Why do appliance repairs (dishwasher, laundry, fridge, etc.) seemingly cost as much as the appliances themselves?
In: 5618
Tldr ; it’s expensive to run a business, and if you do the cost analysis exercise, you’ll quickly see that it costs money to simply exist as a business.
Because of labor cost. Driving a truck/van is not cheap on gas. Time to travel costs money.
Let’s say you’re an owner operator. A new Ford Transit F150 is 50,000 CAD, which works out to about $850/month for the financing. You also have to consider insurance, so another $300/month. Your contractor likely does a lot of driving, 2 tanks a week, (moderate), 8 tanks/month, so approximately $800 in gas a month. So, without even including actual practice insurance, warranties, parts, labour, taxes, maintenance, your owner operator is out $1950 CASH. So, a reasonable call of 30 minutes of driving/parking time, 1 hour diagnostic, that’s going to be about $30 for the COST of running that vehicle. Okay, but the owner needs to make some money too? So how much does he charge? Most trades in Ontario run about $40-50/hour. Let’s say he’s experienced, and he’s even saving you money by running solo. He doesn’t have a 2nd or an apprentice. So for him to just show up is $80. A typical new appliance is between $500-1000. Okay, for every hour he spends there, that’s another $50. The business likely needs a storage space for typical parts, so he’s leasing space in Toronto at $30/sqft (very reasonable). His annual cost is 30k for storage, which means his tiny (and I mean tiny) shop is running a other $16/hr in overhead. So we’re now $96 for the first 90 mins. The part, sometimes you can find them cheap, sometimes they cost a bit. Well, typically parts are sold at 200% cost. So a $50 part will cost the customer $100. You need to charge more because you have to have money to purchase additional parts, you can’t be using a part, getting paid at cost, then waiting for it to service the next customer. So, now we’re up to $146/for 90 mins for a common part swap, and this still doesn’t include the other things I mentioned. Tools, batteries, work clothes, PPE, website payment, business telecommunication, advertisement, and % of customer conversion. Sometimes you go out, give the quote, and the customer shops around. Even if your conversion is quite high, 70%, that puts the cost up to $208…. now think about future proofing the company. Are we thinking about adding a second work truck? Are we thinking about having a 2nd employee? Are we going to get small business benefits for our employees? Do we offer emergency repair (middle of night/holidays)? Do we need some savings in the business account for unexpected expense? Additionally, a corporation operating at exact cost isn’t likely to be considered successful by the bank, and that company revenue is important for future loans and financial flexibility.
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