Customer trouble

Derek_4

I know somone has been here. I hav a customer that I charged $620 to do a number of little fix it jobs. I use flat rate pricing to do all of my service jobs. The next day the customers husband calls and demands an hourly rate from me telling me I riped him off. I don't know how to respond. Need advice please

Murph'_5

Mr Blau monitors one list....\",> how Mr. Blau is doing Mark?

Murph'_5

Mr Blau monitors one list....\",that I subscribe to

jumps in when things get heated!! He was on a few weeks ago stating that he "still fields many calls from across the country" although he is supposed to be retired !!

Paul Pollets

Do you...

have a flat rate pricing manual? If so, show the itemized repairs from the manual. Your service invoice/contract should have an "approval authorization" block where the customer signs for the price before work begins. If that's done, there is very little complaining the customer can do, and you're protected. If they have not authorized the work(by signature)at a fixed price, before the repairs, you'll have to negotiate. Anyone can find someone chaeper to do the work....always after the repairs are completed, of course. Using "flat-rate" without all the tools, will usually result in customer discontent.

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Mark Eatherton1

Here's what the retired guru of flat rate has to say...

http://www.pmmag.com/pm/cda/articleinformation/features/bnp__features__item/0,,5091,00+en-uss_01dbc.html

If you can't make the link, let me know and I'll copy and paste the whole article to you.

ME

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jackchips_2

Any idea

how Mr. Blau is doing Mark?

Miss his writing, although it seems most of his final ones were best of--still worth re-reading.

R. Kalia

from an HO

The whole point of flat rate pricing is that the HO knows in advance and feels protected--- he isn't committing to something where he doesn't know how much it will ultimately cost.

Did you give the HO a quote and did he agree to it? If so he has no case.

It sounds like you didn't do this, and if not, you have no case. Who cares what is listed in some pricing manual that you show him after the fact?

Murph'_5

Plumber5209

we need a little more info on how this went down, do not cut your self short just yet!



Murph'

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Weezbo

flat rates in a book......

when you work flat rates you heve a reason to spell everything out on paper...writing the bill out takes time so does the intricate form. none of that is free.having the tools and materials required by the flatrate manual is also something not free. finding the time in your day to schedule the service work etc is also "not", and can be extremely time consuming. when you give the homeowner the parts breakdown dont forget the intangibles that also cost nuts bolts and supplies and i used the 5% to cover it however quite often that was insufficent. flat rate buys into the idea that on the Average you wont always be the loser in the deal.some you come out feeling at least no worse off from having taken the job others you kinda wonder ,'who in blazes decieded that was a fair price for That Experience!' well, thats the nature of the beast and better the devil you know than the devil you dont!.

Caselli

does each job stand alone ?

If the rate allows for coming to the site, and performing that single task only, then I would say if you performed multiple tasks it seems like the client is being billed the same overhead, travel, etc. multiple times.

bob young

t. & m.

if you broke it down to t. & m. using the highest feasable labor rate coupled with material mark-up or list price would it be comparable to the flat-rate. flat rate rate is simply an established contract price based on labor and material . some people just do not want to pay.bottom line ---always be able to justify your price if not quoted before hand. if your flat rate comes to $500 an hour , you could have a problem.

R. Kalia

When you use flat rate pricing, you are selling insurance to the customer. The customer pays extra to get protection from unanticipated costs. You (the insurer) charge everyone more so that you can absorb the occasional loss.

Well, would anyone buy car insurance now for 2003, knowing that he didn't have an accident last year? In the same way, your customer quite resonably won't accept flat-rate pricing now that he knows there was no unexpected problem. You have to have him sign on the dotted line in advance.

And would anyone sell him insurance for 2003 if in fact he had had an accident? In the same way, if the job had turned out to be harder than expected, I am sure you would have used T&M instead of flat rate.

Mark Eatherton

Bad link...

Here's the article...

'I Want A Breakdown!'

By Frank Blau

Comparison shoppers give us a chance to educate them about the costs of doing business.
Sooner or later it happens to everyone in the business. A disgruntled customer notices the prices of parts and merchandise sold at the retail stores and complains about the big markups charged by the contractor. This is a bigger problem for time and material firms, whose prices are itemized for all to see at a glance. However, even we flat raters face it from time to time.
An East Coast contractor recently sought my advice pertaining to this situation. He was authorized (in writing) by a woman to furnish and install a 12-inch, white, round-front Mansfield water closet for the flat rate price of $297.24. A little later the husband came across a Home Depot ad showing the same Mansfield closet on sale for $50. Then it hit the fan.

"You ripped us off!" he wrote the contractor. "How can you charge $297 for that toilet when Home Depot sells it for $50? The way I figure it, you are charging close to $250 an hour. I want a breakdown for that job."

The object of flat rate pricing is precisely to avoid laying bare one's costs of doing business for the world to see. After all, does the butcher, the baker, the candlestick maker, etc., break down their labor, material, overhead and profit in setting the selling price for their goods and services? Nobody would even think of asking them such a thing. It would be a breach of social etiquette, sort of like asking a stranger what his salary is and how much he spends on his mortgage, groceries, recreation, etc. Sad, isn't it, that because of our industry's senseless time and material tradition, the public has been trained to think they are entitled to see our finances.

Nonetheless, in the real world this is what happens. So how do you handle requests like that?

Give them what they want. That's my advice. No need to lie, to argue, to deceive. If a customer wants to see a price breakdown of your flat rates, then give it him.

Only thing is, make sure you give a thorough enough itemization. What follows is a typical breakdown of the job just cited.



Overhead Explanation
To make it even better, I would attach a separate sheet breaking down how this contractor arrived at the $65 hourly overhead. This would, of course, necessitate a compilation of all overhead expenditures from a profit and loss statement, broken down by total billable hours.

Many customers will stop you here with a comment wondering why overhead is so high. Here we've found it helpful to commiserate a bit, with comments along the lines of

"You know, we think it's too high as well. We've tried everything we can to bring it down, but no matter what we can't get a handle on it. We're even willing to pay a consultant good money to help us out in this area. "Do you have any ideas about how we might bring overhead down?"

A couple of other things about this sample breakdown are worth examining. For instance, note that the Mansfield water closet cost the contractor $61.11, which is actually $11 more than advertised at Home Depot. This affords an opportunity to launch into a discussion with the customer about loss leader merchandising, in which the big retailers like Home Depot offer a certain item - in this case, the Mansfield toilet - at cost or even below just to lure people into the store.

Showing your cost of purchase helps the customer understand the true economics of operating a contractor business.

Secondly, I would not hesitate to reveal to a customer our targeted profit margin of 20 percent. Most consumers are economically illiterate. Surveys show that they believe the average business makes profit margins well in excess of 50 percent. Rather than thinking 20 percent too high, I believe that most consumers would be surprised to learn that most businesses make far less than they thought.

Where people get upset is when they find out that parts have been marked up two or three times, which is commonly the case with most time and material pricing, as well as with some flat rate systems. The logic escapes me as to why so many people in our industry think it's ripping off customers to apply a 20 percent markup to every cost of doing business, yet it's OK to sell your labor at a loss while marking up materials 200 percent or 300 percent. High markups on material cost only invites confrontations with the customer.

Finally, I suspect that many of your customers - as well as many of you readers - may be puzzled as to how this sample job ended up with a price of $297.24. The way you figure it, 20 percent of $237.79 added to the job cost totals $285.35.

If you fall into this category, call me to discuss what you are doing wrong and about booking a

"Business of Contracting" seminar in your area.



Further Explanation
Will this kind of price breakdown satisfy every customer? Unfortunately, it will not. In every market there will be plumbers willing to do the job for half the amount or less. Then it comes time to explain to the complaining customer why you are worth more than the low-cost slugs, i.e.:


Can you count on them to show up on time?

Will they guarantee their labor and materials? For how long?

Will they pull a permit if required?

Will they abide by all other applicable codes and regulations?

Do they have insurance?

Do you know what can happen if they are uninsured and sustain an injury on your job?The struggle continues for the hard-working contractors of our industry to achieve proper selling prices and a level of personal and business compensation they deserve.





Frank Blau can be reached at Frank J. Blau Jr. & Associates, 12221 W. Fairview, Milwaukee, WI 53226. 1-800-FLAT RATE. Fax: 414/258-3307. Web site: www.blauplumbing.com.