Flat Rate Pricing Systems

Ken C.

I work for a flat rate company that uses Maio (not sure if I spelled that correctly). They have two price books, one for plumbing, one for heating. I find them difficult to use, because it can take a while to look up a specific job/task. Also, prices given for some of the tasks may need to be adjusted to your local market. For instance, charging someone $180 to replace a T-87 thermostat doesn't fly with most customers, so I usually charge $100-$120. Conversely, prices for some tasks are too low in my opinion. Other than the way the books are organized, flat rate pricing is generally good, as there are no 'surprises' for the customer. You mentioned your company is looking for a better billing system ... do you currently mail out bills after doing a job? We operate on a C.O.D. basis, which is the only way to go. Some people still ask if we can send them a bill. The answer is strictly no. After all, you take your car to a mechanic, you have to pay or you don't get your car keys back. The mechanic would laugh if you asked to be billed. It's too easy for a customer to delay paying a bill, or just ignore it altogether.

Cheeze-Tech

Good Co./Bad Co. for FRP

We are looking into going to flat rate pricing. Our interest is in having a better billing system not in screwing our customers. We are also a small company (8 people incl 2 owners). With those things in mind, I was wondering what flat rate companies/systems are the best and which ones are the worst (ie to stay away from). Any info regarding this would be appreciated.

Thanks!

Steve_35

MrHVAC

We've used flat rate software from www.MrHVAC.com for about 1 1.2 years now. We've been very happy with it. I chose this product because it enables us to customize our books and print them as and when we need them. The company advertises you can be printing the books within an hour and with their help you can.

I put in about 40 hours over the next 6 weeks or so tweaking them to fit us better and printed them out again. I continue to make 1 or 2 changes a week. At this point we've been printing new books twice a year. Probably within a year or so it will be once a year.

They have different add on databases you can buy that cover other industries such as plumbing, electrical and appliance.

heatboy

That might work.................

with first time, cold call clients as long as they are not referrals. If my business was structured to be COD with existing clients, I would, and rightfully so, lose many of them. I respect my clients and know they will pay me so, invoicing is a better option for me. Cash On Delivery helps cash flow, no doubt. It's just doesn't seem to be the best way to build long term relationships.

hb

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Murph'_5

I sent links

If the email address was correrct ,if not post it in the text body and I will resend. Keep in mind that some of these books (mr hvac) are not one-size-fits-all and they will take work/time to get them the way you want them to be, first step is to print whole book with all task ON CHEAP PAPER and use that to edit pages and add things or delete. that you can do in an hour, but i concur thses folks are great to work with once they know you are commited.


WHile we are on subject, does anyone have boiler installs down to flat rate with sub-jective tasks if so i would like to see how you did it, if so thanks!!


Murph'

Ken_8

I am puzzled by

your notion that a better billing system has any or much relationship to FR. FR is FR. A billing system is a billing system.

True, FR "systems" can and frequently do integrate billing and all other accounting chores in "canned" packages.

I suggest a good T&M billing system is easier and simpler, more accurate and less problematic than a good FR system. No books, no three column pricing strategies, nothing much to buy, little to no support required. We use QuickBooks Pro for billing. It allows payroll, W-2's, P&L's and Balance sheets, customer records, tracking and runs around $200. About $125 for updates if you already have it.

Then again, it depends on the ultimate objective - and how many people you need to work in the office to support the new system - as well as the constant need to update the materials costs to run a FR system.

For our 6 man operation, I cannot justify the investmanet and overhead required to do FR, nor do I care for the glaring weakneses of the premise most embrace who market it.

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heatboy

Flat Rate or Time and Material..........Who cares?

As long as the true costs of running a business, whether it mine or someone else's, are known, you should be making money with either. I flat rate things like preventative maintenance and small service issues. Bigger stuff needs to be looked at and priced according to that job, wnich the owner will know the price, or at least the ceiling before it's done.

If everything is based on a COD basis, a book with given prices for services must be used so the man can bill on site.

hb

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Murph'_5

It all depends ....

on your approach, the confusion lies with "billing" and "charging" We have agreed it does not matter as long as you know the cost of doing buisiness and do not hide behind the system to gouge or hide non-essential items.


First question to be asked is: "how much" quoting labor in the city or progressive area may be the norm, and will not be challenged but from where I work it is almost always questioned. And I personally do not feel comfortable with a wild guess, and most customers do not either. the system can work both ways, as long as you do not take advantage of people in need!!



Murph'

hr

Build your own

After trying several expensive purchased systems, we built our own books.

We kept them small and manageable. Less than 20 pages that covered commom repairs. T-couples or hsi, clean and checks, thermostat replacements, pump replacements,etc. Maybe 5 HVAC pages then the rest for plumbing repair and replacements.

We also involved ALL the employees in the building of the books. A couple afternoons were needed to assure all the techs agreed on the time allotment, parts needed etc.

The back 5 pages had breakdowns, should a homeowner want to see the parts and labor breakdown.

Nothing was hidden from the customer, and any customer could visit the office for more pricing info if they wanted to. We ran an open book company.

FR works, and works well when built and used honestly, like any other price method.

It did take an additional office person to data collect, BUT the info garned from this task more than paid for that salary, and generated monthly reports to see the profitability, and determine which jobs were becoming most common, monthly trends, areas where techs needed additional training, etc.

Lots of info in the numbers once you learn how to collect and read them

hot rod

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Bill_14

Flat Rate Systems.

Flat rate systems are best when they are customized for your own business operation only (just as HR commented). It will take time, but it is done all the time. Be wary of those canned software programs that have no clue about you or your company.

Most people switch to FRP to improve cash flow and to keep everyone in the company on the same page. However, if your FRP data in your book is not "good" data, you could be losing money on some tasks performed or over-charging on other tasks.

It will be a constant challenge to make sure your tasks are detailed properly to cover all your material & equipment costs and to cover the average production (man-hours) based only on your operation.

The systems tend to get very lazy because the tasks are not checked for actual cost versus the estimated FRP cost on a timely basis. Owners tend to think all is okay because cash flow is good and everyone seems happy. The tickets that are turned in each day need to be priced out to determine whether or not your tasks need tweaked or your personnel needs tweaked.

If you are not constantly on top of your FRP system, you could be losing money and not knowing it until much later. In addition, it could be that your pricing is so far out of line that you are not getting the business opportunities at all. Also, if you are getting every job, you have another problem.

In my opinion, the next most important issue is the constant training it takes to make certain all the techs are thinking the same and speak for the company the same on a consistent basis. This is the hardest part because you must sell the FRP system ideas to everyone and they have to believe in it and understand everything about it.

Someone in your company must take 100% ownership of any FRP system and devote the time to design it, know it, teach it, implement it and monitor it. This person must react to changes immediately and not when they have some extra time next month.

Whatever billing system you use, you must know how important it is for it to be the right system for your company. In any case, you have to know your cost of doing business and this cost is no different whether you use a Time & Material system or a Flat Rate Pricing system.

Kevin_12

Flat rate

I used to think that companys that use flat rate systems were charging too much. The place where I work went from T&M to FR. I looked at some of the prices and thought"no way will people pay this sort of pricing. I've now been using flaat rate for about a year and I love it. No more tring to estimate time and looking up prices for parts...
I actually have some thing memorized.
Also when your on T&M lets say that you have 2 identical homes with identical problems. Say its the blower motor. Well 1 guy could diagnos the problem quickly, go to truck, get everything he needs, and have the motor changed in no time, where the other home may have a junior service tech. and takes way longer to diagnos and install the motor. Home 1's bill will be alot less than home 2's bill. So Flat Rate evens all that out. Both homes would of had the same bill.
The flat rate we use is made by corperate, its very general and easy to use. For instance there will be a price for a 1/2 hp universal motor for 400.00 or a price for OEM for 506.00 no matter what furnace it goes on (plus diagnostic charge)

RAD

Flat Rate Woes

I am a huge supporter fo FR systems and all of them have their merits. Hot Rod was right about building you own. I can tell you, having built two FR systems for two separate companies, it is a daunting task. You can have a small 3/8 thick book like mine or a directory the size of a Denver Yellow Pages, it can get out of hand. I reccomend the NSPG system, because you get a huge database of tasks you can modify. Also it is cheaper than the Maio system. It also integrates with Successware, which is a good management software system. It will handle anything you want in the way of a complete AR/AP, time management, Billable Efficiency, Reporting and Taxes, You name it. Ultimately it is up to you to decice which system is right for you. I would check all of them out. I only have built with the NSPG sys. I worked as a tech in a company who used a Maio book and it was smooth, however the new book they use is not a Maio and it seems nicer. Before your palms get sweaty, make sure that you invest a realistic man-hour budget for actually creating the book, and hire a trainer to teach your techs how to use it. This was the other part of my job when building these books. The last Co. I set up went from a $140 average ticket to $260 in three months. (They also had an hour of daily training before work to get it down.) Of course if you are not sure where your break even number is, I'd start there with NSPG's Number Cruncher.
It's a great move though, Go for it!

Murph'_5

Agreed

If your company is charging per hour, and lets say you are busy and send the New guyt to a service job. He cannot find the problem quick, customer pays triple for the repair, the company loses revenue for the experianced guyt after years of training, and efficiency that he brings too the job. or they can watch thier clock, alot of my time is expended before I ring the doorbell !!



Murph'

steve_26

both

We use a combo. of both T&M and FR and find it the best for us.I find it impossible to use just one system.

steve

Cheeze-Tech

Thanks and Clarification:

Thanks so much for your input. I really appreciated all of it. Just for clarification unless we are really busy we write up a bill on each call, so I wasn't looking for a "billing system" per say but a means from which to write the bill. Sorry for the confusion. My boss dropped the idea of going to flat rate on me out of the blue because he wants to do service contracts and the one he saw provided for svc contract discounts. I need to talk with him further to find out what other thought he has. He is very conscious, as am I, about not ripping off the customer. We are very much a small company, we don't even have a secretary, so any FR system would have to be somewhat simple to set up. I would be very interested in what Hot Rod has set up.

Thanks again for all your help. I don't get to spend alot of time online so don't anyone take it wrong if I don't respond directly. Things at the Wall move a little fast for me. Please feel free to e-mail me directly, those I will respond directly to.

Cheeze-Tech

Thanks and Clarification:

Thanks so much for your input. I really appreciated all of it. Just for clarification unless we are really busy we write up a bill on each call, so I wasn't looking for a "billing system" per say but a means from which to write the bill. Sorry for the confusion. My boss dropped the idea of going to flat rate on me out of the blue because he wants to do service contracts and the one he saw provided for svc contract discounts. I need to talk with him further to find out what other thoughts he has. He is very conscious, as am I, about not ripping off the customer. I worked with a FR system at another co. for 7 months so I am at least a little familiar with how one works.

I can very much see the experienced/inexperienced tech issues. I've got 10yrs experience. Our other tech has some, but the other two guys who share "on call" duties are installers who mainly change parts 'til they get it write (I'm working on them).

We are very much a small company, we don't even have a secretary, so any FR system would have to be somewhat simple to set up. I would be very interested in what Hot Rod has set up. We are located in a small community outside a city of 50,000. One of out challenges is charging for/absorbing drive time (15-45min) going into the city. Our local folk won't pay the rates you get in town and those in town don't always like to pay drive time. So there is some of our problem.

Thanks again for all your help. I don't get to spend alot of time online so don't anyone take it wrong if I don't respond directly. Things at the Wall move a little fast for me. Please feel free to e-mail me directly, those I will respond directly to.

Cheeze-Tech

Thanks and Clarification:

Thanks so much for your input. I really appreciated all of it. Just for clarification unless we are really busy we write up a bill on each call, so I wasn't looking for a "billing system" per say but a means from which to write the bill. Sorry for the confusion.
My boss dropped the idea of going to flat rate on me out of the blue because he wants to do service contracts and the one he saw provided for svc contract discounts. I need to talk with him further to find out what other thoughts he has. He is very conscious, as am I, about not ripping off the customer. I worked with a FR system at another co. for 7 months so I am at least a little familiar with how one works.
I can very much see the experienced/inexperienced tech issues. I've got 10yrs experience. Our other tech has some, but the other two guys who share "on call" duties are installers who mainly change parts 'til they get it write (I'm working on them).
We are very much a small company, we don't even have a secretary, so any FR system would have to be somewhat simple to set up. I would be very interested in what Hot Rod has set up. We are located in a small community outside a city of 50,000. One of out challenges is charging for/absorbing drive time (15-45min) going into the city. Our local folk won't pay the rates you get in town and those in town don't always like to pay drive time. So there is some of our problem.

Thanks again for all your help. I don't get to spend alot of time online so don't anyone take it wrong if I don't respond directly. Things at the Wall move a little fast for me. Please feel free to e-mail me directly, those I will respond directly to.

Cheeze-Tech

Thanks and Clarification:

Thanks so much for your input. I really appreciated all of it. Just for clarification unless we are really busy we write up a bill on each call, so I wasn't looking for a "billing system" per say but a means from which to write the bill. Sorry for the confusion.

My boss dropped the idea of going to flat rate on me out of the blue because he wants to do service contracts and the one he saw provided for svc contract discounts. I need to talk with him further to find out what other thoughts he has. He is very conscious, as am I, about not ripping off the customer. I worked with a FR system at another co. for 7 months so I am at least a little familiar with how one works.

I can very much see the experienced/inexperienced tech issues. I've got 10yrs experience. Our other tech has some, but the other two guys who share "on call" duties are installers who mainly change parts 'til they get it write (I'm working on them).

We are very much a small company, we don't even have a secretary, so any FR system would have to be somewhat simple to set up. I would be very interested in what Hot Rod has set up. We are located in a small community outside a city of 50,000. One of out challenges is charging for/absorbing drive time (15-45min) going into the city. Our local folk won't pay the rates you get in town and those in town don't always like to pay drive time. So there is some of our problem.

Thanks again for all your help. I don't get to spend alot of time online so don't anyone take it wrong if I don't respond directly. Things at the Wall move a little fast for me. Please feel free to e-mail me directly, those I will respond directly to.

Cheeze-Tech

Thanks and Clarification:

Thanks so much for your input. I really appreciated all of it. Just for clarification unless we are really busy we write up a bill on each call, so I wasn't looking for a "billing system" per say but a means from which to write the bill. Sorry for the confusion.

My boss dropped the idea of going to flat rate on me out of the blue because he wants to do service contracts and the one he saw provided for svc contract discounts. I need to talk with him further to find out what other thoughts he has. He is very conscious, as am I, about not ripping off the customer. I worked with a FR system at another co. for 7 months so I am at least a little familiar with how one works.


I can very much see the experienced/inexperienced tech issues. I've got 10yrs experience. Our other tech has some, but the other two guys who share "on call" duties are installers who mainly change parts 'til they get it write (I'm working on them).


We are very much a small company, we don't even have a secretary, so any FR system would have to be somewhat simple to set up. I would be very interested in what Hot Rod has set up. We are located in a small community outside a city of 50,000. One of out challenges is charging for/absorbing drive time (15-45min) going into the city. Our local folk won't pay the rates you get in town and those in town don't always like to pay drive time. So there is some of our problem.

Thanks again for all your help. Thanks Murph for your info. I don't get to spend alot of time online so don't anyone take it wrong if I don't respond directly. Things at the Wall move a little fast for me. Please feel free to e-mail me directly, those I will respond directly to.

Ken C.

Heatboy, why do you say you would "rightfully so" lose existing clients if you tried to collect C.O.D.? I can see your point of view for larger jobs, where the customer might need a few weeks to scrape some money together, but what's wrong with getting paid C.O.D. for smaller jobs (say, $150 or less)?

Ken C.

Speaking of driving time ....

One of the drawbacks of being a technician on commission is that you don't get paid for travel time. Well, it's supposed to be built into our flat rate system, but the problem is, my company tries to cover too much territory, so many days, I literally spend as much time driving as I do working on jobs. My first job might be at the southern end of the state, the second job could be 50 miles north, then the third job might be another hour's drive south again. A 50-mile drive might not sound like much to those of you from the midwest or west, but it sure eats up time in a densely populated state with congested roads. I'd like to see the company stay within a 20-mile radius of our capital city.

Ken_8

Here's

> Heatboy, why do you say you would "rightfully so"

> lose existing clients if you tried to collect

> C.O.D.? I can see your point of view for larger

> jobs, where the customer might need a few weeks

> to scrape some money together, but what's wrong

> with getting paid C.O.D. for smaller jobs (say,

> $150 or less)?



Why:

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Ken_8

Here's

Why.

http://www.masterplumbers.com/plumbviews/2003/why_cod_is_bad.asp

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Ken_8

Here are a few reasons why

C.O.D. is bad:
www.masterplumbers.com/plumbviews/2003/why_cod_is_bad.asp

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hr

Don't say no to COD

I've found some customers WANT to pay you then and there. Seems older, retired folks alway insist on paying on the spot.

Often times in CASH, which is always helpful! Keeps me in lunch money for a bit.

Ask the customer what they prefer! Why make it inconvient for them to do business with you?

Same with credit cards. It gives them a way to finance, possible "air miles" or other perks for using certin cards, and gets you paid on the spot.

Mailing bills takes time and money, and usually prolongs the payment. I'm in the service and repair business, not the banking business. Plenty of those around!

A good question to ask at the initial call, how would you like to pay today. Obviously some prefer billing, and theywill indicate that. Most of our commercial and property managment companies need to be billed. (and could be trusted)

COD for rental or dorm dwellers is pretty important, unless you want to keep a "collector" on you roledex

hot rod

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Cheeze-Tech

C.O.D.

My experience has been that it is best to write up a bill on the jobsite and leave it if at all possible. That does not mean that I collect every time, but at least I give them the total. This cuts down on the phone calls to complain about a bill when they get it in the mail. They have it right then and there while its fresh on their minds how cold/hot their house was and what it took to fix it. People have short memories when they get the bill later.

Steve_35

C.O.D.

Over 30 years in construction has told me you're exactly right. A bill on completion of the job most times results in a payment at that time. Is this a bad thing?

Business 101 tells us lowering our receivables is a good thing. One excellent way to do that is to collect sooner. How much quicker can the collection be made than on completion of the job?

Frankly, my company is not in the money lending business. It's in the HVAC service business. The simple question "Will you be paying by cash, check or credit card today?" simply lets the new consumer know you expect to be paid and to be paid today. BTW, we don't ask this question of existing customers unless they're slow payers.

Ken C.

I read the article you referenced. But I disagree with Mr. Secor's first assertion that "demanding C.O.D. implies a lack of trust..." As someone posted below, some customers WANT to pay you on the spot. I guess doctors must not trust anyone either, judging from the "payment is expected at time of service" signs in their offices. Our company does accept credit cards, so people don't have to hope their checking balances will cover the bill. Now, we do have some customers we bill (large corporate customers), but most customers are C.O.D. As several plumbers who run businesses have said, we are not in the banking business.

Ken_8

Perhaps the next time you

go to your supply house the counterman will ask you if you'd like to pay by cash or credit card?

We are not doctors and almost everyone has insurance - which the doctor won't see a cent of for 3+ months.

The mere act of asking up front is offensive. We are not running a barber shop, a delicatessen, or movie. However if we continue to act like that - we may well become like them!

In fact everyone except "us" seems to know that credit sales drive retail and profits! They beg you to get and use a credit card. They know the cash customer spends less - always!

For those of us that don't know how to handle credit - either personally or in business, this may be a whole different issue.

Hell, most of us won't even go into a bar unless they'll run a tab!

The article makes sense to me. Most of which had nothing to do with one or two extremely rare clients who "want" to pay your then and there. How about the other 18 points? Are you suggesting there is no merit to those issues?

Let's agree to disagree.


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Murph'_5

Ken Ken Ken

you know the supply house takes a credit app before they open an account!! You want me to do that with my customers? that stuff mite fly down under, but I never tried it!! that pic makes you look at least 4 years younger!!




Murph'

Ken_8

Murph...

I was eleven when that was taken.

I was drunk.

And I was hung over as well.

Ever been drunk AND hungover?

It ain't pretty.

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B. Tice

Good subject......

I also combine FR and T&M. Hydronic tasks involving piping, etc. is a little hard to FR, I think. I always try to collect on the job, as it cuts down on time. When you collect, it is basically over, no inputting or stamps to buy, no Post Office trips, etc. New customer always COD, of course. But, I have many charges, too. I am VERY lucky to be in the position lately that I can be very selective on taking new accounts on, anyway. I don't even do estimates anymore. If you are not an exsisting customer, I don't want to go out and give you an estimate for a new unit. I just don't have that kind of operation anymore. (not that there is anything wrong with doing estimates) . I think every situation is different. Let's all put most of our effort into making quality , right the first time repairs. Then, we will look better as an industry. If I get $200 for a task, and you get $400, so be it. If Joe is T&M and Sam is FRP, so be it. As long as they are neat and uniformed, and the work is professional, thats my concern.

mp1969

Flat rate

The advice to cutomize your flatrate system is very good advice, after working for the "Guru" for 3 years I found that his system had one glaring flaw:

$ If your goal is to hide excessive labor rates in a one price system you still have to pay attention to overhead. There are several service companies including the "Guru's who are deceptively hiding well over $200.00/hr as there breakeven point.This is a glaring indicator of excessive overhead that can only be overcome by innovative and most times questionable marketing practices.
Flat rate works but it is not the cure all that many claim it is. I currently work as a service tech for a 75 year old company that has 25 field personnel and about 7 office people. They pass along advertising savings as they are well established and rely on repeat customers and word of mouth advertising.
I hope to finish out the last 15 years of my carrer here.It is much better to be referred to as the best and reasonable serviceman rather than a crook as I often was called when I worked for the flat rate concern!
Nothing wrong with COD either!!!!We prefer it however because we work with customers who have used us for years we allow them to send in the payment after they sign and ok the work performed.

Good Luck!
MP1969








MP1969

Cheeze-Tech

Works when you get there

With FR how do you charge for the call where the equip works fine when you get there? Some of them you can just clean or clear drain lines and you are fairly sure that was the problem, however, some calls you have to make multiple trips before you actually get it to mess up or find the right solution.

mp1969

Have a one hour minimum policy. This can be a little tricky if you are flat rate, they used a diagnostic fee.

MP1969