Why does a small part have a big bill?

Why does a hot-surface igniter that can be found on the internet for $20 cost you over $200 when purchased from a contractor?  Why does a hot-surface igniter that can be found on the internet for $20 cost you over $200 when purchased from a contractor?

You have a broken-down furnace, and call a heating contractor who comes out, diagnoses the problem and replaces the hot surface igniter; the bill is over $200 and the technician is there for only 30 minutes!  Later you get on the internet and find that a similar part can be found for about $20 plus shipping & handling.  You are extremely angry by this ‘highway robbery’! Look up almost any heating contractor on Google+, Yelp, City Search, etc. that has more than 5 reviews and you can find this angst-ridden comment next to a ‘zero star’ rating.  

Your question is:  are all heating contractors ‘crooks’ making crazy money off of unwitting customers?The truth is that most of us, after all costs are factored, not only provide excellent value to you, the customer, but the service call was much less ‘profitable’ than you think. As for value, let’s look at the website you found willing to sell that hot surface igniter, and ask four critical questions:

• Does the website properly diagnose the failure of the furnace and any other potential problem?
• Does the website ensure that the replacement part is a proper match for the make and model of your furnace?
• Does the website tell you how to properly install the part and cycle test the unit?
• Does the website warrant the part and installation if there is a repeat failure?

The obvious answer to all four previous questions is NO; the website does NONE of these important things! So why is there so much ‘mark-up’ for this expertise and warranty?

• First, a highly experienced technician wage and benefit package can cost up to $80/hour.
• Second, the 30 minutes the tech is with you does not include time for travel to and from your home.
• Third, the tech comes to your home in a vehicle loaded with $50,000 worth of tools and inventory and costing the contractor over $20,000 per year in gas and other expenses to keep it running.
• Fourth, the tech must be dispatched from an office that also has employees and expenses that can cost the contractor anywhere from $150,000 to over a $1,000,000 per year.

When all these costs are accounted for the ‘huge’ profit on the igniter part comes out to a very small (almost always less than 10%) profit for the company owner.  So why should you care that the heating contractor make a modest net profit for working on your furnace?  Because if the contractor cannot make a profit and goes out of business, you not only lose your warranty, but also lose a valuable service provider that will keep you warm in the winter and cool in the summer.