Hybrid Flat-Rate--T&M pricing strategies

Rocky

do you compensate employees? Am thinking about taking the 30 or so most common tasks we do and converting them to flat rate myself. I currently pay techs hourly. How do others compensate techs for mixture of flat rate and hourly jobs? Am I opening up a can of worms by trying to do both? Surely the die-hard flat-raters have jobs not covered by the flat-rate book and have to do some jobs hourly. How do you pay techs in these situations? Any info would be greatly appreciated. Trying to improve employees life and mine as well.
Regards,
Rocky

Pat Clark

Flat Rate / T&M

Rocky

I emailed you some info on flat rate. If you need more let me know.

Heading to Talkeetna for Softball tournament this weekend, will probably be moving slow next week. Hope the weather holds, has been nice in Anchorage the last week.

Pat

Bell Plumbing & Heating

Bill NTSG

flat rate-debate

Rocky do not be offended but this topic has been discussed here for four years. It is like discussing religion or politics. Only you know what it costs for you to do business in your area and only you know what you have to make to earn a profit. You gotta do what is best for you. Feel free not to take my advice though because my business went belly up. I charged " the going rate". Too late, too smart

Bill_14

Makes no difference

how you compensate employees Rocky. You can effectively use FRP and pay hourly wages. FRP is nothing more than an upfront bid for a task of work. It is nothing more than that...

Bill

mp1969

Key

Flat Rate is ok as is conventional pricing, the key is to know your cost of doing business, flat raters build prices with an hourly charge that reflects all their cost of putting men in the truck. The recently retired guru was an excellant bean counter but because he has such great marketing skills he never controlled his overhead.If you do both you will be both profitable and a good value.The guru's reputation with customers has caused a slip in volume which has resulted in higher hourly rates hidden in their flat rate charges.

I worked three years with the guru's flat rate system and trust me many good mechanics left due being labeled as crooks when they gave the bill.

Good luck

MP1969

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John R. Hall

Agree with David

I would say that small business experts are unanimous in support of "knowing your costs." How can you price a job if you don't know all of the costs involved, including labor? Also, do you allow for any "hidden costs" or cost overruns when bidding a job.

There are arguments for and against Flat Rate. The News recently published a debate between a FR advocate and T&M advocate (e-mail me if you'd like a copy). Your pricing system is based on your own business model, not what any expert is willing to share with you (for a fee).

As one other poster said, this debate can be carried on ad infinitum, but it will continue to go on. Be cautious about how much you want to discuss here in an open forum, though.

The bottom line is this: Price your job based on the quality of your work and good customer service. Your reputation will win more bids than always being the lowballer (see Paul Pollet's post). If you charge a fair price for your work, you can afford to pay a good wage for your workers. What goes around comes around.

Good luck!

Mad Dog

I use a hybrid system, and

what we do is pay them the hourly wage, with an option for a commmsiion if they can sell add ons. Mad Dog

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Bill_14

More on subject...

Please bear in mind that outrageous or out-of-line overheads should be addressed before you determine your cost of doing business is a certain figure per hour, etc.

The company that uses T&M billing, FRP billing or a combination of both (hybrid), will have the same overhead regardless of their billing system. FRP is not the cure-all for higher than necessary overhead. In fact, that one issue probably gets more contractors using FRP in trouble more than anything else.

Always know what it costs to run your business, including all job & office overheads AND your needed PROFIT MARGIN.

Regardless of your method of billing and your method of paying technicians, you should always figure out a fair system of rewarding your guys for the good things they do. There are tons of ways to deal with good performance.

heatboy

I agree wholeheartedly, Bill.

The thing I see about the C-2000 type groups is the philosphy of, that if you generate extreme overhead the business will follow. Doesn't seem like the best business plan to me. I may be/probably am way off base since I am not privy to any inner workings of such groups, but I see most/all of the contractor members spending money like it's water on everything from $40K Yellow Page ads to multi-thousand dollar computer programs. I have enough sleepless nights, thank you!

I know I would like to spend quite a bit more money for certain things on my business than I can due to budget constraints. I can't justify dramitacally raising my overhead, though. It's a choice between what we want and what we really need. That line gets pretty blurry if you listen to some of these people.

I pay my lawyer $175 per hour. I hate it, but all lawyers charge that, so I grit my teeth when I right out a check, but I do right out the check. Would you want a low priced lawyer? Not all heating guys charge +$100 so it gives people the ability to hire the low priced contractor and more often than not, they do.

hb

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