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Flat Rate Pricing

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  • #16
    I am new to these boards. I have been in this biz for 20 years this August. There is no such thing as a free estimate. Flat rate is the standard practice of all car dealerships on car repairs.

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    • #17
      YOUR CORRECT ABOUT THE CAR DEALER PRICING. BUT PEOPLE ARE TOO SMART TO PAY $7.50 FOR A SOFT DRINK. IF THE PRICE IS COMPRABLE TO T&M THEN I CAN FEEL LIKE IT'S NOT A RIP OFF. BUT EVERY ESTIMATE OR INVOICE I'VE SEEN SHOWS JUST THE OPPOSITE TO THIS. I DON'T MIND WORKING FOR AN HONEST LIVING. HOW MANY REPEAT CUSTOMERS DO FLAT RATE SHOPS HAVE. I HAVE WELL OVER 95%. THE ONLY REASON WHY IT'S NOT 100% IS BECAUSE I DO A LOT OF WORK FOR OTHER PLUMBING CONTRACTORS CLIENTS. I DON'T WISH TO TAKE THEIR CLIENTS. I HAVE TOO MANY ALREADY. 750 PLUS. NO ADVERTISING AND NO HELPERS. ALL REFERRALS.

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      • #18
        Re: Flat Rate Pricing

        There are a lot of misconceptions about flat rate pricing. Part of the reason I switched to it is that a lot of my customers were insisting that I tell them what it was going to cost, often referring to it as a "ballpark figure." But when the job was finished, that ballpark figure became the only thing they could remember.

        Figuring out your flat rate price begins with knowing what it costs to do business. You can bet your bippy that McDonald's doesn't base the price of a burger on what Sonic is charging. You can also bet that people don't call all the fast food restaurants on the phone to see which one is cheapest before they go out to buy burgers for the kiddies.

        But McDonald's makes about 25% profit on the burgers they sell. Can the same be said of plumbers? Do most small-town plumbers even know what the word profit means? When buying some phone book advertising a couple of years ago, I was told by a representative that the two types of people they have the hardest time collecting from were lawyers, followed by plumbers.

        There's a reason that mechanics use flat rate to price car repairs. And how often do people hand the mechanic a set of points and eight spark plugs? How often do they go to one grocery store to buy a chicken, then to another grocery store deli and hand them the chicken and say, "I like the way you cook these but your chicken price is too high, so just charge me the labor on this."

        it's not true that all flat rate prices are like charging the price to get you there. The flat rate systems I've looked at all have a price for the first job, which includes getting there, and secondary tasks that are added to that job, and don't include that.

        One of the things I've learned in my research is that no two plumbers that I've seen do things exactly the same way. One may mark up all material 30% and charge $85 per hour, another may charge $65 an hour and double the price of materials. I've seen plumber's invoices where the materials weren't even listed - just "Material = $150" and the labor charge. I've also seen them mis-add their bills and go home with an extra $50 - and I wondered how often they get away with it - how many customers re-add the bill to check it.

        Some charge shop-to-job, others charge a minimum service charge and then by the hour. Some just charge for the hour. And in the flat rate world, some charge a lot and put in the absolute cheapest parts they can find. Others demand the same quality in their parts and service no matter how they do the job, knowing that a trip back destroys the profit. Some use anything they've got on the truck to complete the job and get the bucks, while others go and get what they need if it's not on the truck, because they take pride in their work.

        The numbers don't lie. You need to charge what it costs you to do business and come up with a profit. In a profession that uses hundreds of thousands of parts, uses up service trucks, requires a shop and someone to answer the phone, and so on, it takes a lot of profit for a company to grow. How many t&m people are actually making a profit, let alone a decent profit? According to DEX, not very many.

        If your customers are calling your wife and asking, "What's his hourly rate?" what's the likelihood that you'll get that customer, and why? Are you lower than the rest?

        And as to the customer, how many bills do you hand to them and wince, knowing they're going to be shocked? Isn't it better to get the shock over with at the beginning of the job so they don't feel trapped into paying it when you're done?

        You can make money with t&m if you can get the hourly rate you need and perhaps a separate charge to get to the job, if you even know what it is you need. But when the customer is calling all the plumbers in the book to see what the rate is, what's your standing? If there aren't many plumbers in your town, and the code enforcement is tough enough to keep out the riff-raff, you stand a good chance and my hat's off to you.

        If you hire plumbers and send them out in a van, do they have health care, retirement, good wages? (Neither do I, but I'm working on it.) I did have those things when I worked in a housing factory over thirty years ago. I haven't had them since. I've heard there are flat rate companies that will fire a "tech" who doesn't bring in $1,500 per day, but I don't know who they are. I did talk to one who works for a flat rate company from another town a couple of months ago, and he told me he made over $60k last year. I haven't set my sights that high, but in the thirty years plus that I've been in business, I've seen a lot of other area plumbers go down the tubes. I've seen longtime businesses go bankrupt and there are others threatening to quit because whatever side job they have is paying them more money.

        I've only recently switched to flat rate, and the response so far has been great. In fact, I often get a check before I even start working, though I tell them they don't have to pay until the work's finished. It's "Here's your check, we've got to run, so lock up when you leave."

        However you run your shop, don't knock flat rate until you've looked into it more deeply. Some of it's hype, and greed will kill your business no matter which way you charge for it. But not enough money might kill it even faster.

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        • #19
          Re: Flat Rate Pricing

          herk you seem to have put alot of thought in to your very frist post here and before the war starts please allow me to welcome you here and ........DUCK!!!! lol
          9/11/01, never forget.

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          • #20
            Re: Flat Rate Pricing

            Herk,

            Welcome to the site. I'm not sure digging up a battle from 32-months ago will make many friends but it will sure get you noticed.

            I don't think it is really a flat rate versus T&M debate as much as it is how a shop is run. The arguement about being able to tell a customer what it's going to cost before you start really has more to do with shops who have under qualified plumbers. As a T&M shop I would give the customer a price over the phone which included materials and labor and explain what those charges were. I was able to do this because my plumbers were qualified and I knew how long it took to do a job. Some of the flat rate shops quote a price but will not explain how they arrived at the price and often only give the price after the customer has paid a minimum service charge.

            Mark

            BTW: Yes we made a profit we were able to pay all of our bills and gave our guys full benefits. You might be surprised to learn how many business actually can make a profit while given full disclosure of their pricing.
            Last edited by ToUtahNow; 10-13-2007, 10:35 PM.
            "Somewhere a Village is Missing Twelve Idiots!" - Casey Anthony

            I never lost a cent on the jobs I didn't get!

            Comment


            • #21
              Re: Flat Rate Pricing

              Herk, welcome to the forum. Go through the archives and you'll see this is probably the passionate debate on the forum. There are pro's and cons to each side. My take on it is that the pricing policy doesn't matter, it's the person/company behind the policy. A dishonest person can make the most noble methods become their vehicle for cheating the community.
              Buy cheap, buy twice.

              Comment


              • #22
                Re: Flat Rate Pricing

                Originally posted by ToUtahNow View Post
                ...... The arguement about being able to tell a customer what it's going to cost before you start really has more to do with shops who have under qualified plumbers.
                A shop that uses flat rate has underqualified plumbers?

                I'm not trying to add fuel, but both sides have pro's and cons, which is why this is such a hot topic.
                Ironically an argument could be made that flat rates symbolize an confidence in knowing what a job will entail for time/material, where someone who's afraid to give a flat rate would go with t&M to cover themselves in case they were mistaken.
                I'm not saying thats the case, what I'm saying is maybe insulting another way of doing things isn't the best idea to discuss differences.
                Herk has valid points, and apparently some great experience to offer.
                I'm thinking lets welcome him.
                Herk, he's right...ya probably don't want to start off with this topic, not from what I've been told.

                Comment


                • #23
                  Re: Flat Rate Pricing

                  Heh - sorry about dredging up an old topic. I did a search for flat rate discussions and when I read some of the posts, I felt that there were a number of points being made that simply weren't true or valid.

                  And thanks for all who welcomed me.

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                  • #24
                    Re: Flat Rate Pricing

                    Some one can go into the archives to read what I have to say.

                    Welcome to the forum Herk

                    Comment


                    • #25
                      Re: Flat Rate Pricing

                      First of all, welcome to the forum, stick around for the fun

                      I agree with you on many levels. I have been having a few discussions with other plumbing company owners the last couple weeks. One company stands out in my mind right now, he uses the I2 trades book, the little green one, he has been using it for over 8 years now, does no advertising in the yellow pages, all his customers are referalls and repeats.

                      The customers appreciate the fact that they know the cost of everything before the tech starts. They will even go over the book with him when they have questions, no complaints and he has never been in court.

                      T&M is out the door, Flat Rate is here to stay and the t&m shops will fade out.

                      I am a flat rate company, I watch my prices and unlike some of the other plumbers I know, I am in the business not to be the cheapest, but to provide a reliable, professional, knowledgable service to my customers, not the cheapest hourly rate.

                      Flat rate is an excellent tool when it is used right, you can abuse t&m just as much as you can abuse flat rate.

                      We should leave this discussion dead and start talking about all the Fly By Nite, no-knowledge, unlicensed, wanna be the cheapest, shall I continue?

                      Flat Rate All The Way, out with the old and in with the new.
                      sigpic

                      Robert

                      Comment


                      • #26
                        Re: Flat Rate Pricing

                        Originally posted by DuckButter View Post
                        A shop that uses flat rate has underqualified plumbers?

                        I'm not trying to add fuel, but both sides have pro's and cons, which is why this is such a hot topic.
                        Ironically an argument could be made that flat rates symbolize an confidence in knowing what a job will entail for time/material, where someone who's afraid to give a flat rate would go with t&M to cover themselves in case they were mistaken.
                        I'm not saying thats the case, what I'm saying is maybe insulting another way of doing things isn't the best idea to discuss differences.
                        Herk has valid points, and apparently some great experience to offer.
                        I'm thinking lets welcome him.
                        Herk, he's right...ya probably don't want to start off with this topic, not from what I've been told.
                        I probably shorten my reply thinking what I was saying was obvious so that is on me. What I meant to say is the shops who cannot give a price over the phone whether they are flat-rate or T&M are the shops with under qualified plumbers. I did not need to have some one drive out and take a look at a job prior to giving a price because I knew how long it should take for a specific job already.

                        Mark

                        BTW: I am only referring to service and repair
                        Last edited by ToUtahNow; 10-14-2007, 01:02 AM.
                        "Somewhere a Village is Missing Twelve Idiots!" - Casey Anthony

                        I never lost a cent on the jobs I didn't get!

                        Comment


                        • #27
                          Re: Flat Rate Pricing

                          Originally posted by ToUtahNow View Post
                          I probably shorten my reply thinking what I was saying was obvious so that is on me. What I meant to say is the shops who cannot give a price over the phone whether they are flat-rate or T&M are the shops with under qualified plumbers. I did not need to have some one drive out and take a look at a job prior to giving a price because I knew how long it should take for a specific job already.

                          Mark

                          BTW: I am only referring to service and repair
                          Good call, a KS replacement, disposal, toilet, CI flange, DW, WH, silcock replace, shower valve stem replace, etc...all standard.
                          One of the most seemingly overlooked factors in this topic are the unknown variables.
                          When a call comes in for a wet spot on the ceiling below a bathroom, whats the flat rate if it's not under any specific fixture?
                          How many hours will that take?
                          This scenario doesn't advocate either practice, just a curveball I get thrown alot.

                          Comment


                          • #28
                            Re: Flat Rate Pricing

                            Originally posted by DuckButter View Post
                            Good call, a KS replacement, disposal, toilet, CI flange, DW, WH, silcock replace, shower valve stem replace, etc...all standard.
                            One of the most seemingly overlooked factors in this topic are the unknown variables.
                            When a call comes in for a wet spot on the ceiling below a bathroom, whats the flat rate if it's not under any specific fixture?
                            How many hours will that take?
                            This scenario doesn't advocate either practice, just a curveball I get thrown alot.
                            Ducky it's 2:20AM!!!...why are you still awake?...Turn off the Techno/Trance and get some sleep man

                            Just when I thought this subject had gone away someone dredged it up again.

                            My way is right and this is why......blah.. blah.. blah..

                            Can we get back to discussing whether to use silicone or latex caulking?

                            Comment


                            • #29
                              Re: Flat Rate Pricing

                              the flat rate plumbers all charge extra for unseen issues.

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                              • #30
                                Re: Flat Rate Pricing

                                and the war begins ..................................... TAKE COVER!!!!!!!!
                                9/11/01, never forget.

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