Flat Rate Contracting

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petersonra said:
It is a serious mistake to believe you can set your prices based on some model of what your costs are. It just does not work that way in the more or less free market we live in. It is a good way to determine if it is practical for you to go into business, but not a good way to determine your rates once you are in business.

It is a good exercise in any case. And you may be surprised at how much elasticity there is in what you can charge (I got that word from my brother Dr. Carl the economist).

It is also a serious mistake to believe that because you have high overhead costs that other similar businesses also have those costs. Some business people are just far more efficient at what they do than others are. It is entirely possible that one guy can make money charging $50 for a product or service and another guy lose money charging $100 for the same product, in fact, such a situation is actually pretty common.
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...so are you trying to tell me that everyone should have the same price, but in order for me to make money, I just have to be more efficient than the next guy?

Do you also think that the manufacturers of all of the products in all of the stores just charge what they THINK people will pay for the product or is it more realistic that they have actually done a cost analysis for the product, and then charge what is NEEDED to make the product? It is no different with us. If you can't charge what you need to cover expenses and profit, then don't stay in business.

Oh, while we're on the subject, can you reconcile your economic priciples with the business plans of....let's say Kmart and Nordstrom. They both sell many of the same type of products, but at very different prices. Also, keep this in mind, if price was the only factor in decision making, we would all be driving a Yugo. My point is that the price is certainly not the lynch pin in a decision to use one contractor over another.
 
Roger you have to stop thinking like an employee and more like a buisness owner. Last week I had a job that involved hanging a small chandalier and installing a new center light in a bedroom. half way through it the HO asked if I could change 3 light bulbs that were 25 or so feet high. I said sure no problem.it took me about half hour and I charged her an extra 100 bucks for it just for PITA factor. I had to move a bunch of furniture and carry my extension through a maze of "chachkies" And I cleaned the cobwebs in the corner of the ceiling. And the lady had no problem with that she acually was very happy that that she finally got them changed out, and she was asking me about landscape lighting possibilities in a few weeks.

the moral of this story is just cause you might think its to much money dont assume that your customer will. Beileve it or not there are plenty of people that recognize good service. Its 2008 not 1975 a hundred dollar bill is the new 20 dollar bill.
 
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MJJBEE said:
I just signed an invoce for an EC 4 hours $76.75 /hour plus a $10 truck charge ths seems in the ballpark to me.
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I was just wondering.
How did you determine this was in the ballpark?

What if it had been $95 per hour or $140 per hour?
Would it still be in the ballpark?

Did you come up with this based on some facts or was this just your gut feeling?
 
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No way with that repair

No way with that repair

satcom said:
We just got the car back from the garage, they worked on it for 45 minutes, and put in about $39 in parts, the bill was $527 and I am sure he will spleep well at night, knowing his family will be provided for, and his bills paid, your lucky to get an appointment to have work done there, we do have another garage just up the street that charges, less then half the price, only problem is you never know how long your car will be tied up and you may have to bring it back 2 or 3 times to get it right, he has no waiting lines at his place, and at times no business either.
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Thats over $500 an hour for an automotive tech. Cmon, nowhere in the US is that a legit price!
 
You guys are the best. I had a rough one today and started second guessing myself and my pricing. You have reaffirmed my faith in what I am worth as a contractor and reminded me of the things in life that are important.

Thanks for the kick in the ^%$!!:wink:
 
KnobnTube said:
Thats over $500 an hour for an automotive tech. Cmon, nowhere in the US is that a legit price!
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Some of this stuff should be taken with a grain of salt.

More power to the 'flat raters', I say. Basically, they have figured out a way to charge more per hour by using a different presentation to the customer. Those who are not generally succeptable to these types of gimmicks may have a difficult time swallowing it. It takes a superb 'salesman' and a naive customer. I'm neither of those.
 
ike5547 said:
More power to the 'flat raters', I say. Basically, they have figured out a way to charge more per hour by using a different presentation to the customer.
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Which appears better to the customer? A "flat rate" fixed price, or giving them an hourly rate with no guarantee of how long the job could take, therefore no cap to the potential price of the job?

If you quote a price you are working for a flat rate anyway.
 
ike5547 said:
Some of this stuff should be taken with a grain of salt.

More power to the 'flat raters', I say. Basically, they have figured out a way to charge more per hour by using a different presentation to the customer. Those who are not generally succeptable to these types of gimmicks may have a difficult time swallowing it. It takes a superb 'salesman' and a naive customer. I'm neither of those.
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Your kidding right.

Auto repair goes by book rate and if the book says it is a 3 hour job that is what you pay even if the guy fixes it in 15 minutes.

And flat rate pricing is fair too everyone. A lot of the work I do could be hard to judge time on for a lot of contractors and when giving a price they will figure more time to cover themselves. As for selling, the work we have done sells itself, I have been in business for almost 6 years (not that long) and have had not one complaint. customers love it when they pay exactly what was quoted.
 
peter d said:
Which appears better to the customer? A "flat rate" fixed price, or giving them an hourly rate with no guarantee of how long the job could take, therefore no cap to the potential price of the job?

If you quote a price you are working for a flat rate anyway.
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I'm always willing to provide the customer with a cap to the price based on a worst case scenario. My estimates are alway based on worst case scenarios. If the customer is unwilling to accept it I take a walk.

Flat rating appears to be a cookie cutter aproach. The price is fixed at a minimum before you arrive to look at the job. Instead of a minimum price set on a specific case by case method the minimum is set more general basis and can be applied across a broader spectrum of jobs. If that works for you that's great and I'm not faulting you for it. Who doesn't want to make more money?
 
bikeindy said:
Your kidding right.

Auto repair goes by book rate and if the book says it is a 3 hour job that is what you pay even if the guy fixes it in 15 minutes.
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I generally tend to explore my options before I just accept something like that. I do not pay for my auto and truck repairs by a 'book rate'.
 
Here in Texas it takes 6 years to become a master electrician. Most people take 8 or 10 or more. Compare that to how long it takes to become a doctor or lawyer.

Ok, now you have been in it 20 years or more. Hows your back? Hows your knees? Whats that worth.

Charging too much is one of the last things you should worry about.
Give excelent service, do a above average job, be proud of what you do, work clean, you will be able to charge what you need to .
 
ike5547 said:
Some of this stuff should be taken with a grain of salt.

More power to the 'flat raters', I say. Basically, they have figured out a way to charge more per hour by using a different presentation to the customer. Those who are not generally succeptable to these types of gimmicks may have a difficult time swallowing it. It takes a superb 'salesman' and a naive customer. I'm neither of those.
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you sir, have left me speechless...
 
ike5547 said:
I'm always willing to provide the customer with a cap to the price based on a worst case scenario. My estimates are alway based on worst case scenarios. If the customer is unwilling to accept it I take a walk.

Flat rating appears to be a cookie cutter aproach. The price is fixed at a minimum before you arrive to look at the job. Instead of a minimum price set on a specific case by case method the minimum is set more general basis and can be applied across a broader spectrum of jobs. If that works for you that's great and I'm not faulting you for it. Who doesn't want to make more money?
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you are woefully misinformed...
 
KnobnTube said:
Thats over $500 an hour for an automotive tech. Cmon, nowhere in the US is that a legit price!
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Then you have never been to a new car dealer to have work done, how do you figure that any automoutive tech makes thay kind of money, you have no idea of the cost for operating a service station operation, these guys have a large investment in prime location properties, again another guy thinking all the money comming in is profit, with no idea of costs of doing business.
 
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