We all want to know the answer to the big question: How much is my project going to cost?
It’s a completely fair question, and while I can really only say, “It depends”; in this article I’m going to explain the basis behind how different prices are calculated, and different factors that will either increase or decrease the final cost of your electrical project.
The Algorithms That Businesses Use to Generate Their Prices
There are a few common ways to structure pricing such as flat rate, time and material, and unit cost pricing – or billing per square foot.
Flat Rate Pricing:
I believe that flat rate pricing is the most honest and straightforward way to write estimates and invoices. It’s nice because every task is broken down UP FRONT and both you and I know exactly what the job will cost BEFORE it even starts; and the only reason it should ever change is if unexpected problems come up during the course of the work, or if you add more tasks to the job.
Flat rate pricing works by breaking down each task to its smallest possible part and writing it as a line item on the estimate.
For example, if we were going to install a new TV outlet directly above an existing one in order to hide the wires once the TV is mounted, I would write it up like:
- Wire – 6 ft – 14.50/ft – $87
- Install New Single Gang Box – $50
- Install New Outlet – $35
- TOTAL – $172
So in this breakdown each item is simply that task itself. The price includes the material cost plus the expected time to complete it. Which leads us to the Flat Rate Formula:
Hourly Rate / Expected time to complete + (Material cost + % Markup)
This formula make it easy to determine exactly how much a project should cost, and it’s nice because it generates the exact same price for every job. Nothing is made up so there is no “Nice Neighborhood Markup”.
Time and Material
Another common way to write up projects is called Time and Material. This is pretty much exactly what it sounds like. A contractor will write up all of the material costs for a job with a percentage markup and then keep track of their time on the job so that they can bill you later based off of their hourly rate.
A good contractor will be able to tell you an expected amount of time the project should take, but this pricing model is really designed in favor of the contractor rather than the client.
In my opinion Time and Material pricing is designed so that regardless of performance the contractor is protected and it does not incentivise timely work.
I’ll be honest; it’s a little bit hard for me to set aside my bias against T&M pricing, but there are a few fair reasons to use it; and even times when it ends up benefiting the homeowner and costing a little less overall.
It’s a useful method for a new business owner because it IS important to ensure that your company is generating a profit so that you can grow it, get better tools, and implement better systems to better take care of your clients.
It’s also useful on bigger projects that are relatively either complex or simple. For instance, I wouldn’t mind using T&M on a project like finishing a basement or replacing all of the outlets in a whole house.
All in all, I think T&M is a relatively simple pricing method that can be and sometimes is abused, and it should really serve to be used in the data gathering phase in service towards developing a fully broken down Flat Rate Pricing system.
Unit Cost Pricing
The final common pricing method is Unit Cost Pricing, or pricing per square foot. This method applies more commonly to big contractors and big projects, though.
With Unit Cost Pricing, the contractor basically averages out the cost of a whole project over tens or hundreds of units and lumps it all into one general sum per unit. For Electricians this would include everything from running new outlets to installing lights and even breaker boxes. The contractor would figure out on average how much this total is for lets say a whole new build house, and then break it down per square foot for an estimate on a whole plan.
I can see this method being used in residential service companies for things like whole house rewires or new additions, but I honestly would not expect a homeowner to run into this pricing method very often.
What Factors Commonly Influence Price?
So now that I’ve covered how different prices are determined and presented; let’s get into what sort of things affect those prices, and how your choices and change them.
Type or Brand of Material
When you’re thinking about your project, something to keep in mind in terms of the overall cost of the job is what materials you plan on having used. Different companies and different styles of materials can drastically affect the end cost of a project.
For example, if you are having a new lighting project done; lets say recessed lights installed in your living room; then what lights and whether or not you want them controlled by a dimmer can change the bottom line by literally hundreds of dollars across the project.
As of summer of ’24 a good Lutron dimmer costs $30 just to buy as opposed to $1.50 for a normal on/off switch. This wouldn’t change the overall price of the job all that much, and I would usually recommend a dimmer on recessed lights; but when you take into account the price difference of different brands like standard Commercial Electric vs high end Kichler and quality of the lights themselves; these sort of things begin to add up.
Another thing that dramatically adds to job costs is the style of light you choose. If you were to get a relatively simple chandelier like the one below it would take much less time to assemble and install than a complex one with different tiers of crystals that also add weight that requires reinforcement up in the ceiling to hold it.
Open or Closed Walls
Something else that affects the overall cost of a job, and how difficult it is to do, is whether or not you have a finished room or an unfinished one (closed vs open walls; or drywalled vs undrywalled).
Everything is easier to wire when there is no drywall in the way that you have to work around. It’s an electrician’s job to be able to fish new wires from point a to point b with the least amount of damage possible, but sorting this out and actually dealing with hidden problems adds a lot of time and complexity to a project which increases the overall cost by a good margin.
Things to consider when you’re looking in your home at what you would like done, and how hard it would be to do, are if it is in a middle floor, where is the nearest constant source of power (not a switch or light) and do you mind it if you need to have drywall patched and repainted (and how much would that cost).
Middle floors, and specifically their ceilings, are the most difficult areas to wire for really any project. If you want a new outlet put in on the first floor, or a new light put in on the top floor, it’s easy to pop either down into the basement or up into the attic to “jump” the space in between in order to avoid having to cut a strip or holes across studs and get the wire from point a to b.
In a middle ceiling, though, there are no easy workarounds and doing work on them often requires cutting at least one or two holes in order to get the wire through the actual wood in the way from the top of the wall and into the ceiling.
How Difficult or Dangerous is a Job
There is definitely a danger fee when it comes to electrical work.
Some tasks like changing out a panel or even a breaker are simply more likely to hurt or even kill your electrician. While this is not very likely with good training and skill, it’s still a possibility; and across the board from company to company I have seen higher costs associated with more dangerous work that doesn’t necessarily reflect only the time it takes to do the actual task. While I don’t think it should be dramatically more than the “hourly rate” of the task, I do honestly think this is a fair trade.
Some tasks require more knowledge and skill, too, like troubleshooting. Troubleshooting requires an in depth knowledge of your homes electrical system that takes years to develop, and while sometimes it is the case that your electrician finds your problem in a matter of ten or twenty minutes; what you are paying for with a troubleshoot charge is that years of experience to be able to find the problem so quickly.
What Specialized Tools or Consumables are Required for Your Project?
Some jobs simply need special tools or equipment that costs a lot of money to buy that the average homeowner simply doesn’t have laying around. In cases like this, having the tools and the ability to use them and transport them ends up adding to your projects overall total.
An example of this would be for installing a two story entryway chandelier or needing to drill through concrete blocks and brick in order to get a wire outside. Buying, storing, transporting, and setting up a big tiered scaffolding system takes a lot of time and effort on the back end that gets accounted for in the job price.
Other things that add to your project total in smaller ways are consumables like bits and blades for the many different tools an electrician uses over the course of a job. Buying a new hammer drill bit alone can cost between $100-200.
Does Your Project Require an Inspector?
Bigger projects like additions, new breaker boxes, new pools, and sometimes even new hot tubs depending on your municipality require permits to be pulled and sometimes multiple inspections to be scheduled and done.
I’m not saying that this should affect the quality of work done over the course of a project because it’s going to be looked at. Every job should really be done at the same level of standard as if it was going to be inspected.
Having to pull permits and meet inspectors takes a lot of time out of your day though, and that time is what adds up and adds cost to a project. While you might only see your electrician for ten minutes during an inspection; there is hours of travel time to and from the municipal building, to your project, calling around to coordinate and schedule the inspector at a time that works well for you, and then properly filing everything along the way that goes into that simple ten minute look over of your project.
This whole process just adds a lot of back end work for your electrician to handle that inevitably ends up showing up on the total cost of a project.
Tl;dr
So to conclude, pricing is kind of messy. It really comes down to your specific project and many different factors from the choices you make regarding what materials and fixtures you want to use, how your home was built, what prerequisite work or tools needs to be done or acquired, and whether or not there is extra follow up work like inspections or second visits after painting or something.
I really hope this article has helped you break down the different thought processes that go into both the behind the scenes of writing estimates and also things that change how each job has to be written up.
Now, next time you hear an electrician say, “I’m sorry but I really can’t give you a price for that over the phone” you’ll be able to see all of the things running through our mind when we utter those words and realize why we want to schedule that estimate visit.