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I was speaking with a fellow inspector who wanted to purchase the 3D software and home inspection data libraries when the subject of pricing a home inspection came up.
Most inspectors, in order to figure out there pricing, start calling around and asking other inspectors prices on a fictional home. They do this until they’re satisfied that they know what to charge for the common shapes and sizes. This is a very dangerous strategy for pricing your services and should be avoided at all costs.
The first thing you need to figure out is can you “afford” to be a home inspector in your area. You have to do the math. Take the number of anticipated inspections per year; multiply by the average inspection fee of your competitors for gross income. Next, add up all your fixed costs and subtract it from the calculated gross. Leave 10% for business profit. Can you live on what’s left? Don’t forget any of the fixed costs. There are at least 20 fixed costs associated with the home inspection business. If you can’t think of twenty, your going to need help to calculate your total fixed costs. It’s crucial to have an accurate number here.
To figure out your total fixed costs and projected profits along with your average hourly rate, go to: www.inspectorsuccess.com and download the “PROFIT CALCULATOR”.
If your just starting out you should figure on about 100 – 150 inspections your first year. More if you’re an exceptional marketer. Your next year should produce 200 – 250 home inspections. The average home inspector inspects approximately 250 – 350 homes a year. Can you hang on long enough to get to the numbers that generate a profit after all expenses? Do you have a reserve fund that you can draw down on? At “their” average prices are you creating any equity/savings?
There are number of items that influence the prices in your particular area especially if the market is small. In particular, the one I ran up against was a local firm that did a volume business with three inspectors and kept the prices low enough to discourage others from entering the field. It worked.
I spent about 6 months trying to get into that market place with very limited success. My prices were $50 – $75.00 higher than his because my fixed costs were higher and volume was lower. To compete with him at his pricing I would have been out of business somewhere in my second year.
Out of business, without any equity to show for all the time, trouble, and expense invested in the process. Not to mention that had I stayed employed with someone else, my bank account would never have taken the $20,000 hit to get the business started. So many inspectors out there are just hanging on because they did they’re pricing based on someone elses fixed costs. Its little wonder only one out of five new inspectors make it past year five.
Without the proper pricing structure for “your” business the work will be frenzied, inadequate, underpaid, and, as a result, unfullfilling. It’s quite possible that owning your own independently operated home inspection company is not what it was cracked up to be. In short, to start your own business without the prospect of creating equity is not a good idea. Find your true fixed costs, add them to what you need to create EQUITY in the business after your second year estimated numbers. Try it, you’ll like it.
Copyright © 2005 by Bob Kille. To read other home inspection related articles or to view home inspection software and book publications by Mr. Kille, click on this link. www.inspectorsuccess.com