Service Rates too High?

Darrell

I'd like to see my service rate go up, but, I'm not sure the market will bear it. There is one company that does alot of advertising and has several service rigs. I think they are at 80 something too. The new construction outfits are bidding work with a shop rate of 70-75 per man hour. In Anchorage, the big service outfit is getting 125 per hour shop to shop and marking up 1.50. I was given a comprehensive breakdown of what I cost my former employer, (the point being to show me just how close the margins were and how much trouble I was). I used that to set my budget, and it has worked out pretty close without too many surprises. Bottom line, I'm making money, but I have to keep my billable hours up around 35, which, for a one man show gets kinda hectic sometimes. My business is pretty simple, which translates to profit...but I'm not sure that should be the deciding factor in setting a service rate. Just because I choose to not have the overhead of the other guys, does that mean that I should charge less?

Darrell

Serivce Rate vs. Doctor Rate

So here's how the conversation went...

HO (After I'd fixed his boiler), "What is this eighty dollars an hour? I never met any man worth eighty dollars an hour!"

ME (Sticking out my hand), "I'm sorry, did I forget to introduce myself?"

HO "You're a funny man, that's more than my doctor charges!"

ME "Well of course. I came to your house!"

I came to your house. Me, with eighty-thousand hours of face to face, sweat in my eyes, bloody knuckle, on the job, honest to goodness training. Me, who sits through every seminar that comes to town, eating the stale donuts, drinking the bad coffee, and enduring the stupid stories, just to get one more certification, manufacture's blessing, or tidbit of anecdotal information that will make me better and you safer. Me, who came to this job pesonally, not a nurse, or CMA, or MA. Me, the MEO of my company, (Most Experienced One).

I came to your house and fixed your problem at your convienience. You didn't have to get dressed, drive to town, find a parking place at a hard to find office, during office hours at the doctors convienience. I didn't make you wait for an hour in a waitng room full of sick people reading magazines about places you'll never go, with people you'll never know, spending money you'll never have. I didn't ask you to explain the private issues of your personal plumbing package to a lady who is young enough to be your daughter. I didn't send you away with a bottle of pills to make you more comfortable while your problem gets better by itself. I didn't send you to a specialist, and charge you for the referral. I didn't tell you that your problem is a fact of age and that you can expect the problem to get worse with less chance of recovery. I didn't schedule another appointment in a week to discuss my findings. I fixed your problem, and that's a reasonable expectation that I am willing to meet.

I came to your house. I petted your dogs and cats. I spoke politely to your wife and complimented her on the unique decorations in the living room. I chatted briefly with your elderly mother, and said hi to your kids. I did my dead level best to make you feel like the hero of the hour for having the good sense to call me to fix your problem.

I came to your house and didn't scold you for waiting until the water was running out from under the door to call. I didn't scold you for pulling the batteries out of your CO Detector because it kept waking up the kids. I discreetly threw away the girly magazines that I found stuffed in behind the boiler while I cleaned it and the adjacent space of all manner of debris. I didn't mind that you left me to entertain the kids while you went back to the TV, and, by the way, your boy is a sharp young man!

I came to your house as friendly, politely, and professionally as I know how. And I know how because I spend alot of money on books and seminars that teach me social skills and business attitudes that will "win friends and influence people".

I came to your house and left you my personal phone number so that you can interrupt me anytime and report any noises that you think I need to know about.

I came to your house in my van with 150,000 miles on it. That van holds all of my tools and diagnostic equipment that are paid for. That van holds all the parts that I can think of for whatever your problem might be, and they are paid for too. I do it that way to keep my costs down so that I can provide a quality service to you.

I came to your house, and by the way, I work for your doctor and he has a lot more toys in his yard than I do.

I came to your house and didn't ask you to take off your clothes.

Come to think of it...I should raise my service rate!

jp_2

thats great!

i love it when you guys compare yourselves to doctors, thats too funny!!!!

gerry gill

compare ourselves to doctors?

sorry, but i'm expected to be correct the first time.

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David Sutton_6

I LOVE IT !!!

Ed_26

rant

EXACTLY!!!!!

Brad White_118

You nailed it!

Good one, point by point- how can it be refuted?

Short share: Years ago I was surveying a hospital slated for renovation. I came upon an M.D in his office, who, in a lighthearted way, suggested that medical school was a ticket to a better way to make a living.

I told him what I did was not unlike surgery only more difficult (!). He took umbrage until I explained that a surgeon knows where the parts are before he cuts...in my position, I have to go find them first, in my line of work, every patient is different...

mikea23

80 per hour

Your rates are in my opinion too low My company charges a flat 155 including first hour and 105 per additional hour 135 if its mech and helper.About 2 years ago our accountant did all the math for a 2 man crew with proper insurance and bennys it cost the company 89.70 per hour just in over head. Granted we are based in NY and overhead is high. I think every company should do a audit like this once a year and price acordingly we all probably leave alot on the table.

Tony_23

Doctors

Kill people and have insurance to pay it off and still get to "practice" on someone else tomorrow. Just being a doctor doesn't make one smarter or worth more than another.

Ever have a boiler tell you where it hurts ?

I have immense respect for good doctors, and no time at all for incompetent ones. Actually, that's true of any profession.

jp_2

Oh come now brad,


are you saying a heart can be fixed as easily as a circulator?

you can shut the power off on a boiler and leave it over night, try that with a human

Ron Schroeder

JP

They are working on it, however think about it, they only have one basic model to work on and thay haven't figured it all out, now how many models do we get to work on and are expected to get it right the first time every time.

Weezbo

oops *~/:)

huh? ))

sorry buh that wouldnt pay the bills.



you lib in a different world )

fuel is 3$ agallon here materials are always going up...nah...you can keep it.

Mitch_6

My phone

rings at my house before it goes to the answering service.

If I am away with my family the pager goes off and I call them back within five minuts 24 7

I have several Dr's for customers. They can reach me any time day or night weekends and holidays.

Even if I call a Dr 9 - 5 M - F at best all I get is a rude secretary that makes me feel I am bothering her. When I finally see the Dr I have waited for at least one half hour and he sees me for at best 5 minuts, my co payment is $25.00 x 12 = $300.00 in billable co payment time.

Then try to get a strait answer out of a Dr. or if they miss something or don't fix it or it brakes again they still bill you to fix it (no warranty).

All that aggravation and I do not get vacations longer than a three day weekend, my toys are my pro press and combustion analizer.

I do not go Golfing on wednesday, my $35,000 pleasure vehicle is a 12,000 lb box truck (that after seven years is falling apart). I eat lunch in a dark cellar or in my truck, I am constantly in dirty locations were it is to cold, to hot or to wet.

Am I over paid?

Mitch S.

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Big Ed_3

More you Know the Less you Could Make

The problem with honest market rate on service. The more you know the less you make. Less parts changing that is ,which equals less profit. As you mature in service you will see the real problem and not guess as much. Remember knowing where abouts the problem lies and you change parts until it works ? The Shot Gun Repair ? The 5-20 year buckaroo will tally up a larger bill then the guy thats been around longer then dirt ..


What is knowlage worth in a marketing world ????

frank_25

TO ALL OF YA

I am in agreement will all of the above posters that agree with the basic principal that we, the dirt in the hand professionals should be paid what we see fit for our services. Think of the ratio of profit/cost for doc,sharks,archies etc, and our %. Why should there be such a difference? Generally,I feel that most of us are under-paid. HO's want to pay for labor & material. Not for the knowledge. So, to the HO's out there, go find a hack. If $10,000 worth of repair was needed for your body would you not seek out the "best" in his field? And pay his fee? Well do ya want to look for the "best" in our field for that 10 grand of yours. Ya get what ya pay for. [sorry for the dropped prep.] bwdik?ijap for forty years

singh

what does

bwdik?ijap stand for?


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heatboy

I don't care what.............

my doctor or my attorney charge me. It's their business and they can charge what they see fit. If I don't like it, I can call any one of the hundreds listed in the Yellow Pages. But I happen to like and trust both of them, so I will pay, albiet, grudgingly at times, what they need to charge me.

The same goes with my clients. They know what my rates are and are willing to pay me because they trust me and know they won't find anyone better at what I do than me. I have a stack of keys to clients homes. That, in itself, says volumes.

hb

Al_19

hb,

I agree with you completely. I won't beat anyone up on price or quality. If I feel I was done wrong on either the price or quality of a job, I will simply go elsewhere next time. I don't want to waste time argueing. It could be my garage, equipment supplier, doctor, or pizzeria. But when I find one I like, I am very loyal to them. I will pay more, travel further, and recommend them.

I have/want clients who feel the same way when they are dealing with me. I have walked away from jobs because I was being asked to do something that would compromise the quality of the job. And when questioned about price, I've told clients that it is definately their right to do business with someone else, but not their right to tell me how to run my business.

When you find the clients that you click with, it's great to go to work every day. I also have keys and garage door codes. In fact, I have some that I've been servicing for years and have never met them, only spoken on the phone.

In the past, I have found it useless and frustrating to get into the conversation of justifying prices. You can talk till you're blue in the face, and never convince someone. I think you have to "walk the walk". Be honest, be on time, be up on the latest technology, be consistent. The right people will notice. Those are the clients you want. And price isn't the deciding issue.

Leo

A college teacher

I once worked at the home of a college teacher. She was complaining about the labor rate saying she taught college and didn't make that kind of money. I asked her what it would cost to send my son to that school for 4 years. She gave me a figure and I asked her if her pay reflected that, of course not she said. Then I added that my pay didn't relect the labor rate either. At that point she said, I see your point, BUT I still don't like it.

Leo

[Deleted User]

It stands for

But what do I know? I'm just a plumber.

Seems kind of demeaning to his trade to me. I too am a master plumber, non practicing.

BWDIK?IJAHG

ME

tom_49

Darrell,

Have you thought about 'Flat rate" pricing.

Most people dont like to pay $80, 90,135,what-ever per hour, but if you go flat rate you actually can charge more and everyone will be happy.

Example:

You go on a no heat call. You show up, check things out, and find a bad circ.pump (007 lets say ).

scenario #1: You say, "You have a bad circulator, I can change it out for $80.00 per hr. + materials."

or.........

scenario #2: "You have a bad circ., it will cost you $300.00 to fix it , would you like me to do it.

Do the math.

By going flat rate the customer knows exactly what it is going to cost them, making them feel at ease that your not going to take your time ( not that you would ) changing out the part. They dont care how long it takes. It is costing them $ 300.00 no more,noless.

Of course, not all jobs are cut and dry. But this method works for everyone.

Try it, you'll like it.

BTW, I like the doctor thing.

Tom

Mitch_6

Flat rate or T & M

The complaint is the same if not worse. I bill T & M but work with an HVAC company that flat rates some items.

You do the pump for $300.00 the H.O. walks down the isle of a box store and sees a 007 for $70.00 and it took one hour to change the pump.

How will you justify that to them. You get nailed either way we are just dumb wrench wielding apes to most H.O.'s.

Problem is perception no one knows how much training we do or how complex our licensing is.

Mitch S.

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tom_49

Mitch,

You can look up any price on the net.

The thing about flat rate is its NOT going to run over the agreed upon price.

If you snap a fitting while changing pump it will take you longer, but not cost the HO anymore.

I know how much brake pads cost, but I want to know the price before I pay the mechanic to fix them. If it takes him longer thats his problem.

You are 100% right, few know the true value of are services. I dont think its gonna change any time soon

mp1969

Human nature to complain

Gentlemen,
Customers are going to complain no matter what! Sweet justice today as a lady who has complained in the past begged me to come out at double time to unplug her toilet.She called our shop yesterday and was going to wait until regular rates on Monday.The stench and thought of having that plugged toilet was too much for her so she called and had me come out this am (and no complaints)

MP 1969

mikea23

My wife is an attorney her boss is 79 and still going strong. In our field 79 and still working in most cases doesnt happen if we cant make a good living now when we can what will happen to us when we are 79 SS wont be there and if it is we wont be able to live on it. we all need to keep this in mind

frank_25

Mark...

You take me too seriously. I thought I made it clear to all that I am a non-practicing NYC lic. Master Plumber. My plate # was 575, issued in 1975. Both my father and gramps were LMP's in NYC also. No one is prouder of his trade than I am of mine. As you know, there have been some discressinary remarks made here about plumbers. Some in jest thou. So I started this initial thing as a "c'mon, talk boilers to me, I know 'em too"

Steve Gates_2

I'm with Al.

Just some side notes. One of my wifes Doc's is 175 for 15min. We will most likely only change if he dies or leaves. I on ave.am 13.00 higher than anyone else here. I could work 60 hrs a week but don't. No one else here that I know of is spending 500 to be with siggy this thursday. The day is free. the flight and room ain't. And I could go on and on and on....

KAG

Justify

VALUE, VALUE, VALUE!!!!!!!!!!!!!!!!!!!!!!!

[Deleted User]

Frankie...

Point taken.

I guess its just my opinion that you are not JUST a plumber. Your number one job is to protect the health of the nation. That in and of itself is a very important job, practicing or not, and should not be taken lightly.

That's all. You can put whatever initals behind your name you want.

And by the way, I've noticed that you know boilers:-)

Sorry if I offended.

ME

Steve_35

Value

You build value in what you do so it's not just a $70 pump slapped on.

One thing we do is to warrant the repair for a year parts and labor. And we double that if you're a service agreement customer. If it fails within that time we don't even charge a diagnostic fee.

If we're wrong we fix it and there's no charge for the pump repair.

BTW, that pump is available on our trucks 24/7/365.

Ken D._2

Doctor

One thing is for sure, If the Doctors or Lawyers make mistakes and you either die, go to jail or lose everything in a lawsuit or otherwise not get the outcome you should have, you will not get a refund nor not be charged for rework. I got new glasses. the eye doctor screwed up and got the prescription wrong. He still charged me for both the re-exam and new glasses! I went to a consumer protection and was told , in a nutshell, " Tough Luck!!".

Mitch_6

Your missing the point

You can sell all the value you want only 10% at best of the H.O. out there understand.

Bill gates can take a box with a disk in it that cost less than $1.00 to stamp out and bill $500,00 for the program that is value to the H.O.

The H.O. sees us taking a $70.00 pump and billing $300.00 in and out in one hours making $230.00 they feel ripped off.

The closer you are to the public the more you are scrutinized.

If the pump breaks again in less then a year they already feel you screwed up and should fix it.

There is a good flat rate company in my area real nice guys they do great work. We are not the cheapest T & M shop and are particular on who we pick up as customers.

We have been getting alot of people that use to use the flat rate shop since they bills for fixing two toilets. They guys are in and out in less than one hour and they get a $500.00 flat rate bill.

The H.O. sees what parts go for in the box store and they feel ripped off.

that is the H.O. perception.

Mitch S.

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Steve_35

I have to respectfully disagree

There are MANY contractors in our area that are apparently less expensive than we are. One I know of is around $40/hour. There are large companies, generally companies involved in fuel sales as well, in the $60/hour range. One of them went belly up a couple of years ago.

Our experience has been that our service sales grew by 264% in 3 years from 2002-2005 and we're up almost 30% over last year at this point. Going flat rate wasn't the only change we made but it was one of the major ones.

Did we lose some clients? Yes, but we gained more, better clients. Those willing and able to pay what we need to charge to provide great service.

BTW, I bought into all of the reasons why we couldn't charge more until 2001. That was the first time since I started business in 1988 I sat down, looked at what the costs were, divided that by how many available hours we had and came up with what we needed to charge to break even. I knew then if I wanted to take care of my family, employees AND clients I NEEDED to charge more. We do everyone a disservice if we don't charge enough to survive and prosper.

heatboy

Justification?

It's easy to justify having to charge what I do when it stares me right in the face every day. Is my shop / office free? Is my truck or the gallons of gas it burns free? Wanna talk insurance? Sometimes it feels like I'm hemorhaging $100 bills.

"You charge more than everyone else!" is what I get at times. My answer is short. "Yes, I do."

hb
"Boiler Whisperer"

Steve_35

You're not charging enough.

You deserve at a minimum the same that the majority of Americans expect from their employer. Namely paid vacation, paid holidays, paid sick days, retirement, health care. YOu need to have a service vehicle that is in top notch condition, after all it is your livelihood.

I read something a guy a whole lot smarter than me wrote and it's so simple but it really hit home. "You're never going to have a new truck fi you don't budget for it."

Well, duh, no wonder we had beaters. And then I thought well, shoot, that's true for vacation and holiday pay and retirement and helath care. So I budget for them now and our clients pay for that. Just like I pay for those items whenever I buy a product or service.

I have an Excel file I use to help me determine what I need to be charging per hour to cover the bills and to bring home a net profit. Net profit. After taxes. What a concept. It's easy to work with. If anyone would like a copy please e-mail me.

Joe V

Have you heard the joke...

Where the heart surgeon drops off his Mercedes at the shop with an engine problem? When he returns to pick it up, the mechanic was just cleaning up and showed the doctor a burnt exhaust valve that he replaced. He went on and told the doctor that there wasn't much difference between them and that doctors are just over glorified mechanics. A car has the equivelant of a cardio system (combustion chamber) just like a human but doctors get paid way more than mechanics to replace a valve.

The doctor pondered the comparison thoughtfully and said "this is true, but can you change a valve while the engine is running?"

Scott Gregg

I went to the Dermatologist today!

$91 for 5 minutes! Do the math:

$1092/hr!

And I paid it not an insurance company.

REF

A lot of customers do

appreciate good service, and really do understand that things cost more today. If we take the time to explain the why's; most really and truly are gracious about the cost. Whether flat rate or t&m you have to give some customer service with the numbers. Another point is to let the customer know upfront what the costs may be. Just my experience.

Respectfully,
REF