How much to charge per inspection

[kurt]

yup

[SNations]

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

Chad,

Honestly, I'm not trying to argue with you. I just want to understand, so that I can take that understanding and help me run my business better.

When you said that at a lower rate you had higher revenue and yet lower profit, I don't understand the economics of that and I'd like to. And the only way I can see it making sense is if you have a very high marginal cost per inspection. That is, the expenses that you occur for each new inspection are very high. Things like insurance are not part of the marginal cost, because you have to pay that whether you do 50 inspections a year or 500.

So really I'd just like to understand how you can have a higher revenue with more and cheaper inspections and yet a lower economic profit. Where are your extra expenses coming from?

[Chad Fabry]

Steve,

I can't explain it any better than, would you rather do a hundred inspections for $60K or 150 inspections for for $66K. The $66K is more revenue, but I doubt it equals more profit.

To answer your question, my vehicle expense works out to almost $50 per inspection. If I could multiply myself and do more inspections to produce more revenue at the same margins to reduce my "per unit" expense, I'd be all over it.

I completely understand your ideas and thoughts but please consider this; when you price yourself out of a demographic, you no longer have to work with that demographic. There are very few Kibbels or Katens in the world, but each area has its best and most expensive inspector- that's the position I like to vie for.

The agents think I'm too expensive, the flippers think I'm too expensive, the wheeler dealers think I'm too expensive. All that's left are people with enough money and enough brains to seek a high value inspection. That's the demographic I targeted from day one.

[Jim Morrison]

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.

John is dead-right and has a lot more to say about this. I never made any real money in home inspections before I sat through his class on this subject.

[SNations]

Steve,

I can't explain it any better than, would you rather do a hundred inspections for $60K or 150 inspections for for $66K. The $66K is more revenue, but I doubt it equals more profit.

To answer your question, my vehicle expense works out to almost $50 per inspection. If I could multiply myself and do more inspections to produce more revenue at the same margins to reduce my "per unit" expense, I'd be all over it.

I completely understand your ideas and thoughts but please consider this; when you price yourself out of a demographic, you no longer have to work with that demographic. There are very few Kibbels or Katens in the world, but each area has its best and most expensive inspector- that's the position I like to vie for.

The agents think I'm too expensive, the flippers think I'm too expensive, the wheeler dealers think I'm too expensive. All that's left are people with enough money and enough brains to seek a high value inspection. That's the demographic I targeted from day one.

Chad, I understand and appreciate what you're trying to say and do. And believe me, I'm working constantly to become the Rolex of my area.

I will say that I think the answer to your question of 100 inspections for $60K or 150 inspections for $66K depends on where you stand on the experience/marketing ladder. For a newer guy I think the answer is the latter. (Also your $50 per inspection vehicle cost blows me away. This morning I drove 9 blocks. Last week I drove 2 blocks one day. Tomorrow I'll drive about 10 minutes.)

I have fairly low marginal costs, so I'm still trying to maximize revenue. I'm trying to do that by maximizing volume and by creating a brand that allows me to maximize fees.