Flat rate pricing

[satcom]

Brian, I never said I had all the answers. I'm trying to explain clearly what flat-rate is and correct misconceptions. Unless you were keeping the books and writing the checks at your previous employer, there's no point in speculating how well that business operated. I'll be more than happy to discuss first-hand personal experiences in business.

Instead of being so defensive about T&M, explain specifically what the benefits of it to you are, like I've attempted to explain our flat-rate system.

My problem with T&M is; You can only bill actual hours worked, customers are more likely to question your pricing, and its harder to sell. Feel free to discuss those items and tell my how it works for you.

We've had no problems with commercial customers using flat-rate; in fact many of them prefer this method of pricing.

At a recent contractor dinner meeting, the question of why some guys like T&M, and the number reason was they did not have to estimate T&M , so it appears they would rather lose the advantage of contract pricing, and profitable estimated projects, rather then learn how to estimate for profit.

 

[hardworkingstiff]

Instead of being so defensive about T&M, explain specifically what the benefits of it to you are, like I've attempted to explain our flat-rate system.

I'm not as smart as most of you guys, but it seems FR pricing leans towards benefiting the contractor and T&M leans towards benefiting the customer in that the contractor (if they are honorable) makes less money.

I do perform some T&M work, but hate it (too much work to track and list every item). I'm too far removed from steady work to worry about gearing up FR pricing, but I push hard to contract pricing (I just don't have a FR schedule to work from) whenever I can.

 

[nhfire77]

Commercial accounts, will also question T&M billing, if you present them with a time and material bill, they will also be be likely to slow pay item billing, and shop other work with your T&M rates.

OK Satcom. I am not trying to pick a fight with you.

In my personal experience $125/hr + materials with mark up, I never get questioned. These are negotiated contracted rates BTW. I only have two customers that pay over the agreed terms of 30 days, and I expect it, but always get paid in 40-50 days.

And I just do service work at T+M. I have flat rate pricing, its just that on the service side this rate works and I am making a ton of money on it.

 

[satcom]

OK Satcom. I am not trying to pick a fight with you.

In my personal experience $125/hr + materials with mark up, I never get questioned. These are negotiated contracted rates BTW. I only have two customers that pay over the agreed terms of 30 days, and I expect it, but always get paid in 40-50 days.

And I just do service work at T+M. I have flat rate pricing, its just that on the service side this rate works and I am making a ton of money on it.

When you say you are making a ton of money, I hope your able to pay for your overhead and operating costs, plus, medical, and retirement funding, and vacations out of that $125 and if you are, along with making a decent end of year profit, to grow your business, then I can learn a lot from how you operate.

 

[brantmacga]

I'm not as smart as most of you guys, but it seems FR pricing leans towards benefiting the contractor and T&M leans towards benefiting the customer in that the contractor (if they are honorable) makes less money. . . . .

 

[Rewire]

I've been doing T&M service work and every year I'm up 10-20% from the previous year albeit it only 5 years. I broke my last years gross a week ago.

I haven't changed a thing I am doing, other than adding more work and more clients from referrals.

I'm not the smartest guy, or the most carismatic. I hear that my rates are average to above average.

I will never understand why so many here say T&M "never works"

It is the "T" factor. No matter how hard you work you only have 24 hours a day you can sell . You can't get 25 hours a day no matter what you do. So to maintain 10-20% increases your only option is to increase the amount you sell the time for and even then you will hit a ceiling of what the customer will pay.

 

[nhfire77]

When you say you are making a ton of money, I hope your able to pay for your overhead and operating costs, plus, medical, and retirement funding, and vacations out of that $125 and if you are, along with making a decent end of year profit, to grow your business, then I can learn a lot from how you operate.

I am. Again that is only service Work. Fire testing and inspections (I specialize in commercial/industrial fire alarms) can bring in $2000 net profit in a day to a day and half. I do that 3-6 times a month. I can offer the T and M price with an NTE (varies with the contract) so the customer sees exactly what they pay for and that seems to make them happy. Since have great cash flow in one direction I can offer better pricing in another. Its what the customer wants, T+M at a set price, no surprises. and I get what I want: $. I'm not losing money on T+M to make money on other stuff either, I found a balance between T+M and contacted jobs that is profitable.

 

[satcom]

I found a balance between T+M and contacted jobs that is profitable.

The alarm work, un like electrical contracting, gives you four or more ways to earn installation, maint contracts, repair work (service), and monitoring revenue, T&M can work with alarm repairs, because you already have the account under contract, we don't have that advantage in electrical service.

 

[nhfire77]

The alarm work, un like electrical contracting, gives you four or more ways to earn installation, maint contracts, repair work (service), and monitoring revenue, T&M can work with alarm repairs, because you already have the account under contract, we don't have that advantage in electrical service.

Right, well not me. I have a few monitoring accounts. Maint, contracts, yes. But those are common across all the electrical fields. For instance Lighting.

I think T+M maint contracts are AWESOME. Not easily come by but well worth the time invested.

 

[flyboy]

A hypothetical (for now) question.

Does anyone here believe an electical contractor can get $350/hr. as the labor component of their flat rate pricing for service work with almost little or no mark-up on material?

Just curious to here your comments.

 

[satcom]

A hypothetical (for now) question.

Does anyone here believe an electical contractor can get $350/hr. as the labor component of their flat rate pricing for service work with almost little or no mark-up on material?

Just curious to here your comments.

It's done every day, and they are the guys in my area that ate everyone else lunch, there are plenty of customers want service, not cheap price, when they have problems.

 

[nhfire77]

A hypothetical (for now) question.

Does anyone here believe an electical contractor can get $350/hr. as the labor component of their flat rate pricing for service work with almost little or no mark-up on material?

Just curious to here your comments.

Yes, not every job every day, but some. A decent Lawyer around here gets $175- $250/hr, but I'm sure there are that make more than $350/hr as well

 

[Tiger Electrical]

Wow! The flat rate vs T&M battle rages on.

Something I ask myself about this:

Of the residential service companies that have tried flat rate (or a flat rate/T&M hybrid), what percentage find that it doesn't work and give it up to go back to T&M?

I personally switched to flat rate seven years ago and it works for me. It's not my religion though so if T&M works for you stick with it.

 

[flyboy]

Wow! The flat rate vs T&M battle rages on.

Something I ask myself about this:

Of the residential service companies that have tried flat rate (or a flat rate/T&M hybrid), what percentage find that it doesn't work and give it up to go back to T&M?

I personally switched to flat rate seven years ago and it works for me. It's not my religion though so if T&M works for you stick with it.

As far as I'm concerned, that battle has been fought and won by flat rate a long time ago. Even troubleshooting has a three tier flat rate determined by the situation. Anyone who has reverted back to T&M has taken a step backwards with their business. IMHO

We are a residential service company with 23 employees using flat rate since 1995. We have not used T&M since 1995 and we have not been in the new construction market since 1995. We refuse (respectfully) all offers to do any work using T&M.

Those who have decided that there are markets (types of jobs) that "cannot be done using flat rate" will get no argument from me. I'll never, even after 25 years in business, claim to know everything, but I will say this; our company is always busy, always profitable and always growing our customer base. So, if there is work out there that can't be done using flat rate...we just don't do it.

Why? Because our billable hour, based on our billable efficiency, makes quoting an hour hourly fee prohibited. It would be between $300-$400 hour (I won't reveal the actual amount).

Asking T&M at these rates is difficult at best, but easy to get when pricing using flat rate.

 

[emahler]

just remember it's all a game...most guys who are flat rate are quoting their "billable hourly rate"...of which most guys will have 4 per day...

and the rate is what the truck earns (whether 1 man or 2 men in the truck)

so, they hopefully are earning between $1200 and $1600 per truck per day (not including material)...

or, $150 - 200 per hour for an 8 hr day....

Now, if I'm running T&M at $85/man...and that truck has 2 men on it, and we bill 2 hrs min (or bill actual travel time)...we can bill $170/hr x 8 hrs+ (sometimes we can bill 10 hrs for only 8 worked)...and end up with daily billing of $1,360 - $1,700 per day...

so, the numbers are the same...the difference is...try billing a residential customer for travel or a minimum...no to mention billing $170 for 2 guys to give an estimate....

but, on the commercial end, it can be done...

 

[wirenuter]

Im here in ct and everything pretty much is flat rate, almost no one will give you a blank check to come in and make repaires or perform small jobs. We put disclaimers in our estimates, such as "cost assumes existing wiring and fixture mounting box is adaquate for the replacement of the fan". As far as pricing, every job is unique and I judge each one on its own challenges. You MUST include wording in your agreements that cover the unforseen. You are an electrician not a magician.
G

 

[brian john]

Yes, not every job every day, but some. A decent Lawyer around here gets $175- $250/hr, but I'm sure there are that make more than $350/hr as well

and more, I have shelled out my fair share to them.