Rates

[chrisprickett]

(The following is reply to a business for sale ad on another thread)

Mike,

It's about his rates he he posts them on a public thread. We fight for respect and the right to command a fair price. To post a fee rate so low (without rebuttal) can give many a newbie the impression that $225 is the going rate for a home inspection.

Let's see:

Franchise cut

Insurance (E&O, liability, vehicle)

Marketing

Tools

Transportation

Salary

Taxes

At $225 per inspection, it's not a business, it's a job. IMO, many inspectors have their head up their proverbial butts regarding fees. It's time we made a decision to be paid what we're worth. Too many inspectors let the market dictate their fee, instead of dictating their fee to the market.

[a46geo]

Chris,

$225 X 4 a day X 6 days = $5,400 a week. Lets see.... well thats over $20,000 a year Right?

Don't laugh, I know a guy here that does just that. A 1 1/2 hour inspection which includes the time for the bucket-head, check list report.

The problem here is that guys like you and me start thinking that we all put out the same product, we don't. That's why I get $395 for an inspection and my competition gets $225. However, since he does so many more, he makes a lot more money. I just sleep much better and don't have to rely on realtors for business.

George

YO CHAD ... Mike just did it again.

[denable]

Originally posted by chrisprickett

(The following is reply to a business for sale ad on another thread)

Mike,

It's about his rates he he posts them on a public thread. We fight for respect and the right to command a fair price. To post a fee rate so low (without rebuttal) can give many a newbie the impression that $225 is the going rate for a home inspection.

Let's see:

Franchise cut

Insurance (E&O, liability, vehicle)

Marketing

Tools

Transportation

Salary

Taxes

At $225 per inspection, it's not a business, it's a job. IMO, many inspectors have their head up their proverbial butts regarding fees. It's time we made a decision to be paid what we're worth. Too many inspectors let the market dictate their fee, instead of dictating their fee to the market.

Chris,

Sometimes it takes a good law suit to wake up inspectors to the huge responsibility they take on. Over the past 21 years I have gotten a few suits thrown at me. I have one of those "mold" cases now pending for the tune of $91,000.

As soon as I got the notice for that suit I raised my fees another $100. My goal before semi retirement (3 1/2 years away) is to average around $900 per inspection.

In my neck of the woods the average home is around $500,000 and agents are making around $25,000 per sale. I don't hear buyers complaining about these huge commissions.

Last week after finishing up a condo inspection of a 3,000 s.f unit selling for around $500,000, the client wrote out my check and asked "$715 is the correct total, right"? The agent was in ear shot of that question and starting questioning me about how I base my fees. It appeared she was trying to imply that I was ripping off my client. Boy did she ever bark up the wrong tree.

My client was the father of an attorney who I had done numerous inspections for as well as several of the attorneys in her office. My client was well aware of the huge commission check that was going to be cut to this agent for basically showing the place a few times and tagging along for the inspection.

My client shot back to the agent that he had agreed a week earlier to the inspection fee, but was just double checking because the inspection took about 1/2 hour longer than planned.

[a46geo]

Originally posted by hausdok

George wrote:

YO CHAD ... Mike just did it again.

Huh, wudeyedo? wudeyedo?

OT - OF!!!

M.

Mike

It is a reference to your lightning fast typing speed that I mentioned on another thread. (Humor)

George

[DonTx]

I didn't understand the pricing of his company. Unless he's just wanting to unload the company quick, it doesn't jive with anything I've ever heard about pricing a company.

I've read and been told several times that a company is generally priced to sell at 2 to 4 times its annual gross sales. Now I don't know if this applies to HI business's, but as I understand it this is how other service related companies are priced.

Is this correct? Surely there are some of you who have sold a HI company before.

Donald

[Jim Morrison]

Donald,

From what I've learned through a small bit of research, an HI practice is worth around one year's gross sales, or less.

Chris is right, at $225 apiece, that isn't a business, it's indentured servitude.

Jim

[chrisprickett]

Donald,

Doing the math- $225 per inspection x 8 a week x 45 weeks a year = $81000 annual gross revenue.

Figure in that at that volume, it's a one-man-show. The going rate for this kind of businees is 55-60% gross revenue. I'd say it's over priced.

[kurt]

There is no single method for valuing businesses. There is no going rate for HI businesses. I know of an amazing # of HI businesses for sale in the $100,000 grand range, due to the misconception that it is worth one years gross. If one can pull that off (sell the business for 1 years gross), they are smart and lucky.

As big shops move in, the one man bands are going to become literally worthless. They may make money for the individual, but will have no other value unless there is some intrinsic or intangible that goes with it, such as a reporting system, a book, or other unique value added condition.

[swarga]

I've read and been told several times that a company is generally priced to sell at 2 to 4 times its annual gross sales. Now I don't know if this applies to HI business's, but as I understand it this is how other service related companies are priced.

Is this correct? Surely there are some of you who have sold a HI company before.

I have done a lot of research on this lately and I have determined that:

A 1 man shop will get between 30%-60% of one years gross.[:-ouch]

The more inspectors you have and the longer that they have been with you the higher the percentage gets.

If you have 3 inspectors (Other than yourself) you can expect to get 2 times the gross.[:-glasses]

5 inspectors, (Other than yourself)2-3 times the gross[:-eyebrows]

7-10 inspectors, I can't count that high. At that point we are talking over 6 zeros after the purchase price.[:-bonc01]

Of course there are assets that will effect this also, this is just a rule of thumb.

[a46geo]

Very interesting Scott. It looks like it would be in our own long range, best interest to hire and KEEP our inspectors. A generous wage and benefit package is an investment, not an expense.

George

[DLRambo]

For a 1 man operation you're selling YOUR personality, YOUR expertise and YOUR way of doing business. A good friend of mine is a Home Inspector and Licensed Structural Engineer. He grosses about $180,000 p/yr.

If he sold out to a naive NEWBIE, over 50% of the NEBIES business would STOP immediately. Why?? The MAJORITY of his clients USE HIM because of his PE Designation.

If the 1st inspector geared his business toward realtors and averaged 1.5 hrs per inspection and charged $200 per inspection - and the new buyer took 2.5 hrs and charged $300, again a huge part of the clients will be gone in less than 3 months.

When you buy a 1 man show, that is exactlty what you're buying!!

As far as rates go - there was an article in the Kansas City Star Newspaper last week saying the AVERAGE Doctors Salary in our area was about $121,000 per year.

An inspector charging $225 per job x 3 p/day x 5 days a week is $3,375 p/week. Multiply that times only 40 weeks a year (he/she is lazy) and you come out to $135,000 per year (more than the average doctor in my area).

My Base Price is more than most HI's in my area, to start with and goes up $50 for every 500 sf up to 4,000 sf, and it goes up for age (over 50, over 75, over 100) and it goes up for crawlspaces, 2nd kitchens, etc, etc. Once I go past 4,000 sf I charge a simple XX cents psf. But, from a LOGICAL point of view, there's more people willing to pay $225 for the average house than will pay $350 (Base Fee). I don't agree with that, but I understand it. For a home, termite and radon I'm often $250 - $300 more than my competitors.

One of my ASHI friends charges $325 for home, termite and radon inspections as long as they're under 3,500 sf in size. Another local ASHI Member charges $220 for ANY SIZE HOUSE. They seem to be busy all the time.

I charge more, but I do less volume. I'm divorced, my kids are grown - so it works for me. If I had 3 kids in grade school I might think differently, I don't know.

Dan Bowers, CRI

[Les]

Have you ever noticed that the old timer's seldom get into the price conversations? Bowers has the right idea for his market. The young turks always feel they are worth more than they really are. My opinion is the Las Vegas guy knows his market and likely is working. Can't say I'd be interested, but have worked for a whole lot less. I Hope he is able to sell it.

[pete]

I do not know why anyone would pay more for a franchise. If I sell you my business, you get all the benefits of a franchise at a set cost. The franchise you owe them forever. A friend of the family was very successful at starting franchises and selling them. He said the only time a frnachise is worthwhile is when they produce a product that you can not or that would be to expensive for you to do. He had a bunch of Baskin Robbins, he felt that their ice cream would have been hard to beat. He told me to stay away from the inspection franchise. He explained that in the franchise world there are certain ones that are seen as absolute losers-- HI, handyman, cleaning company, etc. They take so much more than they give. I have spoken with some local guys and they say they could not have gotten started as quickly. I think they are wrong, when you consider how much money they spent they could have been at the same spot. After 1.5 years we are doing 60k a year, with less seed money than any franchise. Plus we are charging almost the top in our market, which the franchises do not seem to do. If I were buying a biz I would rather buy an independent who built a company (that is why we do not use our names on our promotional stuff) than a franchise. Anybody want to buy

Pete

[chrisprickett]

Originally posted by Les

Have you ever noticed that the old timer's seldom get into the price conversations? Bowers has the right idea for his market. The young turks always feel they are worth more than they really are. My opinion is the Las Vegas guy knows his market and likely is working. Can't say I'd be interested, but have worked for a whole lot less. I Hope he is able to sell it.

Les,

You need to talk to more old timers. They almost ALWAYS talk about price. The "young turks" tend to come into the market with low prices. I wish they would come in overpriced.

I had a Realtor ask me Friday if I gave out discount coupons. There's a new guy that came into her office giving out coupons for $175 inspections. I told her that he was her man, and wished her the best of luck.

At the ASHI conference in NM, there were several seminars on marketing and cost of doing business. All of them were being taught by SUCCESSFUL old timers. Without exception, they sang one tune: RAISE YOUR PRICES!

I too have worked for a lot less. As a construction laborer, carpenter's apprentice, and four years in the Navy. I learned my lesson.

[RobC]

Mike,

I've always considered a franchise as buying a job. But I didn't think it was that bad, great information!

[Les]

Chris, would you go to church and ask for a shot of Jack Daniels? I was in AZ, matter of fact helped put the thing together. All good advice and common business practices. Hell if you can raise your rates - go for it! I am saying I have been in every region of the country and participated in the process. I was indicating to you that you do not know my market and damn sure don't know my business. There is not a week that goes by without my office being asked, for pay, to look at another inspectors work or behavior or fee. It would be enlightening for you to spend a day in another inspector's shoes and try to understand their business. I'd like to think we lead the way for approx 175 inspectors in a metro area of 300,000. I also know someday one of us old farts will move to Az and cream off some of the big bucks. Chris - do a good job, charge what you can and leave others business to them.

[chrisprickett]

Originally posted by Les

Chris, would you go to church and ask for a shot of Jack Daniels? I was in AZ, matter of fact helped put the thing together. All good advice and common business practices. Hell if you can raise your rates - go for it! I am saying I have been in every region of the country and participated in the process. I was indicating to you that you do not know my market and damn sure don't know my business. There is not a week that goes by without my office being asked, for pay, to look at another inspectors work or behavior or fee. It would be enlightening for you to spend a day in another inspector's shoes and try to understand their business. I'd like to think we lead the way for approx 175 inspectors in a metro area of 300,000. I also know someday one of us old farts will move to Az and cream off some of the big bucks. Chris - do a good job, charge what you can and leave others business to them.

Not sure what the Jack Daniel's anaolgy is about.

Put what "thing" together in AZ???

I do know marketing, and I do know business. You can market yourself as the best, or you can market yourself as a low baller. You can be a thorough and competent professional inspector, or you can be a buckethead.

If you are constantly being asked to look at other's work, wouldn't you think that there may be a problem? "You get what you pay for" goes back longer than you and me. While there are exceptions to the rule, in the business world (cars, houses, services, manufacturing, etc...) you pay cheap, you get cheap.

If a newbie is out there undercutting me by nearly 50%, I think it's pretty safe to say that he doesn't have the training, experience, equipment, or commitment to service that I do.

To Quote Chad: I'm done now...

[Charles]

This is an interesting thread. As an owner operator of an AmeriSpec franchise I thought I would jump in and offer my opinion. Like our forum moderator I came from a military career (12 years, 7 months, 14 days), stumbled into homebuilding (superintendent then project manager) when I returned home and by chance discovered home inspection.

Upon looking at the various opportunities in my market, my lack of business experience, and a basic understanding that most businesses fail within the first year or two, I chose to buy a franchise instead of going it alone. Looking back now over ten years I would have to say that the primary reason I bought a franchise was to limit my immediate financial risk (fear of failure). The secondary reasons would be to have a turnkey business model, technical training, management training, handholding, an immediate ability to network with fellow franchise owners, competition and potential value in a brand.

I also firmly believe that I am in the business of Home Inspection. Our firm employs five full time inspectors, two office staff, and myself (I am an active inspector). We are priced in the upper edge of our market. We do market to Realtors and focus on those that believe in our customer benefit statement, “We perform our home inspections with you in mind. From the first contact with our courteous office staff to our expertly trained inspectors, we promise timely service, thorough inspections, clearly written reports and a guarantee of satisfaction. No one does it better!â€

[Les]

Chris, I hate it when I am wrong. Why I posted Az when I meant NM. The thing was InspectionWorld. As for Jack Daniels analogy - I believe you will not ever go to a HI conference and find a program that will tell you to lower your prices. Carefully read my post and I trust you will find no anomosity toward you. I, of all people in this business, know there is a real and major problem with our industry. I do admire you and your spunk and if you do know the all answers to Inspection marketing and pricing, I would lose respect for you. Us "old timers" don't have all the answers. We have seen a good bit of change and some of us would like to help stop leveling the field for our competition. To be painfully direct - You don't know the Las Vegas market nor the value of the business for sale.

[chrisprickett]

Les, no anomosity taken, nor sent. I enjoy this debate and that's as far as it goes. Some of the "old farts" on this forum know that since I've been neutered, I'm actually quite harmless.

FWIW, Las Vegas is a pretty cheap market inspector-wise. But it's very similar to how AZ was before licensing. They really need to raise their prices!

[Jim Morrison]

If you want to make more money, raise your rates. But don't wait for everyone else to do it, because that won't ever happen. Every time I've raised mine, I suffer panic attacks, but I find that peace and serenity return when I notice the extra heft in my take-home pay. I think our rates are at top of the market, and next year I'll probably try to raise the ceiling.

Give it a shot during this, our busiest season. You can always lower them in a month or so if you fell like you should.