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How to calculate a call out fee

There’s more to calculating call out fees than meets the eye. Get it wrong and you could lose money on jobs – this article looks at how to get it right.

If a tradesperson under-prices a call out fee then there’s usually no going back. You can hardly complain to a customer about your own miscalculation.

On the other hand, over-pricing call out fees might bring short-term financial gains. But in the long run, tradespeople could find they have priced themselves out of work.

Call outs often have to be arranged to deal with emergencies. A tradesperson has to respond quickly. So, it pays to have a clear plan for how to calculate a call out fee.

This article offers a checklist to think about when deciding how to calculate a call out fee.

What is a call out fee?

A call out fee is a fixed charge a tradesperson makes to attend a job. This is regardless of whether or not the job is completed.

The call out fee can vary. For example, depending on when the call out is made and how urgent it is. The call out fee is usually added to the total cost of whatever work is undertaken.

Be clear

Make sure you get all the information you need about the call out. That includes how far you’ll have to travel and what materials you might need to use.

You should make sure customers understand the call out fee before they accept the work. This ensures no confusion about what they are paying for.

Make sure they know the call out fee is in addition to other possible costs.

Clearly explaining your policy on call out fees can help build their trust in your business. It can also give you a stronger legal footing if a customer later queries your costs.

Be flexible

Deciding whether or not to charge a call out fee might help you win you extra business. Customers will probably appreciate a flexible approach.

For example, call out fees aren’t always charged just to go and do an estimate. Or if a call out is close by or on your normal travel route you might not lose out financially by waiving the fee.

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Benefits of calculating a call out fee

Tradespeople have to make a living. Charging a call out fee is a reasonable way of apportioning your business costs more accurately.

A call out fee ensures you aren’t incurring business costs that can’t be matched to business income.

Call out fees should be regarded as an essential part of your business pricing. It helps ensure you make a profit – or at least break even on jobs.

Calculating a call out fee can also be an effective way of rooting out bad customers. For example, someone who books a tradesperson but when they arrive says they don’t really need them.

One way of looking at a call out fee is to ask yourself how would you have spent that time. Attending a call out takes up time you could probably have spent on other work.

Disadvantages of calculating a call out fee

One of the main drawbacks of charging a call out fee is that it puts up your prices. This could put you at a competitive disadvantage. Your rivals might not charge a call out fee.

The decision is whether your business can flourish without charging a call out fee.

Decide on your pricing structure

It’s always going to be helpful if you are consistent in how you calculate a call out fee. If you can justify your call out fee then it is easier to let customers understand why it is necessary.

They should also be reassured that it is likely to be the same call out fee each time they use you.

Having a pricing strategy is a good starting point. Our free pricing template guide offers useful ideas.

Call out fees are likely to vary between trades. These are typical prices some trades charge for their work:

What to include in calculating a call out fee

It’s not just how much time you need to spend attending a call out. The complete picture of the total cost your business faces covers much more.

You should consider a range of business expenses that might need to be included in calculating a call out fee. After all, these are expenses you will incur. If you don’t pass some costs on to customers then it will reduce your profits.

Depending on your trade, there will be different types of business expenses. Our guide covers many of the typical business expenses.

Profit margin and breakeven point

Calculating a call out fee has an effect on a trade’s profit margin. This is the amount of profit you want your business to achieve after accounting for its costs. There are lots of ways of increasing your profits.

The point here is to make sure you don’t eat into your profit margin by under-pricing call out fees.

Timing of call outs

Two things you can consider here are:

What time is the call out?

If you offer 24-hour availability or out-of-hours work, then it’s reasonable to charge more. These are anti-social working hours. They should be factored into how to calculate a call out fee.

How long will it take to complete the call out?

The amount of time you include in a call out fee depends on things like the distance you have to travel for the job. You could calculate different call out fees depending on the distances involved.

When you attend a call out, think about how much time you might spend examining the customer’s issue. A tricky problem could take a long time to diagnose.

Travel costs

There are lots of costs to remember when you handle a call out. They include:

  • Fuel costs
  • Wear and tear of your vehicle – think about the annual amount you spend on things like tyres, maintenance and servicing

Parts and materials

This is another area that tradespeople may be apt to overlook. A few washers used by a plumber or a handful of fuses needed by an electrician don’t sound like much.

It’s easy to ignore them in calculating a call out fee. But they all add up. What you spend on parts and materials, including on emergency call outs, might end up coming out of your profits.

Another consideration here is to decide about a mark up on materials. This is a way of covering the costs of buying materials.

Work clothes

Some trades will need certain work clothes and personal protective equipment. How you spread the cost of purchasing them is another area you should consider when calculating your call out fee.

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Office running costs

It’s likely that a customer will phone you to arrange a call out. So how do you spread the cost of business overheads like phones and running an office?

These should be included in your pricing template and not forgotten when calculating a call out fee.

Labour costs

Call outs for tradespeople can cover any number of things. Extra hands may be needed. If the job is an emergency, more people working on it can resolve the job more quickly.

The cost of including employees or contractors in a call out should be added to your own time.

Take takeaways

  • How to calculate a call out fee should account for a range of costs related to the job
  • Key costs include time, labour, travel, parts and materials and protective clothing
  • Tradespeople who under-price call out fees and risk losing income on jobs
  • If you over-price call out fees you might lose business if rivals are more competitively priced

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What others think of this article:

Ishmael

It's really helpful I have been doing the jobs.I have never come up with this kind of calculations this just an eye opener.Thanks

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