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  • Flat Rate vs Whatever

    I'm not taking a side on this, I'm a construction plumber. I see the riff between the billing systems on this forum constantly. Can someone please explain the deal. I understand the billing process of both, but what is the effect to the consumer?

    Rick, or others, send some education my way.
    the dog

  • #2
    Dog,

    Typically a flat-rate company will not quote the customer over the phone. They will tell them they need to make a $50 service call to diagnosis the problem. Once there, they figure out what needs to be done and offer the customer a discount equal to the service call if they do it right away.

    The trick is to not ever tell the customer what the hourly rate is. It is often much higher than a union shop would get for a 20-year journeyman even though the flat-rate plumber has only been on the job for a year or so.

    When estimating the cost of the job the plumber uses a flat-rate list to tell him how many hours to charge. An example might be something like this:

    Install lav faucet - 1.5 hour
    Snake lav drain – 1 hour
    Replace P-trap - .50 hours
    Replace angle stops - .50 X 2 units = 1.0 hours
    Replace lav supplies - .50 X 2 units = 1.0 hours

    The total labor not including materials comes to 5.0 hours. Assuming the labor rate is $109.50 per hour the customer will pay $547.50 in labor plus parts even though the job only takes the plumber 1.5 hours to complete. As individual units the hours may be fair but when they are done together they do not give a discount for the fact that you are already there with your tools out.

    Mark
    "Somewhere a Village is Missing Twelve Idiots!" - Casey Anthony

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

    Comment


    • #3
      Utah,

      I see the point. Is the total charge quoted to the customer prior to the work?
      the dog

      Comment


      • #4
        Yes, it most certainly is.

        P.S. I don't waive the $49.00 service call fee if they do the work. It costs my company time, overhead, and wages to send truck w/qualified plumber to your house. If we were to claim to do that for free then we would have to make it up somewhere else which would not be honest. It costs $49.00 (minimum, more depending on how far away you are) to get me to your house. Once I see everything you want me to see, I give you a price that is carved in stone. If the terms are acceptable to you then you authorize the work and I complete the work. If the terms are not acceptable to you then you pay me for the service call fee and I'm on my way. What could be fairer to the customer than that?
        Last edited by ECS; 05-20-2006, 11:00 AM.

        Comment


        • #5
          Originally posted by ECS
          .

          If the terms are acceptable to you then you authorize the work and I complete the work. If the terms are not acceptable to you then you pay me for the service call fee and I'm on my way. What could be fairer to the customer than that?
          I don't know, maybe quoting the customer an hourly rate and then charging for the work which was actually done as opposed to of an inflated amount which someone who doesn't know what they are doing would have to charge. I'm curious as to how many of your customers are certified as cost estimators and know what this type of work is really worth?

          An example would be installing a Badger 1 disposal. According to a flat-rate charge (Trade Services Pricing Manual) the install would be 1.5 hours and a total including parts (putty, 2-wire nuts and the disposal) of $371.04. Not bad pay for a half hour worth of work and $60 in materials. Of course the customer is never told its $311 for the half hour labor. I guess with ESC it would be an extra $49 on top of that because of the service charge he keeps.

          An honest plumber would have charged $85 for the labor and $90 for the parts and offered to clean all of the aerators in the time which was left over. The customer would have saved $200 and gotten a better job.

          Mark
          "Somewhere a Village is Missing Twelve Idiots!" - Casey Anthony

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

          Comment


          • #6
            Originally posted by ECS
            Yes, it most certainly is.

            P.S. I don't waive the $49.00 service call fee if they do the work. It costs my company time, overhead, and wages to send truck w/qualified plumber to your house. If we were to claim to do that for free then we would have to make it up somewhere else which would not be honest. It costs $49.00 (minimum, more depending on how far away you are) to get me to your house. Once I see everything you want me to see, I give you a price that is carved in stone. If the terms are acceptable to you then you authorize the work and I complete the work. If the terms are not acceptable to you then you pay me for the service call fee and I'm on my way. What could be fairer to the customer than that?
            ECS,

            If the customer refuses the job, and is charged $49.00, how much is your plumber paid for his time?

            I'm just tring to get a handle on this.
            the dog

            Comment


            • #7
              I think flat rate pricing is an interesting business model.

              Ive been through the equation as to how much it costs me per hour to be on the road.This includes all overheads relevant to our situation as a Pty Ltd Company structure. I pay myself a wage for the hours i work.

              On top of this is the desired profit margin for the company. This profit is built into flat rate (if i understand correctly).

              The reality is that things are very competitive in Sydney where i live. Someone will always do the job for less, and for the moment we are not busy enough to charge as much as i would like. The end result from the accountant is that the company itself is currently making little money.

              The sole purpose of this company is profit. I want to work regular hours but realise that this will take a little while. Once there is more demand for my services we will be charging more. Basic supply and demand.

              To finally get back to the topic. I personally dont see any issues with charging what you want if:
              *The fixed price or Hourly rate and all other charges are understood and authorised by the customer prior to work starting.
              *You do quality work and clean up.
              *You ensure the customer is satisfied with the service before you leave.
              *And if there is a problem with your work you go back and fix it FOR FREE.

              The "Perceived Value" factor is important no matter what you charge. If the customer doesnt like your rates of charge they are free to use someone else. But once they have used a "cheaper plumber" and it ends up costing them more they will call you first next time.

              Josh
              Last edited by Australian Plumber Josh; 05-21-2006, 12:58 AM.

              Comment


              • #8
                Well said, Australian Plumber Josh!

                Plumbdog10,

                An experienced, qualified, competent, plumbing technician in my market will earn $20 to $25 dollars per hour. Multiply by a minimum of 1.5 to account for his taxes, benefits, etc. and he alone will very easily cost $30 to $42.50 per hour. Now add overhead costs, fuel, etc. and consider it will take an absolute minimum of 30 minutes per customer just to get there and diagnose their problem (that's 15 min. to get there and 15 minutes to get through all the introductions, small talk, and diagnosis). In reality it will very often take longer. When everything is figured, my company does well to keep as much as $20.00 of that service call charge and it's usually less than that.

                Utah,

                Once again you show your socialistic leanings in that you think no plumber should be allowed to charge more than whatever amount you think is right, which seems to be around $85.00. You seem to be quite proud of the fact that you have been "certified" (I'm refering to one of your previous posts) to tell everyone else what something should cost, whether it is materials or especially labor. You seem to think that everyone in the plumbing business should have to break down and justify every single component of a charge even though you don't see this anywhere else in the business world. When you buy a car you negotiate your best price for that car, with the option packages you choose, at which point either the parties agree on the price in which case you buy the car or you disagree and go somewhere else. At the other end of the spectrum, when you buy a candy bar at the gas station if you tell the clerk "now I want a complete breakdown of what each ingredient of this candy bar costs as well as the markup on those ingredients and the cost of the labor to make it, package it, ship it, stock it on that shelf over there, and your profit margin, he will laugh in your face and probably tell you to get out of his store. It is ridiculous of you to think that a business person should have to do this just to insure that no one charges more than what you think they should. What's more is that, what you suggest, without coming out and saying it is price fixing, which is against the law. You are just like all those other socialists who think the government ought to step in and regulate prices on everything that they think costs more than it should. I don't like paying nearly $3.00 a gallon for gasoline any more than anybody else, but I either pay it or I don't, it's that simple. Nobody puts a gun to my head and makes me fill up my tank 2-3 times a week to the tune of around $80.00 a pop. I do it because that is what it costs to keep gas in my truck and I have chosen to keep enough gas in my truck to get me to my next service call. My service is worth what it is worth to me and my customers. When we agree, then I serve them. When we don't agree then I go my way, with my service call fee in hand.

                P.S. The reason you think that a badger 1 can be installed in 30 minutes is because you don't know anything about customer service. I would say that probably 50% of my customers want and in some cases actually need me to spend 30 minutes with them just talking about their plumbing, what needs to be done (this is after I've already given them the diagnosis) and why or very often they will call for one thing and then want me to look at other things too. If someone has all their tools and parts out ready to go, then yes you could probably do it in about 30 minutes (that is for a simple change out of the same type), but if you want to do it properly including testing to make sure their are no leaks, cleaning up after yourself, going over proper and improper operation with the customer, maintenance, warranties, common problems and what to do (reset switches and unjamming), and the like, then it is quite impossible to do it in 30 minutes. As for the cost, I charge $235.00 if it is a simple change out of the same type or $285.00 if it is a new installation (this is for an ISE Badger V which I provide, I don't usually install Badger I unless HO already has it since I believe it to be under powered). But if all you are interested in doing is running in the door, throwing a new one in, and grabbing a check as you run out the door, then yes you might be able to do it in 30 minutes, but I doubt it.
                Last edited by ECS; 05-21-2006, 03:42 PM.

                Comment


                • #9
                  ESC,

                  What you are missing is the idea of supply and demand. There is a reason most flat-rate shops never get more than 20-plumbers and why most don't last longer than 10-years.

                  Many years ago I met with George Brazil who "was" the father of flat-rating. I asked George how he could justify charging the amounts he charges. His answer was he gives them a 10% off card at the end of the job and if they are dumb enough to call him again they deserve it. After reading your posts I doubt you are much different than George. By the way you may have noticed George Brazil Plumbing went from a couple hundred trucks including franchised trucks to a handful of franchised trucks.

                  As for installing a Badger I in 30-minutes a first year apprentice should be able to do that without a problem. I never said I would be out of the house in 30-minutes I said I would spend the balance of the time fixing additional items. As for your skills as a plumber don't forget we read the story about your fiasco with the water closet where you attempted an illegal repair with a non-approved flange and still could not make it work. I guess we all know what type of plumber would attempt such a repair and end up with such results.

                  Your analogies using the car repair shop does not work. The car repair shop clearly posts their hourly rates on a board for everyone to read. If you believe what you are doing is so honest why don't you disclose your hourly rate to the customer. My point is your customer is paying your price because they don’t know any better not because you are worth it.

                  Your analogies of price fixing and or the candy bar are just as dumb. Price-fixing would assume all of the plumbers in your area got together and agreed on the same price for the same work. As you obviously are not charging the same price as all of the other plumbers how would that be price-fixing? The candy bar on the other hand is a fixed commodity which has a suggested retail price set by the manufacture. If you wanted to compare what you do to the candy bar you would have to say the retail price set by the candy maker is one dollar which includes the cost of shipping, spoilage, theft and storage but you add an additional three dollars to that price because you believe your smile is worth an extra three dollars.

                  I had my plumbing business for over 20-years and the employee who purchased it from me has had it for over 7-years. Many of the customers we started with are still with the company and so are some of their kids who weren't even born when we started working for their parents. I always made an honest living and I always treated my customers fairly. If you believe you are being honest to your customers so be it but let’s see where you are 20-years from now.

                  It is not you personally that I don’t like it is the whole concept of flat-rating without disclosing your labor rate. If you were to flat-rate the hours but be up front with the labor and material cost I would be fine with the idea but there is a reason you won’t do that.

                  Mark
                  "Somewhere a Village is Missing Twelve Idiots!" - Casey Anthony

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

                  Comment


                  • #10
                    ECS,

                    I don't know why you are so upset by my question. I don't have an opinion on this, I am simply tring to find the facts.

                    I thought you were a contractor yourself, I see you are not.

                    I'll reset my question: If you are sent to give an estimate, and the customer turns it down, how much are you paid?
                    the dog

                    Comment


                    • #11
                      As a one man shop who is in between the hourly rate charge And flat rate $$$$ price. I will take a look at the job, check my price book. printed up by nspg, and give them the price that I am willing to do the work at hand for. But I hardly ever am asked what my hourly rate. some jobs are quick fixes and only charge small amount. My feeling is when I take my car to get work done they tell me how much, and it dose not matter what the posted price for the hr charge is. they drive it around back and say well call when its done.
                      They could fix the problem in 10 minutes and I would not know. the car shop work on fix rate price structure. At least my customer can see what I am doing. most professions work from flat rate. Vet dr base on certain treatments same with lawn guys, So much to mow so much to trim and so on.
                      But the plumber he is suppose to come in and do a number of repair all in the 1 hr window I charge what I charge to cover my cost to be in bussiness. It's my bussiness to let the customer know what the bill will be to do stated job. It's my bussiness what my hourly rate is. But it's higher than most .

                      Comment


                      • #12
                        so let me think about this, raise my rates 300% and lose 90% of my clients

                        or continue to be very fair with all my clients (900+) and not worry about advertising or having to go to a job and compete with anyone else.

                        on 95% of my calls, i don't need to go and have to price a job. i just go and do it. i don't drive around trying to sell a job. i don't have to worry about the phone ringing.

                        my good buddy who has been in business for 25+ years and runs 12 trucks with 20 field guys, doesn't even have his guys bill the customer. they turn in a work sheet for the days jobs and the office does the billing. his clients are never surprised when the bill comes.

                        if you tried this with flat rate, you would be in court up against an expert like utah. try to explain to the client & judge, why your rate is 3 times higher than a professional that's been in business longer than you have ever done plumbing.

                        too bad you don't live in an area where you have to compete against the real plumbers like utah and i, you would end up out of business as soon as an informed client sees that they have a choice.

                        what you are doing is attemping to sell a job and sign on the dotted line prior to the client making an informed decision and not a snowball sales pitch. you would never be able to pull this off on a competative bid such as in new construction.

                        as utah mentioned "george brazil", he started in new construction. gave that up to go after the quick buck. one of his protege's "mike diamond" spends tons of money on advertising, just to reel in new suckers.

                        his parking lot has more trucks that sit all day, than actually go out and work.

                        pick up a yellow pages in the west los angeles, area. there are 40+ pages just for plumbers. more than half are full page ads. these are the ones that are flat rate. they proudly display that in their ads. in fact there is one that even displays that they don't have a contractors license.

                        at the end of the day, a can of coke is 60 cents. not the $1.80+ that the flat rate co's are charging. i guess they need to pay for all that advertising to attract people that don't mind a 1.80 coke.

                        rick.
                        phoebe it is

                        Comment


                        • #13
                          Originally posted by ToUtahNow
                          ESC,

                          What you are missing is the idea of supply and demand. There is a reason most flat-rate shops never get more than 20-plumbers and why most don't last longer than 10-years.

                          Many years ago I met with George Brazil who "was" the father of flat-rating. I asked George how he could justify charging the amounts he charges. His answer was he gives them a 10% off card at the end of the job and if they are dumb enough to call him again they deserve it. After reading your posts I doubt you are much different than George. By the way you may have noticed George Brazil Plumbing went from a couple hundred trucks including franchised trucks to a handful of franchised trucks.

                          As for installing a Badger I in 30-minutes a first year apprentice should be able to do that without a problem. I never said I would be out of the house in 30-minutes I said I would spend the balance of the time fixing additional items. As for your skills as a plumber don't forget we read the story about your fiasco with the water closet where you attempted an illegal repair with a non-approved flange and still could not make it work. I guess we all know what type of plumber would attempt such a repair and end up with such results.

                          Your analogies using the car repair shop does not work. The car repair shop clearly posts their hourly rates on a board for everyone to read. If you believe what you are doing is so honest why don't you disclose your hourly rate to the customer. My point is your customer is paying your price because they don’t know any better not because you are worth it.

                          Your analogies of price fixing and or the candy bar are just as dumb. Price-fixing would assume all of the plumbers in your area got together and agreed on the same price for the same work. As you obviously are not charging the same price as all of the other plumbers how would that be price-fixing? The candy bar on the other hand is a fixed commodity which has a suggested retail price set by the manufacture. If you wanted to compare what you do to the candy bar you would have to say the retail price set by the candy maker is one dollar which includes the cost of shipping, spoilage, theft and storage but you add an additional three dollars to that price because you believe your smile is worth an extra three dollars.

                          I had my plumbing business for over 20-years and the employee who purchased it from me has had it for over 7-years. Many of the customers we started with are still with the company and so are some of their kids who weren't even born when we started working for their parents. I always made an honest living and I always treated my customers fairly. If you believe you are being honest to your customers so be it but let’s see where you are 20-years from now.

                          It is not you personally that I don’t like it is the whole concept of flat-rating without disclosing your labor rate. If you were to flat-rate the hours but be up front with the labor and material cost I would be fine with the idea but there is a reason you won’t do that.

                          Mark
                          I don't know George Brazil or anything about how he does business.

                          As for my "fiasco", the flange I used, while not my normal choice, was perfectly legal, properly installed, and will serve her without any leakage well beyond her lifetime unlike the previous flange that had been in place for the previous 40 years, which was improperly installed, and leaked so much that it had rotted away the subfloor to the degree that I had to scab in 2x4's in the crawl space so that I would have something to anchor the new flange to. The toilet was installed the next day and the new owner of the toilet loves it. I shared the story simply as one of those jobs that went "haywire" and the only "mistake" I made was failing to warn the HO about the possibility of flange damage before hand which prevented me from charging her for the flange repair. If what you say is true about your longevity in plumbing, then you have almost 3x my experience. I know that you cannot possibly be so arrogant as to suggest that in that time you never made any mistakes or had any jobs that just went "crazy" on you. By the way, the HO in question was not charged a single penny in additional labor for the flange repair.

                          As for the Badger install, maybe you can do the install in 30 min., for that matter I guess I probably could too if that's how I wanted to do business, but I'm not going to race through a job just so I can get out the door to the next one. My customer's deserve more than that from me and they will always receive it as long as I am in the business. When I do an install, no matter what it is, I am going to take the time to make sure that everything is right with it (and that doesn't mean flushing it once as I'm picking up my tools), partly because I don't want to have to make a call back, which I rarely have to do, but mostly because I want my customer to love what I have installed for them. I want them to understand everything there is to know about it so that it will last a very long time for them and serve them well. They need to know how to reset a disposal and how to unjam it. They need to know that they shouldn't try to dump a pound of leftover rice all at once down their disposal because chances are excellant that it will never make it out of the waste arm. They need to know why they really shouldn't set their water heater beyond 122 degrees. They need to know why they shouldn't fiddle around with their t&p valves or try to adjust their prv's. They need to know not to crank down on their tub/shower valves and to just be patient and it won't drip anymore after a couple of minutes. When you run and gun and get out the door so you can get to the next call, you are doing a disservice to your customer.

                          As for the car sale, as usual, you read what you want to read. I never said anything about a repair shop. I was clearly talking about the purchase of a vehicle.

                          With respect to price fixing, I was also clearly referring to your apparent desire to dictate prices on the low end the same way that some people want to have the government step in and limit what the oil companies charge for gasoline, as if the oil companies had any say at all in what OPEC charges for a barrel of oil.

                          As for candy bars being commodities! Stop in 6 different convenience stores and you will find at least 4 different prices. I don't know so much about the price of candy bars but I do drink a fair amount of quart sized Gatorade. A quart of Gatorade may cost anywhere from $1.79 to $2.24 around here. Do you want it or not? If you want it buy it if you don't then leave. But if you want to talk about something that could be considered a commodity, what about gasoline? How can there be such a difference in pricing between gas stations (in the same city with the same taxes)? I'll tell you why. It's because one station wants to be the cheapest, another station says they have special additives in their gas that is better for your engine, and another station will give you a free car wash when you fill up. If my level of service far exceeds the average, shouldn't I be able to charge for that. Can't you see that a lot of people want more than just some guy with a 3 day growth, stinking of cigarettes (I know a lot of you smoke but at least pop one of those listermint things in your mouth before you ring someone's doorbell, it's not my fault it stinks and oh yeah I'm an ex-smoker), with an old ratty t-shirt and muddy boots. Now I'm not saying this is you, I don't know anything about you (except that you have a very high opinion of yourself) but I'm in and out of supply houses fairly often and I know what kind of plumbers I see in there. If I can put my female customers at ease by letting them know that no one from my company will ever enter their home without first having been both drug screened and having their criminal backgrounds checked and confirmed clean, shouldn't I be able to charge more for that? I can sure bet that 98% of the companies in my market don't do it, unless they do any significant commercial work and the GC requires it. I've worked for companies before where if they anounced drug tests, I and maybe 2 other guys would be the only ones who could pass. If I offer warranties that just simply blow the standard 30/60/90 day or 1 year warranties out of the water, shouldn't I be able to charge more for that? I could go on and on but I'm growing weary of this and I'm pretty sure that neither of us is going to change the others mind. The only thing that really bothers me about your point of view is the inference that I am dishonest because I don't break down my bill into parts and labor. If my customer accepts my price and authorizes the work, and I give them the very finest service I am capable of giving, and they love what I have done for them, then why should you have any problem with that at all?

                          Comment


                          • #14
                            ESC,

                            You are a funny fellow and I don't believe you will ever get it. I don’t really care what you charge but don’t try to justify it with quasi math. At least be honest like Brazil and say if they’re dumb enough to pay you your rate you will take their money.

                            As for the non-approved flange I would like for you to explain which internal compression closet flange you are using which you say is an approved fitting. All I need is the manufacture name and the model number and we will see what type of plumber you are. If it is as you say then I owe you an apology.

                            I can tell by the things you say in your post that you probably believe you are doing a good job for your customer and that you are a competent plumber. I can also tell by your post that you have a long way to go before you get there.

                            At one time or another I have had as many as 400 employees across several different businesses. All of the business had something to do with construction trades or services for multi-family residential. In all of those years I only had to take a client to court for non-payment one time. As a matter of fact when that client explained to the judge the only reason he didn't pay me was because I wouldn't lie to his insurance company about his loss the client almost went to jail as well. Hopefully if you are as good as you claim you are and you are worth what you claim to be worth you will go 25-plus years with the same results.

                            Mark
                            "Somewhere a Village is Missing Twelve Idiots!" - Casey Anthony

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

                            Comment


                            • #15
                              Put down the guns and step away.

                              WOW! Who started this anyway? I was going to ask this question but after reading the 180 degree differences I don’t think I could get a good answer without people getting heated up. Good thing this is in cyber space otherwise we may have the medics called.

                              I am going to branch out on my own and have been contemplating this very subject. I have worked for companies who have done it each way. What I noticed is that the time and material companies are usually struggling the most and pay me less than I was worth. Which is why I went to a flat rate company. The T&M one was a union company but I was not getting union pay. Something about being a service plumber. Needless to say, I am not a fan of unions. Not now or before. Now that I’ve made a few enemies, I’ll continue.

                              The flat rate company that I worked for did not rip people off. One company in town did but they were the exception and not the rule. What I have noticed in my decade of being a service plumber is pretty simple. Be friendly, courteous and do an exceptional job with out callbacks and they will call you back. I have people request me all the time. I’ve turned complaints of “I’ll never use your company again!” to a twenty dollar tip when I left. My highest tip was fifty dollars and I was giving this after another plumber from our shop failed to fix the problem twice before, which I did fix. Maybe he felt sorry for me because I was covered from head to toe with grease after repairing the above ground grease trap under the woks.

                              I have had very few people on either side of the flat rate/ time material argument ever complain about their bill. The one’s that did would have complained over anything. I have been accused of price fixing with the other plumbers in town. This man was still thinking we should be charging 1940 prices. Some people you can never please.

                              Personally, I am leaning toward the flat rate. Everywhere we go we are charged flat rates. Why not in plumbing? Oh, as in the past, if I am asked what our flat rate hourly rate is based on I will tell them. To do otherwise is to put up red flags for the homeowner. It is not that much higher than anyone else. Besides, why be embarrassed about charging more for better service? I learned this from my father who owned a janitorial business. He charged much more than the average but was always busy with the same people because he went above and beyond everyone else... and he did windows too.
                              My brother-in-law is a cosmetic dentist. He is one of the best in the country not by my standards but his piers. He makes very good money and charges much more than average. But he has media personalities, politicians, pro ball players and average working folks going to him and much of his work is not covered by insurance. He can do this because he is very good at what he does. He demands excellence upon himself self and his employees. Why can’t plumbers be like this?

                              I’ll end this now and wait for the cyber fists to fly.
                              One of the best lessons I learned from my father is when he did nothing to help me. I then learned to help my self.

                              Comment

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