Hello,
Stonehenge hit the nail on the head with his response on why T&M doesn't work and why, someday down the road, the homeowner you work for is going to 'wake up' and get a price from someone else who will do a job just as good as you do (believe me, your only kidding yourself to think that your work is the best, that I've learned) for half the price you did it for. Just like good work gets spread around by word of mouth, expensive work get spread around too.
I'm working on a basic paver job this week, and will say I could not imagine giving a T&M pricing on it. It's only a small 60 ft walk, and I priced it out low (I needed to fill gap in my schedule). I started last week, and sure enough, we have had rain ALL week. What this means, is I have been 'mucking' around on this job all week, trying to get something done but really getting no where. I have spent 10 hours on site now, and quite frankly, should be almost done. Yet, I am only 1/4 done.
Now, if I were to have bid this out T&M, my price would probably be in the $20 sq foot range. I know these people do not have the money for that rate, and I know they would just laugh at me if I came to them with that price.
When the job gets done (which I pray is soon), I will have made a profit, but it will definitely be far from one of my more profitable jobs. This is part of the business. Next week, I start a job, and if all goes well, I should make enough to cover my slight loss on this one and then some. Then again, who knows, something may happen to stop that. All I know, is I will make enough money to cover my expenses, pay my bills, but may not be buying that 'big screen' T.V. I've had my eyes on for the past couple of months.
Also, what I do know, is that I will be handing the customer the invoice at the end of the job and it will say the same thing that I said before I started. No worries on 'did I charge too much' and no worries about paying my bills this month.
A few years back, I did what was a big job to me (I was probably in a 'little over-my-head) for a 'acquaintenace at work' on a T&M pricing schedule. What a disaster that job was. It was a job that included a lot of mulch (60 yards) and a lot of soil (80 yards), planting (they were going to buy the material - another headache), and relocating a row of boulders. I decided to do the job myself (1 person - what the hell was I thinking), and rented all sorts of equipment, a case 580, smaller kubota tractors, etc. When the job was done, I had a rental and transport cost in the bill for about $2500. Also, I had delivery charges for soil and mulch around 500. Later on, I met up with a excavator, and it turns out I could of subbed him out the job for about 1000, with him as an operator and him running all the loads. The job would of taking way less time (which was also charged to the client) and the excavator would of done all of the deliveries as part of the fee along with cut me a better deal on soil and mulch (he had better connections than I did) Boy, I am glad my client didn't know this! The bill would of been 4k less easily if I had the sub there.
The 'job I should of never done"
From that day on, I decided to never give a T&M price again. Ya, I did get paid, but I knew my business would never grow if I ran it like that. I think the lesson I learned most from the job, however, is to not take jobs on that are outside my range. Maybe, maybe not, but it sounds like this job may have been a little bit bigger of a step than you should of taken at his point in your company. Just a guess.
In retrospect, I use to think T&M was great because it covers all of those 'unexpected' issues that come up during a job. Now, I realize that what T&M does is cover the fact that I didn't know what the hell I was doing. I'm glad I didn't get 'caught onto' during that time, and have learned my lesson well.
steveair