I'm getting eaten alive with installation costs. Consumables, labor hours, gas, vehicle maintenance, it's all cutting into my margin. If not for RMR I'd be on food stamps.
How do I bring the costs under control and make a bigger margin without raising my installation prices?
This is a good question, and an increasingly important one to integration companies.
Over the years, I have seen over and over where skimping on tools ends up costing time, and subsequently money.
For example: buying a rigid conduit/ pipe threader machine can cost $500, while a 'hand threader' may cost $75. Especially if you only have a few ends to thread, justifying the machine over the hand tool may be impossible.
But once the time of actually cutting threads is figured in, the machine may take 10 minutes to do it (including setup time), while the hand tool make take even a strong, experienced tech 35 minutes to an hour per stick.
Over the course of a project, fiddling around with sub-par tools can waste time, decrease quality, and increase waste materials. Buy the right tools for your techs and labor efficiency/ job profits will increase.
rewards, better management, bonus's for under cost , % of profit bonus's
In the 40+ years I have been in the business, the most profitable companies that I have seen have been the ones who find a niche and stick with it.
These companies do the same types of jobs over and over repeatedly, generally using the same brands and same models of equipment. They don't try to be everything to everybody, and don't rush to take on a new line of equipment just to win a single job. As a result, their installation and service people become real experts, and because they do the same work everyday, are incredibly productive.
At the opposite end of the spectrum are companies that are constantly trying new products and always trying to expand the scope of their services. Just when their technicians begin to finally get comfortable with a product, they move on to another product. Because almost every job is new, techs are always in a learning mode, making it difficult for them to be fully productive.
Ive ended up throwing a "Misc allowance" into my quotes. It is calculated based on what I have spent on previous jobs on misc stuff like connectors, junction boxes, screws, nuts bolts etc. I usually will do $500-1000 and in the end use maybe $200.
When I integrate it into the quote, on my end, I see it, but for the customer, I will spread that amount out among line items as if you don't, they will question it.
In general, all things being equal, do you think the end user would have an issue with paying $300-$800 more than they needed to?
It depends on the job.
Nothing is ever equal or perfect on any job.
A homeowner or gas station owner- yes...but I dont deal with that clientele.
I deal strictly with commercial. When it comes to businesses, in particular, car dealerships, they are cheapskates and like to play their games, so I do my Misc budget and spread it out because they don't want to see that they are paying more for unseen circumstances/materials. Its either that, or I come and say "due to unforseen circumstances, you will need to pay for XX&X"
Ive done a line item in the past for Misc Materials, and they bicker. So I just spread it out among other line items.
I guess its a way of being proactive in preventing a pissed off customer, or me being pissed off because the job cost me $.
I'm obviously looking at it from the customer perspective, but I see your position and can't say I blame you. I'm sure there all sorts of things that can go awry, causing the installer to cough up more $ than anticipated.
At some point, you will have to consider increasing your cost to the customer. It is inevitable.
I was researching something unrelated, and it lead me to read up on hiring mellinneals. Turns out, they will work blue collar jobs, but two of the things they are looking for is a meaningful career path and of course, to be compensated. They don't see a big difference between being an engineer and a plumber if you are talented. In their eyes, talent, regardless of job description, deserves to be well compensated. They are not going to change; we will have to change.
It occurs to me that we will all have to accommodate for that. Increasing pay/cost will have to happen at some point in the not too distant future. Today's twenty-somethings are our workforce - now.
"Turns out, they will work blue collar jobs, but two of the things they are looking for is a meaningful career path and of course, to be compensated."
Those are the same two things that everyone who takes any job wants - these things are not specific to millennials.
"In their eyes, talent, regardless of job description, deserves to be well compensated."
This is also not millennial-based. Talent anywhere deserves to be well compensated - or it leaves and goes somewhere else if the market dictates that this particular skill level pays higher than their current wage. i.e. if you pay the going rate (or even slightly higher) for the 'skill', then where are those that erroneously think their pay should be higher going to go?
Generational attributes ascribed to any level of the work force (all younger people feel entitled; all older people know the value of work) are flawed generalizations, imo.
The market dictates prevailing wage based on value when there is no shortage of work force - and the 'job' being done requires only basic and fundamental skills - like entry-level low voltage blue collar jobs.
>...mellinneals. Turns out, they will work blue collar jobs, but two of the things they are looking for is a meaningful career path and of course, to be compensated.
As a 29 year old "millennial", this was a fascinating statement to read. Are persons from other age groups looking for something different???
Last time I checked, I thought everybody was looking for a meaningful career path and good compensation!
What people? People that have a vested interest in 'telling you something' since they write stories for a living, or people who are of the generational label you are trying to 'learn' about?
I've seen the same kind of weakly supported stories that attempt to ascribe characteristics to groups based on their birth dates that you have.... I just don't believe it's true because someone wrote a 'story' about it and you obviously do.
what is your hourly rate?
How is your efficiency? (when you sell 8 hours, does it take 10?)
How is your productivity? (out of a 40 hour week, how many hours are your guys actually installing things?)
A couple of questions:
- What margins are you working off?
- What markets are you playing in (low cost, mid-market or enterprise)?
- How are your techs paid, hourly, salary etc.
- How are our competitors making it work.. are they making it work?
- Is your work bid or private negotiated?
- What are you selling (CCTV, EAC, Burg, etc.)?
- Have you looked at product mix to profit dollars?
There is a lot to your question. I am sure the 'collective mind' that exists in IPVM world can help provide some direction. Please provide some more details so we can help.
I spent 17 years of my career working in Systems Integration and I feel your pain! As you stated in your post, most of your unexpected cost overage is related to physical installation labor and the need to purchase/rent site or hardware specific tools (e.g. Fiber termination kits, trenching machines, boring tools, special 6ft. drill bits, lift trucks, etc.) for infrastructure (cable, conduit, power, poles, concrete, etc.) installation.
I was able to reduce and control our installation costs by eliminating our in-house general labor pool and, depending on the type of work, subcontracting an Electrical, General Contractor or Network Infrastructure company to install the necessary infrastructure and physical hardware for my security related projects. If you aren't already competing with these folks for projects you will know that the live in the infrastructure world and have a labor pool that can perform this work efficiently, so let them do it for you.
A good subcontractor will typically offer you labor costs at hourly/daily/weekly rates for manpower to install your system (you can also have them terminate and connect the cable to your edge devices). Assuming they have taken the time to inspect the job site with you and they understand your detailed and specific Scope of Work, they will provide you with a fixed number to install it for you.
It has been more than ten years ago now, but I was able to negotiate a rate of $2,750 per week for 2x men for a 35 Hour on-site work week with tools, ladders and truck for general installation labor for any of my Projects. The labor costs varied based on specific site requirements (i.e. trenching, fiber terminations, pole installation, etc.) but even then, the cost went up marginally and I wasn't on the hook to purchase or rent specialized equipment or tools, cost of gas, cost of vehicle, cost of insurance, cost of overtime. etc. I have no doubt that rates are more expensive these days but the key is that I had a FIXED LABOR COST and no hidden surprises with specialized installation tools because my sub covered it all.
If your subcontractor is able to save time on the installation (and they will), they make money. If they run over or need to purchase/rent a specific tool or machine to perform the installation, it's on them because they inspected the job site and provided you with a hard quote/number for your Scope of Work (be sure to have a paragraph about Change Orders in your SOW & contract with your sub!). You can/should also apply a "Project Management Fee" to your quotes to manage your subs and assign one of your full time staff to do it. You still have to send someone to site to make sure your sub following your installation SOW.
Send your existing in-house Technical Team to a Project Management class and have them focus on "Parts & Smarts" (i.e. Programming, Commissioning & Servicing your installed projects). Redirect, retrain, reduce, or eliminate your 'general' labor staff (those that do your non-skilled general labor) and assuming you can write a meaningful and detailed Scope of Work that covers everything you need to get done for the installation for your subcontractor, you will immediately reduce your installation costs and see your labor and general margins increase.
Finally - I would also recommend that you send your Sales and Technical Team to a Project Estimating class. This will ensure that they understand how to correctly look at and estimate labor to perform any Project as well as empower them to negotiate with your subcontractor to be certain that you are being quoted realistic labor numbers for the work you need done.
It worked for me.
you mention an estimating class. Have you used any that you would recommend?
Kevin,
The Estimating class that I took was a 1.5 hour class offered at a PSA Security Tech Conference in the early 90's by a Company called ISN (Independent Security Network). I thought is was excellent and it completely changed how I looked at estimating. I tried Googling ISN but didn't get any meaningful results. I don't know if they still exist as a Company or still offer the class, perhaps you can contact Antohony Berticelli (Director of Education) at PSA to find out if they have a current Class offering or if they can direct you to ISN.
Alternately I am certain that there are some current Estimating classes offered by BICSI, ASIS or your local EEE Board. Likewise IPVM may offer a Project Management class or be able to recommend one as well.
Hope it helps.
Labor is the unforseen Monster
From the shop, to the coffee shop, to the 5 min. drive thru that takes 30 min. , to the just need to go get lunch which took 1 hour , then 1 hour to eat. to the I have to go back as I dont have all I need on the job.
Wrong materials, Wrong information , Wrong Start date ( not ready )
or you allocate 3 hours programming and it takes 7 hours and return trips for reprogramming.
When You sum it Up , what it really means is YOU have no idea where the cost are at sometimes and you just have figures to estimate from and hope their correct.
The Bottom Line is YOU the manager or owner have to spend more time micro managing the projects and when you let go , cost go thru the roof.
when its me I know exactly where I am , when it s others , it is a guessing game and that s a hit or miss.
So you put up figures to cover the what if's .
I own the company and let me tell you , I have seen so much gross negligence and incompetence, acts out there, it makes you wonder how anyone makes the job pay.
The successful ones have one thing in common.
Know what they do , Do it well, Charge a Premium for it. And Hire only extreme qualified or competent Sub's, Know how to head off the damages early on. Keep a sharp eye on all that is around you.
Keep those under your command accountable for actions.
Train, Educate, discipline , Reward for Excellance.
The one sure thing is , the larger the project , the larger the Fluff or room to cover mistakes, and waste or ( FWA ) as the Gov. puts it.
You said..I have seen so much gross negligence and incompetence, acts out there, it makes you wonder how anyone makes the job pay.
I agree. I am always helping set up system configurations and wonder how they make a living.
Here is a humorous real story taken by our customer care folks for a small rack mount system this past week.
The customer said he had attached it to his network, and found it with a scan, but couldn’t figure out how to get into it to change the IP address.
I said, “Attach a screen, keyboard, and mouse. It runs Windows.”
“(short but tangible pause) Oh…it’s a computer.”
I said yes, and which port to use for his monitor and which was the capture device.
He thanked me and closed the call.
The Quick Start Guide spells right out how to start it up. Obviously he hadn’t read it.
What systems are you installing? Do you try to be everything to everyone or do you specialize in a couple of products and do them very well?
Training your techs is very important to get consistency on projects which helps reduce install costs. Also, detailed quotes and designs are important. I find the more time I spend on the design and system layout the less time I spend going over projects with our PMs and techs.
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