders it's getting harder to make a buck i'm thinking of going straight but after reading this i think i'll hang it out for another year

All part of the game i 'spose

As an estimator for a reasonably large D&C contracting company we do many tenders as design and construct.
Spend heaps of hours as free Quantity Surveying and Consulting services to help some builder win a tender - only to loose it to a back yarder when the builder puts the screws on and has 2/3's my information.
Do you think the winner did the hard yards in the first round?? 🙅
We recently spent 3 engineers for 4 months solid working on a tender.
We have a 1 in 3 chance of winning

Most of my tenders i am lucky if there are less than 10 opposition

DUBB61 wrote:Pardon my ignorance but most of the overheads you guys have listed are tax deductable against income ? (business welfare)🥷

Tax deductable doesn't mean free!!

I see the arguments from both sides.

I am both a wage earner in a gov't dept, and

a private consultant.

Untill you walk a mile ........

Tax deductable means just that, a deduction against your tax liability, not that you don't have to pay for the item in the end. If you charge $100 for a job and included in there is $50 for materials etc then the bit left over for your pocket is $50, on that you pay tax, the cost of materials is not taxed so that means you don't pay tax on the total $100, if that makes sense, did I explain that correctly, shit I don't know but I think it goes something like that

Hey Alan,
are you sure the dude heard you?!
You probably had his hearing aid in your hand.

(deaf guy nods like he can hear you)

yeah, its not easy, even to figure out your costs initially, balancing the overheads over the number of clients/sales etc. and alot of peopel just dont get it, especially in the art world, think you do it all for fun and dont need to make any money to live off.

If you've been in business long enough you come to realise the people who need the explination will never hear the answer they want (a lower price).

Best by far to have the confidence in yoiurself that you are offering the best service and price you can, and that the good customers will keep coming back.

Yep, correct there, they never hear the answer they are looking for, we often get the question "is that the best price you can do?", best answer is " no but it's the best I am prepared to do because I want to stay in business not go broke"

well said andy

"I see the arguments from both sides.

I am both a wage earner in a gov't dept, and

a private consultant.

Untill you walk a mile ........ "

Let's see if I got this right? I - as a taxpayer - pay your salary (you being a wage earner in a gov't dept) - and you are also a private consultant. So, your base costs are paid by me, so that you can compete against me (a private consultant). Don't you have a massive conflict of interest?

Conflict of interest - no.

Perceived unfair advantage - maybe.

I also am a tax payer, on 2 fronts, so who's salary do I pay?

Business would be great if there were no customers, then there would be no business cause there would be no need and then what you were doing would be just a hobby, then it would have to be paid for by someone else who paid you wage to work in another business which would make them an employer which would mean then were dependant on customers which would mean you were still dependant on customers to fund your hobby.... so are back to square one.

This is a crazy world !!!!

Good post Alan,

I also work in health. Psychiatry for those who didn't know. Im a Clinical Nurse Consultant who works independantly of an inpatient unit sorting out non-psych inpatients of a major tertiary and transplant hospital. I work for the government. People automatically assume that government workers are fat, slack, well paid, long lunch taking etc etc. I only fit the fat bit. (young kiddies = minimal cycling 🙁)

Private practice for me is untenable as private health insurance companies payment per service provision is dismal. A group of us looked at setting up a private support service but the actual business costs are prohibitive given the remuneration.

People simply will not pay for health care. ❓

This amazes me. Ppl pay for all consumerist goods and services but when is comes to health treatment the expectation is that it is totally, including home aides (shower chairs etc) Athritis aides such as fat cutlery etc. 'Why can't I have these? you don't pay for them and I pay my taxes so I pay your wages' Why will people not pay to improve their quality of life? For the vast majority is is not like thay cannot afford the $20 buck or so that it costs for a lot of products as they are made by non-profit mobs.

People become so entitled within the health care system and expect to make no contribution. You should hear the moans about the co-contribution for medications.

"Conflict of interest - no."

Section 42Y of the Public Sector Management Act

The Bigfella wrote:"Conflict of interest - no."

Section 42Y of the Public Sector Management Act

Public Sector Employment and Management Act 2002 No 43
There is no s.42Y, but s.42 states:
"42 Definitions

(1) In this Part:

disciplinary action, in relation to an officer, means any one or more of the following:

(a) dismissal from the Public Service,

(b) directing the officer to resign, or to be allowed to resign, from the Public Service within a specified time,

(c) if the officer is on probation—annulment of the officer’s appointment,

(d) except in the case of a senior executive officer—reduction of the officer’s salary or demotion to a lower position in the Public Service,

(e) the imposition of a fine,

(f) a caution or reprimand.

misconduct—see section 43.

procedural guidelines means the guidelines in force from time to time under section 44.

remedial action, in relation to an officer, means any one or more of the following:

(a) counselling,

(b) training and development,

(c) monitoring the officer’s conduct or performance,

(d) implementing a performance improvement plan,

(e) the issuing of a warning to the officer that certain conduct is unacceptable or that the officer’s performance is not satisfactory,

(f) transferring the officer to another position in the Public Service that does not involve a reduction of salary or demotion to a lower position,

(g) any other action of a similar nature.

(2) In this Part, a reference to an allegation that an officer may have engaged in misconduct includes a reference to the appropriate Department Head being made aware, or becoming aware, by any means that the officer may have engaged in misconduct."

There is no mention of conflict of interest.

What is the conflict of interest you are inferring?

People hate paying for stuff they have to have but love paying for stuff that they don't need

Section 42Y relates to needing approval in writing to do it.

Conflict of interest could keep us busy for months. Its about breaches of the master servant relationship. Let's say you start thinking about solving a client problem while being paid by the govt to be at work .... or, using their phone to call your client (simple examples). Another example would be me doing a marketing job for a client and then a marketing job for their competitor.

Anyhow - this is getting into thread drift ........

Back on topic - a common rule of thumb in consulting is that you need to bill three times your salary.

Thanks for the input guys.

I guess the original topic was regarless of industry (health or whatever), is that a lot of people don't seem to realise why a certain hourly rate needs to be charged. I think this particular example was just to show that a lot of customers/consumers don't necessarily think of overheads when charged a fee - they think it is all going into the person's pocket.....which in my case well under less than half of my hourly rate does go into the bank.

Alan

All so true, but first you have to get paid!

And so many people ask why I don't open my own business?

i dont own a small business myself, but am employed by one.

We as locksmiths charge a $55 call out fee. flat rate. whether it be to turn up and have paper work signed, or do an hours work. iv had dozens of clients complain about paying $55 for me to gain entry to their property after they've locked themselves out, mostly because from alot of practice i can pop most household locks in 15-30 seconds.

they find it hard to understand how 30 seconds of work is $55, what they dont understand is it has taken me alot of practice to be this efficient.

sometimes paying more for less isnt such a bad thing.

“The bitter taste of poor workmanship lingers long after the sweetness of cheap prices has passed”

I am an illustrator/designer and freelance after hours. Once in a while I get a client that questions why things cost so much and I reply that to get to where I am at the moment I had to start drawing at 3 years old. They always nod & smile🙂Wayne

Sioux wrote:i dont own a small business myself, but am employed by one.

We as locksmiths charge a $55 call out fee. flat rate. whether it be to turn up and have paper work signed, or do an hours work. iv had dozens of clients complain about paying $55 for me to gain entry to their property after they've locked themselves out, mostly because from alot of practice i can pop most household locks in 15-30 seconds.

they find it hard to understand how 30 seconds of work is $55, what they dont understand is it has taken me alot of practice to be this efficient.

sometimes paying more for less isnt such a bad thing.

Yeah thats me 😂 I think its more the fact that Im pissed off locking the keys in. But yes your time getting to the door and back to work is not free.

I do window frosting and security films in my spare time. People seem to forget that there are 2 components, the material cost and the labour cost.