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Tow411

How to figure by hour pricing?

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Tow411 Topic Originally Created by firemedic in December of 2007:

 

I pretty much understand how to figure your costs and what it costs you to run your truck. How do you translate that into an hourly price. I haven't been able to understand that.

 

doingitall r54_1559570275.gif said:

What I did was keep track of my times per call port to port, and figured out what my retail hook and mileage rates figured out to per hour (it varied per call of course but not by a huge margin). Since I was happy with what I was getting for my retail rates, I translated that into an average hourly rate for local calls, rounded to the nearest $5 mark, and that is my hourly rate. Works out in my case to a little less that my usual hook and mileage rates, but most customers like it better because it is easier to understand, I like is because it's easier to bill! I still charge extra for special equipment, anything that is accident related is more per hour (sharp stuff, glass, etc.), winching is extra, and the rate is higher after hours. It was pretty easy for me as I am a one man show (mostly), so I did not have to take into account the variation in drivers efficiency, or try to collect the information from several sources (drivers).

Overall I am very happy with switching over to mostly hourly rates, has worked well for me!


Andy - A+ Towing

 

ncoast said:

I use what it cost me for the previous 12 months, total paid out, plus what my truck payment was (its paid now) plus a little. Then I add what I want for wage and profit. I look at this every month.
I divide this, by what I consider a reasonable number of billable hours in a year.
4 hours a day, 5 days a week, 52 weeks a year.
Due to the reality's of pricing in most areas, mine included I can't always charge this.
But in some cases, like winching, equipment moves or anything out of the ordinary I charge at about 20% higher. I also try and charge after hours at time and a half based on this rate.
I'm also a one man show, and my hook and mileage works out about the same. Sometimes more sometimes less.
I have found that knowing this hourly number and dollar amount per. day keeps me motivated to charge enough.
Its also helps to know this so you can pick and choice MC calls. Even with a decent contract alot of MC calls won't come close.

 

Wade200 said:

If you know your costs it should be simple. Just get an average of how many hours you work each week and divide it out. I have mine figured as if each truck ran 50 hours per week they would need $XX per hour to pay all costs or $XX to pay all costs and make a profit. Once you get an average it's pretty easy to adjust things to figure it more accurately.

 

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FLCOWBOYINIRAQ said:

we tried that by the hour stuff on regular tows but we were losing money. the only time i tell the customer there will be an hourly rate added to the tow is if they want to send me to orlando on friday night or when ever i get stuck in traffic for a long period of time. all recoveries are by the hour port to port that includes if i have to clean my truck or any equipment port to port till my truck is ready to run the next call. when i do have to charge by the hour on a tow i normally just charge what the hook up is.

john fenshw - lakeland fl - tikrit iraq

 

ncoast said:

Remember even if your truck is paid for, it still needs to be figured in. And some added to go towards replacement cost.
And I use 4 hours a day not because that's what the truck runs, but because it also needs to earn enough to cover time spent on paper work, truck maintenance, cleaning and everything else that goes along with a business.
My main customers are Monday - Friday 7:30 am to about 6 pm
I don't do police towing or very much MC work. So as a result I do very little after hours or weekend work.
I don't keep track of time spent on calls every time, but I have in the past, if I use that to figure my hourly,
it comes out lower than by using hook and mileage. And even thou I do use hook and mileage a lot, having an
hourly rate works better on some calls.
Say I run 50 miles down the interstate to bring a car back, 2 hours and I'm done. But what if I have to run 50 miles and its on back roads, I could spend 4 hours on the same distance.

Lets hear some more ideas

 

doingitall r54_1559570275.gif said:

That is exactly why I like to do most of my retail hourly - if the weather is bad and slow driving, I still am covered, customer gives bad info and tow/recovery/locating customer takes twice as long, covered, need to include equipment cleanup, covered. I just quote and bill hourly - 1 hour minimum, then 1/2 hour intervals from there.

Andy - A+ Towing

 

Wade200 said:

In my opinion, the only real down side to hourly rates is inconsistent billing for customers. Today it may take 1 hour to complete the job and tomorrow (with traffic or weather) it may take 4 hours for the same job. I have found that our good shops don't like variable rates like that and some have quit using us due to rates that vary more than a few dollars for comparable tows.

You can't please 100% all the time, so whatever works for you is what really matters.

 

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anaron said:

Daniel, I understand what you are saying but you can bet the shops do exactly that on their repair work. They will give you a bid for a valve job but if they find a crack in the head, it's going to cost more! Not their fault, not your fault - called extenuating circumstances. Everything I do is calculated by the hour but I never quote a job as $xxx per hour. Too open ended and you will lose most of the jobs. I have done this for so long, I pretty much know within a few dollars what the total will be for most everything I do so I give a total "estimate". How much will this cost? "Sir, Based on what you have told me, it's a simple hookup and tow, etc. - should run about $XXX if we do not run into any problems." You have given them an estimated price and left the door open for any unforseen problems. Sometimes they want an explanation of what problems might be encountered, most the time they don't even ask. Should I run into any problems that would significantly increase the cost the customer is immediately advised and given the option of declining my service. I have never had anyone decline the service after I arrived on scene and explained that this job was going to cost $xx more because of whatever. Weather issues should not be a problem because you should be quoting rates based on the weather conditions anyway. Most traffic issues should not be a problem as most the time we know what the traffic situation is at any given time and should quote accordingly even going so far as to suggest a better rate at a better time. You might be surprised to see that most customers understand that a 3 mile tow in a blowing blizzard is going to cost them considerably more than the same tow on a nice sunny day.

 

Jerrys Road Service said:

All tows should be charged hourly port to port.yes Daniel your right abought consistency but i tell them theres lots of trafic NOW if you wait till say 7pm it will be cheaper your call
 
Jerry's Towing -Santa Clarita ,Ca - 661-857-6828
 
ncoast said:
his post has gone from how to figure an hourly rate to should you charge hourly, still a good post.

Hourly is for out of the ordinary stuff, not run of the mill hook and book tows.
When I quote a price or write a bill its total only, I never break it down. But do use hook and mileage alot.
When people hear xx + x per. mile they freak and think the worst. I did a tow last year where the customer followed me to the drop, while unloading he said I called xxx and man hes hi, he wanted xx + x to do this. I laughed and said well this was only x miles he woulda been cheaper. He ended up tipping me anyway.

Isn't WFG an approved pricing method
 
Towman26 said:
Daniel, I to understand your concern on the differences in prices but what about the guy that has several trucks towed from one location to another & you do it with different trucks & drivers, I bet if you did 10 trucks you might get 5 or 6 with same milage but i know that Dustins truck odomiter is on the mark, but the others we are constantly having those adjusted. Hell on my wifes Navigator when we go to her surgon in Tampa (which we do every other month for the last 6 yrs & sometimes more) but in my pickup & Dustins pickup the mileage is tow miles different, that could be from were you exactly pushed the button, but in her Navigator, going the same way same speeds, it is 32 miles further!! yes I said it is further & no Tampa didnt move. In town it is fine, right on the doy, but at highway speeds it starts adding miles, & the faster I go the more it adds, once when we had to rush over I satyed at about 110 & it was 44 milesmore. So back to what you were saying about being inconsistant there is problems on both ways Unless the call is at your front door, every call would be over one hr. I would love it if the companies on the FL east side would get into that type of pricing. That is what is going on the west side in tampa, sarasota area, but unfortunatly if 20companies all got together & said we would go to hourly, 2 or 3 would go behind the others back & try to snatch up the customers. I think it is the best way to make it simple for the customer, they know it takes xxx amount of time to get there xx amout to get back, drop & then back to your shop or even stop when you drop, it still is better. That way they dont have to get a long list of things, hook up, mileage, drive line, air, fsc. etc etc. it would be 2.5 @ xx = xxx that it! Like I had stated in another post when you have company's that will do rotations for as much as possible but then turn around & do accounts for as low as they have to to get the customer, like box trucks for $60 & 3 or even $60 flat rate in the county or $70 &3 for loaded t-t. When you have to deal with this its very hard to get change but i still have hope. lol
 
a841a20e6e5146159f603a9a15e3a125e1ed3bd2
Warren Driscoll --- 877-KW TOWS U
 
FLCOWBOYINIRAQ said:
put a bid together for a local allison shop. how i did it was he told me the furthest he went for trucks in all directions so i towed a few and kept track of the mileage. he really needed a flat rate so he could bid on jobs. so what i did was took the furthest point away added the miles then x by what we were getting a mile rr drive shaft plus air hook. now we towed them there broken down and towed them back to the customer when they were repaired. on the ones going back as long as he had another unit coming back for a repair i would tow the repaired one back for half. and i did not have to remove the shaft on the tow back to the customer.

that hourly stuff is only good on heavy tows i actually tried that and wrote the bill both ways and hook and mileage was better, unless towing a crane or big motor home stuff like that. one thing is what do you do if you have an expirenced operator that can hook and tow very good and safe and then you have one thats not so good and you do the same tows diffrent days diffrent drivers and his bill is more then the others. we tried that with waste management and the bills were very incosistent. they had 5 bills from the landfill back to there shop and all 5 were diffrent.

john fenshaw - lakeland fl
 
In Memory of BROTHERSANDSONS who said:
I've been following this for a little bit, because its one of my favorite subjects. I notice a lot of you saying that Hook up + mileage comes out higher than hourly........that bothers me.....what it says to me is your off on your hourly rate..If your charging, for instance....100 for the hook up and 5/mile( lets leave the shaft out of it and tow it from the rear) and your going 20 miles thats 200 dollars. easy hook and fly thats a 90 minute job to drop, half hour back to your yard... 200 @ 2 hrs .......thats 100 per hour??? Maybe a better cost analysis is in order ( even if you jump up to 150/6 its still only 135/hr) some costs are constant.some are dynamic..without going into to much detail a straight heavy with a quality driver is in the 220-240 range.depending on a few things. thats 440-480 for the same tow........much closer to reality of cost( at dollars/tow.dollars/day is another subject). Specialized units are more, of course.but costs are costs.
as far as the inconsistencies of time and pricing ( traffic ,weather, stubborn drivelines, Texas bumpers etc etc) It ain't my fault or the customers.they are just a fact of life...I give a rate that reflects my costs , not based on what the market is doing.and YES it makes it tough when you have potatoes out there dropping their drawers just to get cash flow. If I had my way we would all have breakfast once a month and decide what the going rate was and everyone would have no choice but to pay it......then some previously mentioned potatoe would undercut us all and we would have to slay him....its something that can be addressed by some standards.....including standards for compensation......I can see it.but, I can't figure out how to make it work.

In regards of how to figure it, I take my monthly costs and divide them by 121.6 ( 30.4 days in the avg month x 4 hrs per day ) and thats even a little low because of the day off factor of drivers.but its close for me. Thats just to pay the costs ( dollars per tow) profit comes into the game when you build up the tows per day to the point of stretching yourself thin and needing another truck..its a constant re evaluation process....fuel, insurance, drivers wages, etc etc............takes up a good amount of my time each month and how do you calculate that into the overhead???? lol....its worth it to be serious about it.it does show up where it counts.in the bank
 
Towman26 said:
Ya I cant see were hourly is less than hook & mileage. Weve done both & everytime hourly is more. I just did one today 40 miles $490. paid hourly. Like I have said I wish we would all go to it .
 
a841a20e6e5146159f603a9a15e3a125e1ed3bd2
Warren Driscoll --- 877-KW TOWS U
 
anaron said:
I agree with Jan, if your mileage/hookup rate total is more than your hourly rate total, some immediate attention needs to be paid to your hourly rates. Back in the early 80's, I charged $25 hookup and $0.75 per mile round trip and never gave it much thought until I gained a new customer, 8 mile round trip that took 1.14 hours to complete for $31 - opps! Got a problem here! That's when I began taking a good look at my rate calculations and found that over 30% of my tows were losing money because of the time differentiation - started calculating my rates on an hourly basis - problem solved.I calculate my rates on light, medium, heavy, jump starts, lockouts, everything is by the hour. Here's some figures from my data base for a 10 mile simple light duty tow from 5 different locations. These times are an average for each location and I do them on a weekly basis- .58, .66, .68, .72, .75
For simplicity, use $50 hookup and $2 mile round trip for a total of $70. You get $70 for .58 hours and you also get $70 for .75 hours. Now something's wrong with that picture! For simplicity, use $100 per hour - $58, $66, $68, $72, $75 - looks much better as I get paid for my time involved. The problem with hourly is that most companies have no idea how long it takes them to do a tow job. How long did it take? Oh, about 45 minutes when in reality it took 48 minutes. Geez, 3 minutes! That's really nit picking! Back when towing was $25 hookup and $0.75 mile, 3 minutes did not make a lot of difference but at the rates we should be charging today, it makes a huge difference especially over the entire year. Not charging for 3 minutes on each tow adds up to 1500 minutes or 25 hours for 500 tows. Calculate that with your rates! The hookup/mileage would work great as long as you could keep every call at .66 hours or less but we all know that's not going to happen. Now several have commented that hourly rates would be confusing to the customer and your right but so is hookup/mileage. Some companies charge $XX hookup and $X per mile loaded, some round trip, some 1/2 round trip and no telling how many other ways. We should never quote "$XXX per hour" or "$50 hookup and $2 per mile". Your miles and his might just be totally different - kinda like the motorclubs paying mileage based on THEIR charts! We should calculate what we believe the total to be because that is all the customer is concerned with, not how we calculate our rates. How much will this cost? "Sir, Based on what you have told me, it's a simple hookup and tow, etc. - should run about $XXX if we do not run into any problems." You have given them an estimated price but at the same left the door open for any unforseen problems.

John brought up a good point - "we tried that with waste management and the bills were very incosistent. they had 5 bills from the landfill back to there shop and all 5 were diffrent." I firmly believe that this is a problem but it's our problem and not the customer. In my entire career, this has never been a problem for any of my customers. I tow for an electric coop from all their branchs to their repair shop and no two bills from the same branch office has the same total. I have a dirt company that I haul their trucks from their pit to the same repair shop, bills are never the same. No two tow jobs will be identical in time even if locations and mileage are identical. If you are trying to get you invoices to show the same dollars on each tow, you either have to base your rates on the highest invoice which is not fair to the customer, on the lowest invoice which is not fair to you or work out an average and hope you do not get too many tows that end up above the average!
 
firemedic said:
Appreciate all the info.

A few questions:

1. When you do port to port as I assume most do, do you just figure the time to drive to them if you are not at office and to drive back from point of drop off? How do you figure that? 60 miles would take an hour? How do you calculate for traffic, weather, etc?

2. I am assuming that once I figure what my hourly rate should be, how do you figure out the difference from light, medium, heavy? I normally adjust my hookup based on weight and difficulty of hooking up. On medium and heavy I understand where hourly would be better, i.e. that driveshaft that just won't come out when you normally say $XX dollars for driveshaft removal.

Light duty by the hour would be ok, it's just confusing I guess. I heard of someone giving a class at one time about figuring costs and charges, wish I could go. I don't want to undercut myself, I want to make that dirty word "profit". LOL!!

I also don't want to rip anyone off, so that is why I ask, please excuse my ignorance if I seem like "I just don't get it".
 
anaron said:
Glenn asked:
When you do port to port as I assume most do, do you just figure the time to drive to them if you are not at office and to drive back from point of drop off? Yes
How do you figure that? My calculations are easy as the info in my data base consists of all the towing jobs (recovery and accidents are not included) done over the last 15 years showing total mileage, total time, pickup location and drop off location for each job. When I first started, I took the last year of hookup/mileage total revenues and divided that by the total time for the year. Now this will only work if your hookup/mileage rates were calculated on actual costs and profits. It creates a good starting point that can be fine tuned as you go.
60 miles would take an hour? This is a good way to estimate your travel times but 60 miles in an hour is almost impossible on local towing. I do not do long distance towing anymore but back when I did, it pretty much averaged 47 miles in an hour. My 15 year data base for local towing shows that I average 31 miles for each hour. Your average may be different depending on the factors of your area.
How do you calculate for traffic, weather, etc? Fortunately traffic is not much of an issue in my area. Based on experience, I generally know if I should add x amount of time due to heavy rain, traveling thru construction zones or whatever.
I am assuming that once I figure what my hourly rate should be, how do you figure out the difference from light, medium, heavy? Your hourly rate will need to be calculated on each light, medium & heavy. You cannot use one to calculate the other as each is in a world all of its own.
 
Gerry Sienk said:
First question i ask is what did it cost you by the hour to run your light, medium and heavy call? You need to know your cost to calculate a price. I have used an hour meter for service on my trucks, which was recorded monthly. Using the yearly total per truck, and dividing the cost to run the truck for the year, including labor or in case of owner driving the salary I would want per hour, into hour to find out what it cost me to run it last year. Because regardless of whether it was idling to warm up in yard, or on a call, that is what it cost to run the truck per hour even if I was not getting paid, the money had to come from my business to pay that cost! That hourly cost is what you needed regardless of whether you were getting paid that amount. And yes there are some "if, ands and buts" to this figure. As far as how you bid calls, you should have a basic knowledge of how long calls take, on most jobs you can either give a price that will "fly" with the customer and you still make a profit, leaving you open for getting more, or less, it is just of matter of how you communicate with them. But If you know your cost, you know if you made money or not.
 

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