How Much to Charge a Client???

[SecTrainer]

GordonSecurity,

Sorry, I haven't been on in a while. Click on this link and you can download a fully functioning trial version of our contract pricing software: http://www.hrdickinson.com/AutoRate_...0daytrial.html

There is a tutorial that opens after installation. To include a vehicle, follow the link on the main menu for Vehicle Information.

Also, here is a link to my most recent newsletter which includes an article on the "Qualitative" aspects of contract pricing: http://hrdickinson.com/newsevents/Newsletter_0807.html

If you need some help, give me a call at 281-251-9168, I would be happy to assist you. I never "Turn on the Clock" for a phone converstaion, especially not for SIW members.

Interesting article you linked here, HRD. A couple of other important qualitative considerations when considering price are:

1. Opportunities for future up-selling or cross-selling with this client or affiliates that this contract might provide. Sometimes an initial contract is the "the thin edge of the wedge" that will lead to bigger things in the future.

It isn't unusual for service companies to grow by expanding the amount and range of services (and sometimes products) that they sell to existing clients. Such new business from existing clients is the least costly way and least risky way to grow, in fact. So, when you're looking at the potential client, don't just look at what they are seeking to buy now, but also at the potential for further business with them.

"Up-selling" is selling more of, or a higher quality of, the same services you provide now. "Cross-selling" has two meanings - i.e., selling to affiliated units of the original client, or selling a different line of services to the same client.

Adding 50 officers to the current service level by displacing a competitor who is also serving the client at other facilities would be up-selling. Providing, installing and maintaining a CCTV or access system (assuming you can do so or can subcontract to do so) would be cross-selling.

CAVEAT: Make your own assessment of such possibilities, and take whatever promises potential clients might make in this regard (to induce a lower rate from you) with a grain of salt. If a client says "We're growing 110% per year, opening new facilities....", etc., there will be independent evidence that confirms such statements...or there won't. (cough!)

If, for instance, the client says: "We're going to begin construction on a 100,000 square-foot addition to our facility the first of the year"...you know they will have already had to begin the process of design, approvals, permitting, and possibly land acquisition and zoning variances. Pop by city hall and ask the boys in Planning what's happening with XYZ Corporation. Check the local BUSINESS newspaper or journal (to which you DO subscribe, right?) to see what's been written about the company, etc. Check the local want ads to see if the company has been gearing up to hire more workers, etc. Such things can't be done in secret!

2. What I call the "linkage value" of this client.

We've probably all heard of the "six degrees of separation" - the theory that no two people on earth are separated by more than six linkages. In business, and particularly within a local business area, there are usually no more than three degrees of separation. If you're working a smart marketing strategy, you'll discover ways that you can open up these linkage channels and work them for new business.

When you land a new client, you're landing more than the business itself. You're placing yourself (if you're smart) into the middle of a whole new set of business relationships, and into a "channel" of communications that you could never penetrate otherwise.

So, for instance, you are looking at a contract with a company that is a supplier to Boeing. If you land this deal, you have the opportunity to join the channel or "club" that is comprised of many other Boeing suppliers...as an "insider", which is always a prized position.

Both the potential for upsales/cross-sales and gaining "insider" access to a high-value relationship chain are valid reasons to consider structuring your proposal with profit margins that are a bit tighter than you might otherwise if there are no such valuable "intangible benefits" to be realized from landing this contract.

[hrdickinson]

GordonSecurity,

Sorry, I haven't been on in a while. Click on this link and you can download a fully functioning trial version of our contract pricing software: http://www.hrdickinson.com/AutoRate_...0daytrial.html

There is a tutorial that opens after installation. To include a vehicle, follow the link on the main menu for Vehicle Information.

Also, here is a link to my most recent newsletter which includes an article on the "Qualitative" aspects of contract pricing: http://hrdickinson.com/newsevents/Newsletter_0807.html

If you need some help, give me a call at 281-251-9168, I would be happy to assist you. I never "Turn on the Clock" for a phone converstaion, especially not for SIW members.

[ValleyOne]

I hope I didn't kill this thread...oops

[ValleyOne]

A client needs 24 hour security for a 574 unit apartment complex. He wants two guards on site per shift. Furthermore, he wants our company to provide a patrol car. How much should I charge this client for two guards for 24 hours, and a patrol car?

I would think this information is/should be covered in your business plan or at least your sales plan. Are these postions armed?

It sounds to me like your in the negotiations stages of the deal. So I would go with my officers being armed. I would work them in 12 hours shifts (who doesn't want four days off?). I would also split the duties, first half one of them is in the guard shack checking id's etc, and the other is out and about patrolling. Then at the mid shift point they change out. This would help beat the boredom as well as giving each a chance to make it interesting.

Why not just go for three officers? That way there will always be two in the car? The third person in this scenario could be the shift supervisor, he/she would always remain in the vehicle making it possible for him/her to be able to respond to all incidents in the property as well as being able to utilize that age old adage; Two's better than one. Especially on large apartment complexes where the summer will bring pool fights, loud music complaints etc.

I would look at what I will be paying each officer, then multiply that by at least 2, if not 2.5 (taxes). Then take the total man hours for the month and multiply your hourly rate to determine what you could bill the client.

For this type of account (on site) I don't see you going through fuel as often as you would if you had a normal patrol district or beat. I've worked large on site accounts where the vehicle only needed to fueled once a week. But, I could be wrong. My point is this; don't worry to much about charging for your company to use your company's vehicle on the client's property. Instead focus on the third officer, the money made there will off set some, if not all, of the expenses on the vehicle. I don't see you having to get oil changed every month, tires every other month, etc.

Scheduling for this would be a snap, for two per shift you'll only need 10 people. PM me if you want some help with that.

Also, take into consideration of Probationary Periods. If your going to end up paying your Officers $12/hr save yourself some money and start them off at $9 or $10/hr untill they pass your Probationary Period then bump them up to the $12, this will not affect what your charging rate, keep it at the same rate, don't flex the rate.

The most imprtant task here at this stage, and every stage is to keep the client informed and educated. The more knowledge he/she has as to yoru operations will reudce or elliminate problms that will occur. For example there is another thread here RE: a security firm coming in and cleaning house so well that there was no perceived threat or problems any more, and the contract got cencelled. Keep it hammered into your client's head that there may come a time when no problems exist, that is only evidence of your team doing a great job.

Also, something as small as reporting a broken sign can be powerful. If you point out what is going on at the property you could be even more valuable to your client as this reporting of Maintenance concerns will undoubtedly improve the client's livability and bottom line. Who wants to live in a run down dump?

Personally, NEVER make promises you know, or are unsure that you can't deliver.

Good luck, it sounds like you got 'em looking at your lure, now just jiggle it little and then set the hook!!

[junkyarddog]

Had a very good friend in the BSC industry got burned on this very thing and it put him out of business permanently. For him, it was not only the "other clients" issue, but other things also:

1. The fact that the "subs" basically worked full time for the "primary".

2. The "primary" scheduled and dispatched them.

3. The "subs" used tools, equipment and supplies provided by the "primary".

It was definitely a scam. The "subs" really were employees by any definition you could name, and the IRS is no sucker on this stuff.

Playing with this little item is playing with fire. As one site discussing this topic says (and I can attest): Companies that are caught doing this usually don't survive because of the enormous penalties, back taxes and all the rest of it that comes crashing down on your head.

You have to be very careful about using subs. My solutions have always been:

1.> Make sure the sub has his own liability insurance and fills out a schedule C when he does his taxes- even if you have to connect him to the insurance agent, fill out all the paper work and charge a small service fee. Smaller accounts that you do not want to bother with you feed to your subs so they have other clients. I always help my subs do their taxes and get insurance and as a result have saved/made them a decent amount of money (eic, ctc credits etc) as well as established an excellent working relationship with our insurance agency.

2.> Scheduling is often more a matter of customer requirement than anything else. As in, "We need someone in here between 0000 and 0600 to preform x job" - the sub simply has to abide by the customers schedule in order to do the work. You never dispatch subs from your own location.

3.> You buy in bulk and sell the supplies to the sub with a very very small markup. This can even be set up as a loan where you deduct so much from the subs pay each check.

Personally I have found that people are much much happier and do better work working from the understanding that they are their own business rather than "just" an employee. Especially when I am pretty much doing their taxes for them and providing an essential administrative function for their "business".

A big BTW, in the BSC there are tons of franchises. They do almost exactly what I outlined above, but they are ruthless. I am wondering why the security industry does not have these kinds of franchise operations.

[SecTrainer]

re: the 1099 responses.

Thanks for the comments and info. about 1099 'independent contractors'. There has to be some way to get around that in the security industry. I am well aware of the IRS definition of an independent contractor. As a primary contractor in the BSC industry I have never had problems using subcontractors, the only real sticking point has been "must have other clients".

Had a very good friend in the BSC industry got burned on this very thing and it put him out of business permanently. For him, it was not only the "other clients" issue, but other things also:

1. The fact that the "subs" basically worked full time for the "primary".

2. The "primary" scheduled and dispatched them.

3. The "subs" used tools, equipment and supplies provided by the "primary".

It was definitely a scam. The "subs" really were employees by any definition you could name, and the IRS is no sucker on this stuff.

Playing with this little item is playing with fire. As one site discussing this topic says (and I can attest): Companies that are caught doing this usually don't survive because of the enormous penalties, back taxes and all the rest of it that comes crashing down on your head.

[Maelstrom]

Around $15.00 plus depending also on the number of dependants you have, tax rebates and deductable expenses.

I should also mention that if you manage to land a corporate position you can make even more...

[junkyarddog]

Gee that's harsh... our company pays us the equivalent of $18.13 USD per hour (more if you work night clubs), with the recent changes to the taxation system we'll actually get to see more in our pocket (hopefully), who knows it's an election year

Well depending on how many dependents you have, $11.50 an hour can mean only 11% taken from your check in taxes a week + up to $5000 a year in child tax credits (cash) and earned income credits (cash). Curious how much of that $18.13 you actually get to take home.

[junkyarddog]

re: the 1099 responses.

Thanks for the comments and info. about 1099 'independent contractors'. There has to be some way to get around that in the security industry. I am well aware of the IRS definition of an independent contractor. As a primary contractor in the BSC industry I have never had problems using subcontractors, the only real sticking point has been "must have other clients".

[Maelstrom]

No worries, and it's pretty pathetic. The only way you will see $14 and above is if you're working a Fed Gov't site. Another way to make somewhat decent money is to be "cool" with the owner or top level management. To retain officers companies out here are resorting to paying 40 hours taxed..and 40 hours under the radar. OR, my personal favorite...paying and taxing 80 hours and giving the OT under the radar. I recently heard of another company that is giving employees 1099's. Sad part is it's not like they couldn't pay more. For instance a friend of mine is pretty much runs the company. She's paid $11.50 and gets no overtime, and works pretty much 7 days a week.

Gee that's harsh... our company pays us the equivalent of $18.13 USD per hour (more if you work night clubs), with the recent changes to the taxation system we'll actually get to see more in our pocket (hopefully), who knows it's an election year

[SecTrainer]

Is it illegal to use 1099 employees in the security industry? In other industries subcontracting is a well established practice.

Sorry...you can't use "independent contractors" or "subcontractors" in our field to substitute for "employees", except for very rare situations. The IRS has published many memos regarding the requirements for a person to be an independent contractor (they must have substantial control over their work, their hours, the place where the work is done, they must have other "clients" than your company, etc....), and 99% of security jobs would definitely NOT meet the requirements.

Here's a plain English discussion of the IRS rules.

It's very costly for companies to try this little trick and lose, too...big penalties, paying the employee's back taxes, etc., etc. As you can imagine, everyone would be doing it if it were legal.

Subcontracting would typically be limited to some EP situations, occasional or irregular (not "long term or permanent") sorts of specialist and other consulting work, "backup" or mutual aid arrangements, etc. A one-man company could certainly subcontract with another company, but it can't be a "sham" arrangement. Each company must exist as a separate and legitimate business. The IRS looks very closely at this sort of thing.

[N. A. Corbier]

There's no such thing as a 1099 "employee." There's a 1099 independent contractor, and it'd be interesting to see a security company maintain operational control over 1099s without stepping over the line and creating common law employees (which means they owe LOTS of back taxes, and the 1099s do too...) over such things as "how to do the job."

[davis002]

Kind of off topic, but the hourly rates for security are so similar to facility services contracting (janitorial, landscaping, maintenance etc.), and yet the overhead for security seems so so much lower.

If you are an armed security company, then the insurance is insanely costly.

[BadBoynMD]

Kind of off topic, but the hourly rates for security are so similar to facility services contracting (janitorial, landscaping, maintenance etc.), and yet the overhead for security seems so so much lower.

In certain areas, yes this can be found to be true. The overhead in security probably is lower. All you have to really furnish per officer is uniforms. In my area you may get 2-3 pairs of pants and 2-3 shirts. Maybe a badge is you're lucky. Anything else is on you. So if you're just starting out in security you can expect to pay $500 and more for duty gear. You can purchase retired police vehicles for about $2,000 - $10,000 from auctions or dealerships. Pretty sad, but true.. atleast in my area.

Is it illegal to use 1099 employees in the security industry? In other industries subcontracting is a well established practice.

Honestly, I don't think it's illegal to do so. It's basically stating you're responsible for paying your own taxes. It's also another way for the company not having to worry about workman's comp, health and other benefits. So, if you're not careful and putting money on the side you're gonna hate life come tax time. Alot of police officers use to work 1099, but most won't touch 1099 gigs anymore.

[BadBoynMD]

This is really pretty astonishing that companies would take the risk of breaking the law (and the penalties for this sort of thing can be E-NORmous) rather than to simply adjust their pricing to reflect the realities of what they need to pay and retain officers. There would be no competitive disadvantage here to explain this because all companies would presumably have to adjust their rates by about the same percentage if they were doing things legally. And, they should report any company that does not to the DOL and state authorities.

The client should be bearing this cost...not the tax payer (which is what these companies are doing - shifting the untaxed portion of their "under-the-table" payments from the client to the tax payer). Shabby. Real shabby.

Thing is not ALL of the employees get paid this way. You have to be a "special" employee to recieve this sort of payroll. This is also the same company that has a armed supervisor working there with knowledge of said supervisor endulging in CDS on their off time.

Sad thing is these knuckleheads don't realize if they get injured, they are SOL. They won't be recieving anywhere close to what they are being paid. Some don't mind the risks involved.

However, the funny thing is company X can afford to pay higher wages. They just simply choose not, because most people are replacable. For example one officer will patrol 4 properties. Each property would be charged lets say $15 an hour. So times that by 4 and you have $60 an hour billing out and that officer is getting $10 an hour.