Another new inspection success video tip uploaded: Inspection fee calculator.

[Nick Gromicko]

http://www.nachi.org/inspection-video-tips.htm

[Pete Campbell]

Very good, Nick!

[Marcel R. Cyr]

I charged $19.00 less than the calculator last Friday for a 2,709 s.f. building.
Good estimator Nick.

[Christopher Currins]

Originally Posted by mcyr

I charged $19.00 less than the calculator last Friday for a 2,709 s.f. building.
Good estimator Nick.

Low-baller.

[Marcel R. Cyr]

[James L. Keilson]

Pretty cool. I just did a few tests and used the tool to price up the last 3 inspections I have done and priced using my own "Algorithm". I was surprised of how close this calculator is. In fact all 3 were withing a variance of 40 bucks of my prices.. Nice tool Nick.

Jim

[Nick Gromicko]

You have to set it up first by adjusting the lower shaded area and running some hypothetical inspection jobs through it until it represents your fee structure. Then you can turn your phone over to your spouse or an employee or even an answering service and they can offer free estimates that are perfectly in line with how you would bid the job.

[Nick Gromicko]

Note: If you are a franchise that pays a fee based on gross sales, you want to raise your base rate up high in the shaded area so that you are doing fewer, but higher profit margin inspection projects. If you don't understand the math behind this advise, just post here and I'll explain it in more detail.

[James L. Keilson]

Originally Posted by gromicko

Note: If you are a franchise that pays a fee based on gross sales, you want to raise your base rate up high in the shaded area so that you are doing fewer, but higher profit margin inspection projects. If you don't understand the math behind this advise, just post here and I'll explain it in more detail.

Nick I totally understand the math behind this line of thinking, but one also needs to consider that "Most" potential clients especially the ones that are asking for quotes rather than what you have to offer more than others, won't pay a higher price just because you need a larger profit margin.

Jim

[Nick Gromicko]

Correct. That's the mathematical problem with franchises that charge monthly fees based on gross sales. The math rewards the franchisee to chase only the higher margin projects, even when he/she isn't busy, rather than price pointing his/her local market correctly.

[Nick Gromicko]

I'll do a little chalkboard example for franchisees. These aren't actual numbers, but rather round numbers I picked solely for demonstration purposes.

Lets assume for demonstration purposes that the cost to the inspector to do an inspection (time, mileage, risk management, overhead, marketing, etc.) is $300.

Lets also assume for demonstration purposes that the franchisee has to pay 15% of his gross sales to his franchisor.

Now, lets say that franchisee BOB does 50 jobs this month at $500. His gross sales are then $25,000. His franchise fee is 15% of that or $3,750. His net profit before paying the fee is 50 X ($500-$300) or $10,000 (remember this number, I'm going to refer to it in a minute). After paying his franchise fee he is left with $6,250 for the month.

Now, lets say that franchisee TOM does only 25 jobs but at $700. His gross sales are only $17,500 (poor Tom ). His franchise fee is less, only $2,650. But like Bob, his net profit before paying the fee is 25 X ($700-300) or $10,000. After paying his franchise fee (based on gross sales), he is left with $7,350...$1,100 more than Bob.

Tom took home more money than Bob even though he had the exact same net profit as Bob.

That's impossible! How could that be!!!??

It's because if you own a franchise that charges you a monthly percentage based on gross sales, you should, like Tom, focus on increasing your net profits on fewer gross sales. In other words, if you own a franchise, you are financially compelled to do fewer but higher margin projects. We all should, but franchise owners are extra compelled because of the math I described above.

[James L. Keilson]

To me, that is why in the industry and economy a franchise is not a good thing.

Jim