Up front pricing and contracts?

[BattleCat]

This idea was spawned from another thread but I didn't want to take that person's issues off topic.

When doing service work, do you give prices up front? Do you get a signed contract?

Some customers wanted up front pricing, but not all of them. So I used to just go to work and fix what they needed and then bill them. But I started getting some complaints. You know how people are, they may be expecting to pay $500 but if you give them a bill for $300 they still complain and say it should only cost $200. It got to the point that while I was working I was always worrying about dealing with the customer afterwards.

So at that point I switched and started giving prices for everything up front. If I couldn't give a solid price, then I would lay out a pricing scheme ($150 for the service call and first hour, $100 each additional hour, for example). At that time I just bought an iPad and started using it for pricing and invoicing, so I had the customer sign right on the iPad.

Ever since I started doing that, it relieved a lot of stress and issues. Even if I had a customer complain, such as saying "You fixed that too quick, I'm not paying for a whole hour!" I always felt confident since I had the signed agreement.

 

[Ponchik]

I have started using the up front pricing method and am very happy with that decision. Customer knows the price before you start and haven't complained a bit. Of course if I quote a repair for $XX then come to find out it was just a tripped GFCI or some other very minor issue then i am not charging them the whole $XX that i had quoted. The customer appreciates that honesty and will more likely use you and refer to to others.

I use software made by www.electricalflatrate.com

 

[Gold]

I think everyone has a different opinion on this and the best one is the one that gives you most confidence. I flat rate upfront for resi-service exclusively. I don't have any dispatch fees or minimums because I try to get in front of as many people as I can. I have made my own spreadsheet for pricing and made it into an invoicing software, basically it prompts you for info in order name addy service description, then prompts probing questions and allows me to take pics of the job so it knows what to suggest for extras on the invoice. The invoice is then printed with multiple line item options pics suggestions and value added options, its usually 3 or 4 very descriptive pages that I go through with the customer item by item by the time i get to the end they already know how much the deposit is and have a check written (10 minutes) I simply hand them the pen and show them where to sign to give me authorization to proceed.

I've done it both ways and IMO this leads to higher invoices, better close rate, practically 0 invoice disputes and happier customers.

 

[Fulthrotl]

I think everyone has a different opinion on this and the best one is the one that gives you most confidence. I flat rate upfront for resi-service exclusively. I don't have any dispatch fees or minimums because I try to get in front of as many people as I can. I have made my own spreadsheet for pricing and made it into an invoicing software, basically it prompts you for info in order name addy service description, then prompts probing questions and allows me to take pics of the job so it knows what to suggest for extras on the invoice. The invoice is then printed with multiple line item options pics suggestions and value added options, its usually 3 or 4 very descriptive pages that I go through with the customer item by item by the time i get to the end they already know how much the deposit is and have a check written (10 minutes) I simply hand them the pen and show them where to sign to give me authorization to proceed.

I've done it both ways and IMO this leads to higher invoices, better close rate, practically 0 invoice disputes and happier customers.

i've tried it both ways.... and flat rate up front is better, in my experience.

and sometimes people just have to haggle.
i gave a flat rate of $1k to sort a customers situation and give a solution, with a price.

first haggle, was "will the $1k go towards the price of the work?"

yeah, it will.

second haggle was "will you do it T&M CNE $1k?" for the estimate.

yeah, i will. i explained that ALL TIME SPENT on this in any activity was billable.
they agreed.

looks like the work is gonna run between $15 and $20k... haven't got all the pricing yet.

that's what i figured at the start. normally, i'd a just figured out how to do it, and
given them a price, but in the past, they have had me design a solution, and then
used my idea and went with someone else. it's happened more than once.

i'm not doing freebies. sorry. and they know why it's the way it is. i got the call after
they had someone else jack them around for three months without giving them a
solution or a price.

 

[jmellc]

I have largely done up front quotes on most work and a few on service work, but service work can be nearly impossible to quote. Too many unknowns. Many people I deal with have had every hack on earth do work in their house. Crawl space is nothing but spider webs of wires, j boxes, open boxes, live loose ends, you name it. I have sometimes been able to work it into a quote if I were rewiring the main house & fixing such things in an addition or outbuilding, & could figure a day's labor on it, making it part of the larger project. Most of my customers would balk at a day's labor for that being the only job. But I can't say $100 if I am likely to spend the day fixing junk.

I am also coming up with a new strategy for getting paid on the service call where customer wants a price to fix the problem but doesn't want to pay for my hour or 2 of diagnosing the problem. I have been burned a few times. I now say "I charge for an hour's work" to diagnose and do a quote. I had a few customers call about some appliance out, usually turned out to be a bad breaker or receptacle. Then wanted price to fix it, then "let me think about it". He had a free diagnosis, then bought the part himself and did it, or got the $2 handyman to do it. No more of that. I am not in the charity business.

 

[BattleCat]

I have largely done up front quotes on most work and a few on service work, but service work can be nearly impossible to quote. Too many unknowns. Many people I deal with have had every hack on earth do work in their house. Crawl space is nothing but spider webs of wires, j boxes, open boxes, live loose ends, you name it. I have sometimes been able to work it into a quote if I were rewiring the main house & fixing such things in an addition or outbuilding, & could figure a day's labor on it, making it part of the larger project. Most of my customers would balk at a day's labor for that being the only job. But I can't say $100 if I am likely to spend the day fixing junk.

This is where T&M comes in handy. Singed invoice for X amount per hour. In many states you would have to agree upon a maximum and if you need to go any longer you will simply have to sit down with the customer again to make another agreement. That has happened to me a few times, another area where the iPad comes in handy. Showing the customer pictures of flying splices in the crawlspace and burn marks on their joists helps greatly, flip over to the invoice app and have them sign a second agreement to fix the extras..

I am also coming up with a new strategy for getting paid on the service call where customer wants a price to fix the problem but doesn't want to pay for my hour or 2 of diagnosing the problem. I have been burned a few times. I now say "I charge for an hour's work" to diagnose and do a quote. I had a few customers call about some appliance out, usually turned out to be a bad breaker or receptacle. Then wanted price to fix it, then "let me think about it". He had a free diagnosis, then bought the part himself and did it, or got the $2 handyman to do it. No more of that. I am not in the charity business.

That was a big issue I had at the beginning too, which is why free estimates for fixing problems just doesn't work. I charge a service call fee which includes the first hour of diagnostics and X amount for each additional hour. Small fixes are included, larger fixes will require a new signed invoice in addition to the service call fee.

 

[Gold]

Wow.

Flat rate works fine for service calls once you know how to use it. The more complex the job the better it works.

You can offer free estimates and still get paid for the diagnostic work.

Free estimate for a repair starts with a quoted diagnostic fee, in my case I charge $99, its like a loss leader but you can charge whatever you want. Then either a minor repair (replace an outlet, switch splice etc) which is included or quote the repair, if they don't fix it right away tag out the effected ckt so its safe until they can make a repair. 90% of the time they except the quote.

I think most people that have had negative experiences with flat rate structures actually had margin issues.

 

[BattleCat]

You can offer free estimates and still get paid for the diagnostic work.

Free estimate for a repair starts with a quoted diagnostic fee, in my case I charge $99,

Yeah. that's not really making too much sense...

A free estimate and get paid for diagnostic work? So what was the estimate for, to tell them how much the diagnostic is going to be? If you do that, the first thing that the customer is going to say is "You said free estimate!" and they are going to know that it was just a lie to get into their home. I'd rather lay out the costs up front and not waste time and fuel.

 

[Gold]

Yeah. that's not really making too much sense...

A free estimate and get paid for diagnostic work? So what was the estimate for, to tell them how much the diagnostic is going to be? If you do that, the first thing that the customer is going to say is "You said free estimate!" and they are going to know that it was just a lie to get into their home. I'd rather lay out the costs up front and not waste time and fuel.

A call for a diagnostic comes in and its explained over the phone very clearly. Pep boys charges a diagnostic to plug your vehicle into there equipment and they give you a detailed printout of needed maintenance and repairs, we do the same thing, we plug our equipment into there house and give a detailed report of needed maintenance and repairs. If its minor we include the repair. The cost is $99 whether it takes 1 hour or 4, the cost is the same.

How are you laying out the cost upfront if your charging by the hour?

 

[cadpoint]

Yeah. that's not really making too much sense...

A free estimate and get paid for diagnostic work? So what was the estimate for, to tell them how much the diagnostic is going to be? If you do that, the first thing that the customer is going to say is "You said free estimate!" and they are going to know that it was just a lie to get into their home. I'd rather lay out the costs up front and not waste time and fuel.

I don't run a electrical business but I think your being harsh on Gold!

The free is showing up (from what I've read here) some charge a dispatch fee.
Free is figuring out what the problem is, Gold's read to me made sense.

Maybe I'm less stupid then some other's... maybe greater in other's eye's!

 

[petersonra]

It seems to me that the real problem is people call someone out to do some work and get huge surprises because they do not anticipate the magnitude of the cost involved.

Just tell them up front what it will cost. It might be that you tell them it costs $300 for you to come out and figure out what their problem is and you won't know what the cost to fix it is until after you figure out what is wrong. Just be upfront with them.

Make sure they actually understand what you are telling them so there are no surprises. If they don't like it, politely say goodbye and move on to the next potential customer.

A lot of service companies try to play fast and loose with the cost side of things and people just hate getting a big surprise.

We tell people it is our hourly rate with a minimum of 4 hours billed plus mileage and other expenses just for us to show up. The billed time includes all time involved with the job including trip preparation and travel time. We even bill for the time it takes to write the service reports and expense reports when we get back. You would be surprised at how many people that need "immediate" service decide they can live without the help when they find out how much it will cost them for us to show up at their door step.

 

[renosteinke]

I'd rather haggle at the start, before I have done any work, than haggle after the work is complete. That early haggling also helps to clarify the scope of the job. Get the agreement first, then go to work.

Why? You do this because issues WILL arise during the job. Since you have an agreement, these issues will now be of only two types. These are:

1) "Don't worry, it's in the job, and this 'extra' work you see me doing won't cost you a penny more;" and,

2) "That's not in what we discussed and will cost more."

You use the first when the customer, say, objects to your installing a light and receptacle in the attic as you replace his HVAC unit. Now is not the time to debate code rules, etc. It was covered in your quote, so just set his mind at ease.

You use the second when the customer says "while you're up there, could you ....?"