How much to charge per inspection

[patholland]

Hi - I was wondering about the amount to charge per inspection- What are the general guidlines for amounts charged- Thanks

[Scottpat]

Hi - I was wondering about the amount to charge per inspection- What are the general guidlines for amounts charged- Thanks

Before you set a price you need to know what you expenses are. Too many inspectors do not have a clue as to what it cost to stay in business. You have to figure all expense, income tax, vehicles, insurance(business and medical), retirement, education cost, license fees, etc, etc)

After you figure out what it cost per inspection (my cost is in the $145 range) you should then do a survey of what your local competition is charging and then I would set my pricing in the middle or what I need to set them at to make a profit. A large percentage inspectors underprice their service because they do not have a clue as to what it is cost them to keep the doors open.

My per inspection cost might be lower than some as I work out of my home and my trucks and tools are paid for. Also what folks pay in CA or in NJ will be different from what folks pay in TN.

[Jim Katen]

Hi - I was wondering about the amount to charge per inspection- What are the general guidlines for amounts charged- Thanks

Expenses + Profit / number of inspections performed = Fee

Remember that this is a *business* not a *job* and the fee is not the same thing as a salary. 90% of new inspectors fail because they never understand this. They *think* they're making great money, while they're really doing a slow bleed.

[resqman]

Using Scotts number of overhead costs $145 per inspection plus 3 hrs on site and 2 hrs writing a report. If he charges $300, he is only making about $30 hr. But remember all the hours spent marketing, taking calls, scheduling, driving to and from the site, driving a second time for the radon pickup/delivery, attending assoication meetings, etc. He has spent signifcantly more than 5 hours. More like 7-8 hrs per inspection so his hourly rate drops to only $20. If you are charging anything under $300 per inspection you are losing money.

[Marc]

There's financial software out there that's less expensive and as easy to learn as report-writing software. It will tell you exactly what your profit margin is as well as lots of other important facts. Count it as one more thing you should acquire and learn if you're going to run a successful business.

Marc

[hausdok]

Before you set a price you need to know what you expenses are. Too many inspectors do not have a clue as to what it cost to stay in business.

Yep,

When I got into this gig I believe the franchiser. Sold my franchise in 2001 and after a year of not paying constantly changing royalties I got a handle on what it cost per year to run this gig. Then I decided how many inspections I wanted to do per year and divided that number by the number of inspections. That told me my business cost per inspection. I then estimated the tax on that and added what profit I wanted to make for the company and for myself per home. That gave me a median and then I stepped my rates up or down from my average sized home based on square footage to produce a price chart.

Knowing what it costs to run the company is the most important part; especially if you are ever tempted to give a previous client, an elder, a vet or someone else a break on your fee. It's okay to decide to not make any personal profit on a disabled vet, but you at least need to ensure that your company is going to break even, otherwise over time those discounts add up to a substantial loss. The company must at least break even if you are to stay in business.

I chuckle when I see all of these companies doing 3 or 4 inspections a day for hundreds less than I do, while all the while keeping up a blistering suckup schedule in order to keep the 'zoids happy and referring them. Experience tells me that with their prices so low they have no idea of the true costs involved with doing business so; they're almost all guaranteed to burn themselves out or end up bankrupt within a year or two.

They're like the rabbit; they're running hard all the time laughing at us old dudes because they are getting the lion's share of 'zoid referrals; while this old fart of a tortoise just chugs steadily along. I've watched a lot of them fall by the wayside over the years.

Figure a pricing scheme and then stick to it like super glue; don't allow yourself to be influenced by what you see others charging unless/until you have your own costs figured out.

ONE TEAM - ONE FIGHT!!!

Mike

[patholland]

Thanks so much you guys for your input on fees for inspection

[SNations]

I'd like to offer a different perspective. You should charge an amount per inspection that will maximize your revenue.

I don't know what that might be in your area, but you want to charge a high price of course, but not so high that potential customers go with a less expensive inspector. Somewhere there's a number that maximizes your revenue, and you can't do any better than maximum. Finding this number might be difficult, and it might involve some trial and error. Knowing what your competitors charge will help. Maybe even the advice of a local realtor would help.

If this amount of revenue doesn't cover your expenses (including your salary) then you need to rethink your expense structure. Or you need to work on marketing so that you can get more business, or be able to charge a higher price. But you can't just expect to be able to set your price to cover your expenses. Business doesn't work that way. The business news is full of stories of companies faced with rising costs for commodities who realize that they won't be able to pass along the rising costs to their customers.

Maximize your revenue, make it work, and good luck.

[Paul N Frey]

We just had an inspector lower his rates to 249.00!! He felt he needed to do it to stay in business ("a financial decision" as he called it)! Just 2 days before he did this he was bending my ear about other "Inspectors" that were low balling and how he hoped they went out of business soon since they were stealing business from good inspectors. Well, now I hope the same for him!! How many referrals do you think he will be getting now?

[Chad Fabry]

I don't know what that might be in your area, but you want to charge a high price of course, but not so high that potential customers go with a less expensive inspector. Somewhere there's a number that maximizes your revenue, and you can't do any better than maximum.

Respectfully, I disagree. Revenue does not equal profit.

Someone has to be the most expensive; I endeavor to vie for that position in my market.

The downside is, for a while business wanes. The upside is, as the referral base grows, the referred clients have an expectation of a larger fee along with which is the expectation for a top quality product.

My minimum fee is roughly twice the average, but I almost never lose a sale to price. In fact, it's not at all uncommon for me to book an inspection without ever talking price.

Obviously, if one charges more, one must deliver more. That said, I deal with fewer clients, market less and have less liability per dollar earned.

By dropping my price 20%, I'd have to inspect another house each week to generate the same revenue. That's not good business.

[Bain]

I don't know what that might be in your area, but you want to charge a high price of course, but not so high that potential customers go with a less expensive inspector. Somewhere there's a number that maximizes your revenue, and you can't do any better than maximum.

Respectfully, I disagree. Revenue does not equal profit.

Someone has to be the most expensive; I endeavor to vie for that position in my market.

The downside is, for a while business wanes. The upside is, as the referral base grows, the referred clients have an expectation of a larger fee along with which is the expectation for a top quality product.

My minimum fee is roughly twice the average, but I almost never lose a sale to price. In fact, it's not at all uncommon for me to book an inspection without ever talking price.

Obviously, if one charges more, one must deliver more. That said, I deal with fewer clients, market less and have less liability per dollar earned.

By dropping my price 20%, I'd have to inspect another house each week to generate the same revenue. That's not good business.

I don't understand. With your limited knowledge and experience, how do you possibly manage to deliver a "top quality product?"

[Brandon Whitmore]

We just had an inspector lower his rates to 249.00!!

I'm assuming it was one of the low cost guys who inspected the house I was at today. I fired up the gas fired, unvented radiant heater in the garage, looked up, and saw a large louvered vent like one would see for a return air grille. I peeked through it, saw it was just an open hole into the attic, and told the gal that it needs to be sealed up, and explained why. She said "but I just bought my house, and my inspector went on and on about how it was great to have a vent right above this heater"[:-dunce]

[Chad Fabry]

I don't know what that might be in your area, but you want to charge a high price of course, but not so high that potential customers go with a less expensive inspector. Somewhere there's a number that maximizes your revenue, and you can't do any better than maximum.

Respectfully, I disagree. Revenue does not equal profit.

Someone has to be the most expensive; I endeavor to vie for that position in my market.

The downside is, for a while business wanes. The upside is, as the referral base grows, the referred clients have an expectation of a larger fee along with which is the expectation for a top quality product.

My minimum fee is roughly twice the average, but I almost never lose a sale to price. In fact, it's not at all uncommon for me to book an inspection without ever talking price.

Obviously, if one charges more, one must deliver more. That said, I deal with fewer clients, market less and have less liability per dollar earned.

By dropping my price 20%, I'd have to inspect another house each week to generate the same revenue. That's not good business.

I don't understand. With your limited knowledge and experience, how do you possibly manage to deliver a "top quality product?"

John, I've shared this secret with you before- I copy and paste things from this board that I think sound smart and use them for my reports.

At some point some of it will sink in.

[SNations]

Respectfully, I disagree with your disagreement.

I don't know what that might be in your area, but you want to charge a high price of course, but not so high that potential customers go with a less expensive inspector. Somewhere there's a number that maximizes your revenue, and you can't do any better than maximum.

Respectfully, I disagree. Revenue does not equal profit.

Who said that? Not me. Not even close.

Someone has to be the most expensive; I endeavor to vie for that position in my market.

The downside is, for a while business wanes. The upside is, as the referral base grows, the referred clients have an expectation of a larger fee along with which is the expectation for a top quality product.

One of my primary points was that you can't just set your price to cover your expenses. The marketplace doesn't care what your expenses are. But your reply doesn't mention expenses at all, so I think that argument stands.

My minimum fee is roughly twice the average, but I almost never lose a sale to price. In fact, it's not at all uncommon for me to book an inspection without ever talking price.

Obviously, if one charges more, one must deliver more. That said, I deal with fewer clients, market less and have less liability per dollar earned.

By dropping my price 20%, I'd have to inspect another house each week to generate the same revenue. That's not good business.

My other point was to set prices to maximize revenue. Why would you possibly think that I'd advise to drop prices by 20% and do more inspections in order generate the same revenue. That's not increasing revenue, so clearly I'm not advocating that. If there are multiple data points that maximize revenue that's fine. (And I'll obviously admit that maximizing revenue might not be everybody's goal. Some people might want to maximize free time, for example.)

I also made the point that marketing can help to drive up the price. Clearly you've done that in order to be able to charge a higher fee. I think that's great.

So here's my 64 thousand dollar question to you: Why don't you raise your rates by 50%. You'd make 50% more money, wouldn't you? Or do you not do it because you think you'd lose business. I mean, everybody has their spending limits, even rich people buying houses. Even Ferrari can't just jack up the prices of its cars forever. So it seems to me that you have in fact found a price level that maximizes your revenue. Just what I recommended. It's just that for you the price level is higher than it is for other people in your area, especially someone just starting out.

[Chad Fabry]

So here's my 64 thousand dollar question to you: Why don't you raise your rates by 50%. You'd make 50% more money, wouldn't you? Or do you not do it because you think you'd lose business. I mean, everybody has their spending limits, even rich people buying houses. Even Ferrari can't just jack up the prices of its cars forever. So it seems to me that you have in fact found a price level that maximizes your revenue. Just what I recommended. It's just that for you the price level is higher than it is for other people in your area, especially someone just starting out.

In the beginning, I priced myself at the high end of average. I had higher revenues then, but my profits were no higher, my exposure was greater and I was working more.

Now, as always, I focus on margin and income- getting those two numbers right is far more important than revenue. I never meant to imply that setting rates with reckless abandon is a business strategy.

[Tom Raymond]

When I started out I looked at what others were charging in my area. The two dumbest guys (I have met them both and they really are idgits) were at opposite ends of the spectrum, $150 and $350. My mother is thinking of buying an investment property that I'll likely do for lunch, otherwise I refuse to work for less than an idgit.

The only push back I get on price is from clients who bail on the first house and call me back for the second. I did one of these last week and his discounted fee was $400. Make your living on fees, not on volume. If you want to join the race to the bottom then go hang out at oDesk.

[SNations]

In the beginning, I priced myself at the high end of average. I had higher revenues then, but my profits were no higher, my exposure was greater and I was working more.

Now, as always, I focus on margin and income- getting those two numbers right is far more important than revenue. I never meant to imply that setting rates with reckless abandon is a business strategy.

So I'm curious about your expense structure (and everybody else's too). For me the marginal cost of one inspection is very low. There's really nothing I pay on a per-inspection basis. I use my own report format, so I don't pay any licensing fee for that. I pay a flat rate for E&O/liability (does anybody pay for that on a per-inspection basis?). Really my only expense that's unique to each inspection is transportation. And that's pretty minor as I live and work in a densely populated area. What do you calculate to be your marginal cost of one inspection?

[ghentjr]

In the beginning, I priced myself at the high end of average. I had higher revenues then, but my profits were no higher, my exposure was greater and I was working more.

Now, as always, I focus on margin and income- getting those two numbers right is far more important than revenue. I never meant to imply that setting rates with reckless abandon is a business strategy.

So I'm curious about your expense structure (and everybody else's too). For me the marginal cost of one inspection is very low. There's really nothing I pay on a per-inspection basis. I use my own report format, so I don't pay any licensing fee for that. I pay a flat rate for E&O/liability (does anybody pay for that on a per-inspection basis?). Really my only expense that's unique to each inspection is transportation. And that's pretty minor as I live and work in a densely populated area. What do you calculate to be your marginal cost of one inspection?

So what is your time worth? $20, 40, 60 per hour? Do you depreciate your car? Your car insurance? Do you increase your price when gas goes up? Who pays for your health insurance? How many pairs of jeans, boots, clothing do you go through in a year? Did you have lunch at Micky Dees? Do you do your reports at home and what does that cost you? E&O? Supplies? I could go on all day with picky little stuff that most HI's do not factor into cost. When you get that all totaled, then add 30% for profit, which is, in fact a cost. Do the math and see where you stand. If you aren't banking any "profits" you may need to change your pricing structures.

[kurt]

After a lot of years doing it, I still eat it on a few jobs, make out really well on a few, and get by only ok on the majority. I've factored my costs in and out a gazillion different ways (that's a big number). I still don't know what it costs to perform a home inspection.

I know if I'm not clocking down, at minimum, a $500 nut for anything I do, it's not all that great a salary. I charge as much for a condo as I do a small single family; if they won't pay it, I don't care. I'd rather be hanging out in my studio with a cup of coffee losing money than out getting my assed kicked losing money.

Charge as much as you can get away with all the time. When it drops below $500 on average, you're probably not making money. If you're not in a major metro, most costs are considerably cheaper, but you're probably putting on more miles. I don't know how that factors in; within 6 miles of my house, there's a couple million people; that helps a lot.

[SNations]

So what is your time worth? $20, 40, 60 per hour? Do you depreciate your car? Your car insurance?

Those are sunk costs and are not part of the marginal cost of one inspection.

Do you increase your price when gas goes up?

No. But as I said, I live and work in a fairly densely populated area. Also as I said, this is definitely part of my marginal cost, but it's fairly minimal. A few dollars at most.

Who pays for your health insurance?

That's also a sunk cost and is not part of the marginal cost of an inspection.

How many pairs of jeans, boots, clothing do you go through in a year?

Not enough for it to be a significant factor in marginal cost.

Did you have lunch at Micky Dees?

What? I have lunch every day. What does this have to do with my expenses as a business owner?

Do you do your reports at home and what does that cost you?

As I said, I use my own report format so I don't pay any fee for that. And what does it cost me to be at home? Zero.

E&O?

E&O is a sunk cost.

Supplies? I could go on all day with picky little stuff that most HI's do not factor into cost. When you get that all totaled, then add 30% for profit, which is, in fact a cost. Do the math and see where you stand.

I know where I stand. I'm asking others what they think their marginal cost is.

If you aren't banking any "profits" you may need to change your pricing structures.

Or your expense structure. Or your marketing plan. Or something else. You can't just change your pricing structure because you want to make more profit. The marketplace doesn't care about how often you eat at Mickey D's.

[Bill Kibbel]

Health insurance is a "sunk cost"? E&O is a "sunk cost"? Those are not at all "sunk costs". Those are recurring expenses to operate in this business.

[SNations]

Health insurance is a "sunk cost"? E&O is a "sunk cost"? Those are not at all "sunk costs". Those are recurring expenses to operate in this business.

Actually, they fit exactly the definition of "sunk cost". Exactly.

"In economics and business decision-making, sunk costs are retrospective (past) costs that have already been incurred and cannot be recovered." en.wikipedia.org/wiki/Sunk_cost

Recurring expenses become sunk costs once you pay them.

And once you pay them they are not part of the marginal cost of the next inspection. I'm trying (with great difficulty) to discuss marginal cost and how that plays into the economics of this profession.

[Chad Fabry]

Recurring expenses become sunk costs once you pay them.

Steve, those expenses must be applied to the cost of past inspections or future inspections-as do all expenses. The expense is deducted against the current year's revenue for the IRS. Sunk or not, it's an expense.

Based on last year's numbers my input costs per inspection run right at $170 .

vehicle expense- fuel, depreciation,repairs, insurance

insurance expense

hospitalization

office equipment and supplies

linen and laundry

postage

tools and equipment

advertising

accounting

payroll

payroll taxes

I usually have 2 hours total drive time and assuming a simple 3 br ranch I'll inspect for 3 hours and write for 2 hours. that doesn't count time I spend advertising, doing book work, selling the inspection on the phone or the follow-up calls. It also does not count the time I spend on education

Obviously, I won't leave home for less than my minimum of $550. In fact, I think I will bump my prices a bit.

Thanks for making me take another look.

"I lose money on every inspection; I make it up in volume."

[Marc]

The whole idea of trying to anticipate what to charge for inspections is futile. Too many factors involved. Do your bookkeeping right and adjust your rates up or down depending on what recent profit margins were.

Marc

[Jim Morrison]

My father is the only home inspector I have ever heard give an honest answer to the question "How much do you charge for a home inspection?"

He always said: "As much as I think I can get."