How does everyone feel about flat rate pricing

Unknown

I don't want to start a war; but I would like to know if any of the wallies use flat rate. If they like or dislike it and why. I have heard good and bad from different folks, but would really like some honest imput from the guys I trust.


Peace Be With You


David C. Broome

Online Sheriff \"Murph\"

well david

I am about to join the ranks.
two reasons:

1)NO MATTER what the price per hour is, the customer will always perceive it as too high, and will constantly wonder if you are fulfilling the time in the best manner possible.

2)depending on the job, or the ability of the mechanic, or the type of tools used to complete the job, this will be the fairest way to price a job ,up-front and forthright.


you may start a small battle here, but just like anything else, there is always the chance that it may be abused. I for one know there is a difference between new const.,installation, and service speciality. I am setting my sights for service, it may cost a little more than an installing firm that makes the majority of their sales and profits from installations that are bid (read "flat rate")from the get go,so they can be the nice guy that fixes a minor problem for a minimal hourly rate, probaly has more to do with marketing and trying to attract a new customer ,than realizing what it cost to be there.

murph'(SOS)
weekend sheriff !!

John@Reliable

Flat rate

Flat rate is the only way for over 75% of the work I do.
The other 25% is for "no heat" calls,when you don't always know what is wrong right away.The way I look at it is why should I be penalized for having experience and being able to fix it right in less time than someone else?
Besides we all flat rate anyway!
Customer; About how much to fix it? Us; In our mind labor = ? parts = ? {about $450.00} should fix it! YOU JUST DID FLAT RATE that wasn't hard now was it.

Mark Hunt

I think that it doesn't matter how you price a job as long as you are pricing it accurately.

You could flat rate and still not charge enough if you don't understand what your REAL costs are just as you could with an hourly charge.

Now here is a question, IF you FR and you have an ace technician that pumps the work out in less than the allowed time, do you pay the tech for the time on the job, or the time allowed?

Flat rate needs to be fair to EVERYONE.

Now if I can knock out a water heater in half the time it takes another tech to do it, isn't the profit margin better if I do it? And why shouldn't I be rewarded accordingly?

Yes, I'll probably be making a higher per hour rate, but at what rate are the jobs being priced?

I think FR is the way to go and there are some that worry that the consumer is going to get hosed, but I would also concern myself with the folks doing the work.

From what I have seen, you will have a tougher time getting seasoned pros to adjust to FR than you will the buying public.

IMHO

Mark H




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Tony Conner

I Have...

...no axe to grind one way or another. I do mostly industrial stuff. In the last go-around with this debate over at www.area51hvac.com (Groom Lake, specifically), somebody actually (finally) looked it up. Y'know what? At least in some jurisdictions, residential flat rate HVAC/plumbing is illegal. Period. There were at least 4 states specifically identified, if I recall correctly, but I don't remember which ones they were.

If you're in one of those jurisdictions, it doesn't matter if you think it's good, bad, right, wrong, or a really nice shade of blue. When it comes to legal & code requirements, I don't like taking anyone else's word for it. Not even inspectors. I like to read it for myself. I've been given incorrect information by well-meaning (and a few not so well meaning) people for years. A LOT of the word of mouth stuff (on just about every topic you can imagine) being repeated is WRONG. Check situations like this out for yourselves, then do what you need to. It's your neck.

Online Sheriff \"Murph\"

a contingency bid

is just that. how would you have a crystal ball to forsee if this was a problem until you get started. I am by no means an expert on the subject, but would say that you could (fr) bid that x-y will cost $$.$$ and if needed z will cost $$.$$ more, but only if needed, if the customer in question would not/or unwilling to work with that, then maybe these are the ones you should run-walk away from.

ScottMP

FR

I am really glad to see this subject come up. I am feeling the same way, we need to flat rate our service work. If for nothing else then to streamline the process. I have a funny idea about WHO claimed the FR was illigal over at area 51. Any "old" wallies want to take a guess .

I agree ( again ) with Mark and BJ. You have to know your cost and overhead, and when you quote a price/contract, you just flate rated.

Scott

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Tony Conner

It Wasn't...

...Ken who looked it up for that particular exchange. It was someone who was arguing with him. The looked-up info was posted, and that was pretty much the end of the discussion.

I didn't look this info up myself, because it doesn't impact me. If it involved MY business, I'd pull out some reference books, and check for myself.

Dan

Serv. Tech on FR

I'm a serv. tech with three years experience and I like the FR design, because I don't know the price on all the parts.
I pull out the book and say for this Delta faucet or this Taco circulator the "Up front price is xxx" whether it takes me 5 min. or 5 hr., the tough one's are the no heats and you fix or adjust as you investigate the problem. Some customers in this little mountain town think the plumber still works for $20/hr, so I give them the FR before I start work and have only been turned away twice in three years. Flatrate is straight forward if customer is informed. Have a great day. Dan

GW

we use FR

and there's no turning back. I will use it for no heat calls too, as someone mentioned that they don't use FR for no heat. Simply charge for a diagnosis. Is you skill worth anything? If you tell someone what there problem is and they say "oh, that's OK, I take over from here...", how would you like the fact that you just got used and abused?

I get a kick out of the idea that we can't charge for services unless something is "fixed". Garbage, i say. We do stuff that not many people do around here. I don't even know how many heating guys around here can check the MV on a water heater,or check the static pressure on a duct.

We actually have 3 different prices in out book, simple to complex.

Gary

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hr

Involve all the players

make sure all your employees are clear on the how and whys. Include the field employees and the office staff. Have a meeting with the entire company and get their input. Start small and simple, let the techs have a say as to what should or shouldn't be in a FR book. Have them generate the task and time allotment.

The techs in the field certainly should have the authority to grant a freebie or special rate for the struggling grandmother, or whatever the special case may be. Just keep an eye on it.

And most importantly ask your CUSTOMER what they prefer. Include post paid response cards with your invoices. These are "report cards" from your valuable customers, rating your company. Ask them questions point blank about their experience with your company, service, price, employee attitude, suggestions etc, etc.

Balance all the pros and cons and decide from there if it is right for your company. I suspect a blend of FR, T&M and contract price will be what most contractors settle on.

Switch to FR for the right reasons. If you are not generating enough money the problem probably is elsewhere in the company. Only accurate number crunching will revel the true story. Stay away from that A. Anderson Company for number crunching however

hot rod

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John@Reliable

Hi Gary, I should have said I don't on "no heat" calls,But we always charge a service call with a 1 hr. min.& time and ahalf after 5pm. no matter what. Free est. are for new systems only! It is to hard to flat rate the whole job due to the parts which I have to replace due to no heat plus you will find other parts like electrodes and couplings etc. which are worn out and overlooked by others. I have found 80% of first time customers we do need electrodes this alones ads 4000.00 a yr to the bottom line.

Bill_14

FRP works good

when the owner of the business understands everything that is in the FRP manual and spends the necessary time to adequately train and educate his employees on the proper use of the FRP book.

The content of the FRP book must be your own thought process (as opposed to using a "canned" FRP manual) and it should be based on the tasks of work that your company encounters.

After the initial education and training (constant training), the owner needs to constantly monitor actual task performance and be ready to adjust the materials needed and/or the man-hours required. These revisions will need to be completed at least once every 3 to 6 month's in the beginning. At the same time, this will give you a chance to add tasls to your manual.

The point that I am trying to make is that FRP is not a "piece of cake" if you intend to do it correctly. It will take time to fine tune.

Don't forget, that someone in your organization still has to account for costs. Otherwise, you will never know if your FRP tasks are over or under where they should be.

We do FRP, but I really miss the simplicity of time and material billing. However, it is sure nice not to bill later and wait for payment (or fight for it).

Bill_14

FRP works good

when the owner of the business understands everything that is in the FRP manual and spends the necessary time to adequately train and educate his employees on the proper use of the FRP book.

The content of the FRP book must be your own thought process (as opposed to using a "canned" FRP manual) and it should be based on the tasks of work that your company encounters.

After the initial education and training (constant training), the owner needs to constantly monitor actual task performance and be ready to adjust the materials needed and/or the man-hours required. These revisions will need to be completed at least once every 3 to 6 month's in the beginning. At the same time, this will give you a chance to add tasks to your manual.

The point that I am trying to make is that FRP is not a "piece of cake" if you intend to do it correctly. It will take time to fine tune. It will be easier for the companies that have low turnover.

Don't forget, that someone in your organization still has to account for costs. Otherwise, you will never know if your FRP tasks are over or under where they should be.

We do FRP, but I really miss the simplicity of time and material billing. However, it is sure nice not to bill later and wait for payment (or fight for it)...FRP will certainly improve overall cash flow, but it is certainly no guarantee that your bottom line will be improved.

In ALL cases, you gotta know how much it costs you to get up in the morning and go to work.

Bill Russell