Flat rate pricing

[StephenKG]

I am a new EC starting out, an up to this point I have been doing service jobs with time and material. I have been looking into flat rate pricing, and was wondering how it has worked for some. How to come up with a good set of solid prices to use and be able to quickly and confidently quote to customers.

 

[WarrMann]

I only do flat rate pricing, unless it's a trouble shoot, or something stupid like they just want me to change bulbs. Doing time and material is a good way to start developing your per job pricing. For example, a can light install (for just one in this example) might cost you $15 for the can, $15 for the trim and bulb, and $10 in wire. The install might take around 45 minutes. So, you have 45 minutes of time, and $40 in material. Add %20 into materials, and add what you would charge for an hour of your time. This usually puts me between $175 and $250 for a typical can light. Keep in mind that this would be off of an existing light point in the ceiling. If that doesn't exist, then you can then charge them for the switch leg as well. The best way, in my opinion, to develop your prices is through experience. Once you know how long a job should typically take, and the materials needed. Getting that price figured out per item will start to come naturally. Over estimate the time you think you need. That'll help you with not getting screwed when you run into trouble and have to totally change your plan of attack for the job.

I've also taken a look at bigger residential companies price books. I know some guys with companies like mr. Sparky. That will help you see just how detailed they can get on itemized pricing. Best of luck out there on your own.

I am a new EC starting out, an up to this point I have been doing service jobs with time and material. I have been looking into flat rate pricing, and was wondering how it has worked for some. How to come up with a good set of solid prices to use and be able to quickly and confidently quote to customers.

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[Fulthrotl]

I am a new EC starting out, an up to this point I have been doing service jobs with time and material. I have been looking into flat rate pricing, and was wondering how it has worked for some. How to come up with a good set of solid prices to use and be able to quickly and confidently quote to customers.

here is a good suggestion, in my experience.

https://ellenrohr.com/the-bare-bones-biz-plan/

get the plan. i think it's all of $10.
take a weekend, and do what she says. it isn't any fun.
i don't care. do it anyway.

you will end up with a spreadsheet that will tell you how much
you need to bring in each hour to not have to eat cat food.

the number will make you gasp. this is why you need to flat rate
the jobs. if you tell someone what you are going to make an hour
from their job, they will throw up.

case in point. service change, overhead feed, from 60/100 amp to 200 amp.
$2,275.

i'll do them all day at that price. $700 in materials, $1,500 for you. a days work.

i'll quote it over the phone, after a discussion, and a photo from the customers
cellphone. let's say one out of ten sucks, and i have more work than normal, or
more material expense. so i only make $1,000 instead of $1,500.

i've saved TEN round trips to look at chit i don't need to look at to give a price.
around here, southern california, ten round trips is three days.

with the three days i've saved, i can do three service changes, making $4,500
and losing $500 on that one job.

so i'm $4,000 ahead, and have cut my hours worked to do it.

if i'm doing T&M, i'm making $85 an hour nominal, and 25% on the material.
and the only time i'm doing that is if i cannot determine the scope of the work.

 

[romex jockey]

FR is basically reducing everything to a bid, usually sight unseen

Lots of contractors aim high doing it, assuming they'll have to eat the unforseen few.

~RJ~

 

[Coppersmith]

here is a good suggestion, in my experience.
https://ellenrohr.com/the-bare-bones-biz-plan/

get the plan. i think it's all of $10.
take a weekend, and do what she says. it isn't any fun.
i don't care. do it anyway.

you will end up with a spreadsheet that will tell you how much
you need to bring in each hour to not have to eat cat food.

the number will make you gasp. this is why you need to flat rate
the jobs. if you tell someone what you are going to make an hour
from their job, they will throw up.

Let me put a sharper point on what Fulthrotl is saying. There are two separate issues here:

1) You don't know what the correct labor price to charge is until you add up ALL your costs (it's easy to forget some), divide by the number of billable hours available, and add an appropriate hourly profit. Ellen's book will walk you through doing that. (The correct price has NOTHING to do with whatever anybody else is charging.) Materials and travel expenses are additional.

2) The correct price will be higher than most customers want to hear, so don't tell them. Quoting a fixed price avoids giving then an hourly rate. For some reason, if you give them a fixed price, they are much happier and you will be much happier too.

 

[Coppersmith]

FR is basically reducing everything to a bid, usually sight unseen

Lots of contractors aim high doing it, assuming they'll have to eat the unforseen few.

It's very expensive to go look at jobs (typically $100-200 when you consider labor time and vehicle expenses). Therefore you learn to ask the correct questions over the phone and quote from that. I generally will not go look at a job unless it sounds like about $1500+. People who are new at estimating will go look at almost every job, they have to. Once you have enough experience it's not necessary.

Even customers who are paying T&M want an idea of what the total might be. It's not a fixed rate thing. However, since fixed rate jobs compensate the EC better, it's easier to take a risk if you guess wrong. If I feel like I don't have a good handle on the job, I can schedule the work with the understanding that I will give a fixed price after I look at it and they are under no obligation to accept. This is even easier if there is a troubleshoot component. I give them an upfront troubleshooting cost and offer to give them the full fixed price once I figure out what the problem is.

 

[romex jockey]

I argee, and basically operate in step with what your saying Copperdude.

I've been at this a long time, and am not some philathropic entity, nor am i out to save the planet

As ex, Thursday i did 30' of #2 seu,w/head and plastic clips, all on a 1 story dwelling

Took me a hr, coordinate w/poco prior (email)

quote= $800 , happy customer, paid on the spot

but here's the kicker, he didn't shop around

~RJ~

 

[Rdcowart]

At the company I work for now our labor is based on the operating costs of the estimate that van for that day plus the overhead of the office divided by number of vans we are running a day. For example we maybe about $1350 a day and $439 per service hour. Now we do have a price book and that has pre done prices in it that has been adjusted for our market. You can’t just charge but so much for certain tasks. But I would still recommend looking at every job because they are all different. At every job we go to we do a safety inspection, we check panel, age of smoke detectors, bonding of gas line, etc. This will help you sale more, and adds value to your customers. We do have a diagnosis fee so that some of our time is covered as well. We tell every customer we do up front pricing. If the customer doesn’t go with any work we charge a dispatch fee. Plus we charge a dispatch fee to each job just to cover some of our expenses. If the work is over a certain amount we will wave dispatch fee, just so we don’t lose a sale or to make the customer feel like they are getting a better value. I’m setting up my company on the side now and I’m going to do it this way. Now there are times when flat rate pricing does bite you in the butt. In the end it’s all about the law of averages.

 

[JFletcher]

. For some reason, if you give them a fixed price, they are much happier and you will be much happier too.

Because there are no surprises for the customer with a fixed price. My mother never wanted to pay anyone by the hour, but by the job.

Taking something like a panel change, probably 9 out of 10 people would come out slightly ahead if going by time and materials versus a flat rate. Those nine people will be happy, and maybe two of them will tell two of their friends what a good job you did. The 10th person though with the nightmare job that winds up paying substantially more for hourly than he would have with a flat rate will not be happy and will tell 5 to 10 people about how bad you are. In the end you wind up hurting yourself financially and reputation wise even though you save 90% of your customers money over the next guy.

With the aforementioned panel change, they're usually not a lot of surprises to mess up a flat rate, so I'm curious as to how you guys accommodate the inevitable time spent finding crossed up neutrals tripping afci Breakers. With the construction methods here and rather relax code on the breakers, it's not a big deal, however I could see it being a massive headache in areas on the 2014 or 17 NEC.

 

[Coppersmith]

so I'm curious as to how you guys accommodate the inevitable time spent finding crossed up neutrals tripping afci Breakers.

Most panel changes do not extend the branch wiring more than six feet so no AFCI's are required. Before that rule was in place, I would bend over backwards to not extend the branch wiring to avoid AFCI's.

ETA: If I did quote a job where the panel was being relocated and required AFCIs be added, I would quote high and use a (yuk!) GE panel for their non-gfci AFCI's.

 

[Rdcowart]

If we end up having to use arc faults we just add the cost plus 25%. Plus in our job description we put there maybe extra cost involved in code or permits requirements as per the inspector.
99 percent of the jobs have been planned to the T and there are no extras. But every so often there’s that one job. If it’s something Minor we just eat the cost of it. It goes back to law of averages.

 

[Ponchik]

I have been on flat rate bases for about 7 years and been very happy. I have been using

this system

with excellent results.

IMO, you also need to consider

sale training

. You are a technician but a business owner as well. As a business owner Sales should be on top of your list. At fist I was skeptical but after taking the first 5 day training I am a believer and do see the results when I apply what I have learned.

 

[Stickboy]

I have been on flat rate bases for about 7 years and been very happy. I have been using with excellent results.

IMO, you also need to consider . You are a technician but a business owner as well. As a business owner Sales should be on top of your list. At fist I was skeptical but after taking the first 5 day training I am a believer and do see the results when I apply what I have learned.

Edward, I couldn't agree more with your comment on sales training. A mentor of mine once said "If you're in business, then you're in sales!", like it or not. I have done the same sales training you link to above, one of the best in the business IMO. How has the software worked out for you? I'm actually doing a live demo of the very same one tomorrow. Was using JOBI but it has not worked out so well.

Also, props to whoever mentioned Ellen Rohr. She's another great wealth of info and a no nonsense straight shooter. Heard she'd left consulting and gone back into the plumbing franchise bizz again though.

To comment on what others have said above regarding pricing, the formula is pretty simply but CRUCIAL!
MATERIAL COSTS + LABOR COSTS = JOB COSTS
JOB COSTS + OVERHEAD + PROFIT = SALE PRICE

Pricing the job based on anothers price book or hourly rate is suicidal!
Do the math and know the right price for YOUR business. Period.

 

[romex jockey]

Pricing the job based on anothers price book or hourly rate is suicidal!
Do the math and know the right price for YOUR business. Period.

very true

the fact is FR has existed long before this soul suckin' device was around

which invites all the 'teach but can't do' vultures in

they would be the one entity i would caution any startup to avoid

~RJ~

 

[Stickboy]

very true

the fact is FR has existed long before this soul suckin' device was around

which invites all the 'teach but can't do' vultures in

they would be the one entity i would caution any startup to avoid

~RJ~

I can appreciate your sentiment regarding mobile/digital devices (I'm assuming thats what you're referring to when you mention the soul-sucking devices.
However, for better or for worse, they are here to stay and they do have some decided benefits over the old fashioned price books.(the sales statistics and customer database features are pretty nice!)
That said, I believe that even if you use mobile app for your FR, you should still carry and know how to use the old 3 ring price book.
Some areas lack cell service, sometimes you forget to charge your device, sometimes the app just crashes for no reason.
A price book is a good backup and a good way for new techs to become familiar with your FR database.
And, yes, I agree there are TONNS of FR apps out there claiming to do just about EVERYTHING short of bringing world peace.
But, its better to start with something than nothing, and I would have been completely hopeless starting out in FR without some kind of pre-built FR book or app.
Its been no small task, but adapting and tweaking an existing FR book as you go is still WAY easier than building one from scratch IMO.
So i'd have to disagree a bit as I do think a prebuilt price book or app is a good way to get started.
However I'd recommend to look for something as simple and economical as possible: the main goal here is just to get going with flat rate, not reinvent your entire business model. ($200/mo should get a subscription to something decent).
Mobile scheduling, dispatch, inventory tracking, geofencing, customer databases, sales stats ect are all great things......if you NEED them.
I'd recommend to anyone getting started in FR to buy a simple pricebook or basic app, you can always upgrade to something better once you outgrow it.

(PS I'm going to start a thread regarding FR apps, databases and sales training if anybody wants to come join. I'll try to figure out if I can post a link to the new tread on this one)

 

[Adamjamma]

Because there are no surprises for the customer with a fixed price. My mother never wanted to pay anyone by the hour, but by the job.

Taking something like a panel change, probably 9 out of 10 people would come out slightly ahead if going by time and materials versus a flat rate. Those nine people will be happy, and maybe two of them will tell two of their friends what a good job you did. The 10th person though with the nightmare job that winds up paying substantially more for hourly than he would have with a flat rate will not be happy and will tell 5 to 10 people about how bad you are. In the end you wind up hurting yourself financially and reputation wise even though you save 90% of your customers money over the next guy.

With the aforementioned panel change, they're usually not a lot of surprises to mess up a flat rate, so I'm curious as to how you guys accommodate the inevitable time spent finding crossed up neutrals tripping afci Breakers. With the construction methods here and rather relax code on the breakers, it's not a big deal, however I could see it being a massive headache in areas on the 2014 or 17 NEC.

two things here. First thing.. I prefer a flat price ahead of time rather than a piecemeal rate... if you run into problems that you can honestly show me were unforeseen..then we can negotiate more money on that...
but, at same time, I will never give a price on a full panel change unless I have tested a few circuits first... I have run into too many jobs that were nightmares.. crossed wires, additional circuits needed that meant wall repairs and painting... etc.. and then customer yelling that I said it would only cost X amount...

So, it is better to check it out first many times... I am sure everyone has had that panel swap where they had two circuits that did not work, but they did not know until testing.. hours spent trying to find the problem only to be told.. Oh, uncle sal disconnected those back in the eighties...

 

[Stickboy]

I can certainly appreciate the above comment, there is always the risk of unforeseen or unforeseeable conditions on any job.
Have had my fair share of the types of jobs described above too.
However the theory behind FR pricing is that on AVERAGE you will come out ahead (provided you've set your pricing up correctly).
As someone else mentioned (I think) its what Cassinos do: Statistically the house knows they win more than they loose, thats how they make money.
That said, the odd time where I loose my shirt on a job, we DO sit down as a team and discuss what happened and what we could have done better / or how to avoid said situation in the future.
FR pricing also requires that we keep a close eye on all our numbers regularly to make sure we are pricing jobs high enough to stay in the black.
But I think there is another, more important issue at stake here: customer service.
In my books good customer service isn't about just retuning phone calls and doing a "good job", it's about considering every aspect of my business from the customers perspective including how my customer is charged for the work we do.
In the above post (forgive me if I have misinterpreted you, but it sounds like you're saying T&M is OK on a job where conditions are unforeseeable), the customer is the one taking all the risk for the panel change out: if there are unforeseeable problems, the customer has to pay more.
I know lots of contractors do this and I completely understand why: the contractor doesn't want to risk loosing his shirt pricing a job where he can't predict all of the factors involved.
As a business owner avoiding loosing money is a very legitimate concern, but also consider it form the customers perspective.
IMO making the customer take all the financial risk for MY profession is NOT good customer service.
When customers ask "How can you give me a price upfront when you don't know what might happen?" I tell them that, "I'm an Electrical Professional, and good customer service to me means that I take the risk for the job so that you don't have too."
I know this may be a bit off topic, but I really do believe that Flat Rate pricing is not just about contractors making more money, I believe its also (perhaps even more so) about respecting your customer and giving them good, professional customer service.
When we can do THAT as an industry, I believe the rising tide of professionalism will raise ALL ships.

 

[Gary11734]

I would never do T&M. Flat rate pricing is like a bid. You assume the risk but the price is settled before you start the work.

I would rather have a higher bid over the phone, taking some risk, and get fewer but at a better price, as to a bunch of T&M jobs that barely keep me alive. And, the customer will still complain under T&M as they watch you and say you are going too slow to add dollars to the bill.

In construction, I would refuse to do T&M. If you don't want me to price upfront, come to an agreement before we start the work, then get someone else to do it...

And, I could double and triple the profit as a bid and negotiate, as to T&M.

Flat rate sounds like the way to go... IMO...

 

[Gary11734]

I can certainly appreciate the above comment, there is always the risk of unforeseen or unforeseeable conditions on any job.
Have had my fair share of the types of jobs described above too.
However the theory behind FR pricing is that on AVERAGE you will come out ahead (provided you've set your pricing up correctly).
As someone else mentioned (I think) its what Cassinos do: Statistically the house knows they win more than they loose, thats how they make money.
That said, the odd time where I loose my shirt on a job, we DO sit down as a team and discuss what happened and what we could have done better / or how to avoid said situation in the future.
FR pricing also requires that we keep a close eye on all our numbers regularly to make sure we are pricing jobs high enough to stay in the black.
But I think there is another, more important issue at stake here: customer service.
In my books good customer service isn't about just retuning phone calls and doing a "good job", it's about considering every aspect of my business from the customers perspective including how my customer is charged for the work we do.
In the above post (forgive me if I have misinterpreted you, but it sounds like you're saying T&M is OK on a job where conditions are unforeseeable), the customer is the one taking all the risk for the panel change out: if there are unforeseeable problems, the customer has to pay more.
I know lots of contractors do this and I completely understand why: the contractor doesn't want to risk loosing his shirt pricing a job where he can't predict all of the factors involved.
As a business owner avoiding loosing money is a very legitimate concern, but also consider it form the customers perspective.
IMO making the customer take all the financial risk for MY profession is NOT good customer service.
When customers ask "How can you give me a price upfront when you don't know what might happen?" I tell them that, "I'm an Electrical Professional, and good customer service to me means that I take the risk for the job so that you don't have too."
I know this may be a bit off topic, but I really do believe that Flat Rate pricing is not just about contractors making more money, I believe its also (perhaps even more so) about respecting your customer and giving them good, professional customer service.
When we can do THAT as an industry, I believe the rising tide of professionalism will raise ALL ships.

As long as both customer and the person doing the work have a smile on their face as you complete the work and dollars exchanged, I really don't care if I made 1000 percent on the job. The key here is, is everybody happy. The same concept happens when you buy a car... Yes, flat rate IS about making more money, period! The customer does not have to accept this since I see hundreds of service trucks on the road... ; and doing T&M!