May, 2002
From the ASHI President.
Inspection News and Views from the American Society of Home Inspectors



The Cost of Doing Business

MICHAEL CASEY

This month I would like to talk about operating a business. I believe many of us sometimes forget the actual costs of running a business, especially a sole proprietor, single inspector operating out of a residence. Of course, costs will be less for this type of operation than for a multi-inspector firm with office space and so forth, but it’s still worthwhile to review expenses. It certainly helps when determining our professional fees for inspections and consulting. I’ve included the cost of Errors and Omissions and General Liability insurance in this discussion, because I’ve seen statistics that indicate there are more than 100 million lawsuits every year.

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If you make more than $50,000, you have a one in four chance of being sued. Not necessarily sued for errors or omissions, but that’s the most common risk in our business. Personally I believe to be responsible to my family and to myself, I must protect myself with a good contract and good insurance. I also include health insurance and disability insurance in the cost of doing business because most employers provide this for employees. In addition, if you’re self-employed you do not have the workmen’s compensation normally provided by an employer. Here are some real-world annual numbers to think about:

Costs can also be examined on a per-inspection basis. Subtracting weekends, holidays, and a few vacation days, there are about 250 working days in a year. Let’s say an inspector does 300 inspections per year, a little more than one per working day – a reasonable number for most inspectors.  At this rate, the cost of getting in the car to do an inspection is $134.

These estimates do not include state and/or federal taxes, which you should consider based on your own personal situation. Also, the estimates do not include any salary for the inspector. It’s up to you to determine what you consider to be a professional hourly or per job rate.

In addition the figures do not include a salary for the person answering the phone or handling administrative work. If family members are doing this work, the cost of their services should be considered in the revenue generation necessary to make a profit.

Also not included are retirement plans, business transfer, or bulk sale methods of retirement revenue generation. Please consider your retirement. Social security is not enough.

I’m sure I’ve overlooked something, but I hope talking about this has enlightened all of us to the real costs of doing business.  

Take care and we’ll talk next month.