Flat rate pricing

[Rewire]

Everyone has to get the idea out of their mind, that there is a book that prices a job, the book is only a guide to additional data, for developing a price, as far as misuse of any pricing, it is common in todays markets, there are plenty of good companies offering flat rate pricing, and in some states, you are required by law to give the consumer a total price for the work (A FLAT RATE) you can not charge crime and material, or any other unknown, in my area the flat rate companies have pretty much captured the service market, they eat the lunch of most of the low priced, so called low overhead guys.

"Crime" and material...now thats funny

 

[cowboyjwc]

I think a lot of guys use FRP even when they bid bigger jobs, as least my old boss used to. $25 an outlet for romex, can lights were more of course, panel is $X, flex might be $50 an outlet, usually came out about right. I know he owned a nice house two nice cars, and took very expensive vacations every year, so he was probably doing ok.

 

[jmsbrush]

Ishium, you are very close to how it works. Flat rate prices means if done correctly, is that all prices are based on your costs of doing business. Once your break even cost has been figured out, you can then apply that to your flat rate program. All prices for all items are predetermined for you in your standard pricing guide.
For example, If you have installed 100 switches as a service electrician, you will have a pretty good average on how long it takes to install that switch. Out of those 100 switches, some of them will pull out correctly with 6 inches of wire and are properly grounded in a plastic box. Some will pull out with only one inch of wire and you wonder how the person before you even got the switch in, in the first place. So when you do get it out, you see that you are working with a metal box that is not bonded. Regardless of the scenario after completing the task many times you will get an average time, there for you can get an average price.
Good books will have six Colum pricing to help you sale service agreements and yes it can be done in electrical.

(Standard rate) 1st task $124
(Standard rate) 2nd task $49

(Service Agg. rate) 1st task $105
(Service Agg. rate) 2nd task $41

(After Hours rate) 1st task $224
(After Hours rate) 2nd task $174

Of course it would be laid out nicer than this in your book but its just to give an example.


A good system will have most every possible scenario that you come across. So pricing a job on the spot will not be a problem. It also gives you a wonderful chance to up sell on items.
I hope this helps if anyone has any questions just pm me.

Satcom you seem to have a good handle on this and I am curious as to how the whole system works. I'm not asking for a tutorial necessarily but just an idea/ example of how this works.

If Mrs. Jones calls and wants a light in the bedroom and there is no existing electrical how do you start? Is there a set price for cut in single pole switch, light box and fixture install and than you add those numbers together? And than are there multipliers or some such device to add for plaster, insulation, access above versus no access?

And then it seems that the heart of this system is not necessarily the light install but the opportunity to tell Mrs. Jones that she needs GFCI's in her baths and dimmers would be a great idea and you need to look at the panel to make sure everything is safe.

Am I in the ball park with any of this? From what I can glean from what I've read the above is my best guess into this method.

And FWIW I'm not against this system necessarily but I have seen too many instances of abuse to make me entirely comfortable with the whole framework of stressing the upsell above all elst. The most obvious case that springs to mind is a job I did about 5 years ago. The HO was a single mom that had an issue with some wiring in the basement. She first called out one of the major franchises to look at the work. Long story short they told her that her panel had signs of arcing on the bus in addition to some other safety concerns and that she needed a service change. She didn't like the price and called someone else (me) in to evaluate the situation. As a rule I don't like throwing other ECs under the bus and I really tried to find something wrong with the panel, breakers, bus etc. Aside from being about 20 years old and some sloppy work there was nothing wrong with it at all. It makes me wonder how many people are sold things that they are scared into buying when it wasn't necessary and I really feel that the car salesman approach of "produce numbers or your out" encourages that.

 

[jmsbrush]

The above example is for a switch replacement.

 

[Rewire]

I looked at a cost book for an AC flat rate system and most of their tasks are pretty straight forward without much variance.Most of the tasks were maintenace type work which would probably be the easiest thing to develope. I am looking at flat rate pricing as a way to collect at the end of the call.It always seems like just when the tech is about to figure the bill the customer will ask for them to look at one more thing ,with a cost book the tech can reprice the job without having to call in.

 

[juptonstone]

Flat rate pricing has its uses, however it can be a vehicle for dishonest employees to rip people off. For some things I use flat rate...e.g.:

Paddle Fans $89.00 each with customer supplied fan - assuming that the original fan was properly mounted. (I explain this to the customer). Home Depot and Lowes charge $99 for the first one and $79 or 89 for each one thereafter.

Smokes: $50.00 each
CO/Smokes $79.00 each

Replace wall mounted sconces/garage lights: $49.00 each

Replace small ceiling mounted lights/chandaliers/pendants: $69

Larger chandaliers (especially with long chains on high ceilings: $125.00 and up.. requires more time to satisfy customer with exact height -adding/removing links, etc.

Really large chandaliers - requires two guys and a large ladder... $200.00

Chandaliers with crystals that need to be hung are not flat rate priced!

Post lamp and photocell (basic plastic lamp) $99.00 other lamps are obviously more.

Remove flourescent light and replace with recessed lights/high hats: $150 each

Hope this helps...

 

[brantmacga]

Flat rate pricing has its uses, however it can be a vehicle for dishonest employees to rip people off. For some things I use flat rate...e.g.:

Paddle Fans $89.00 each with customer supplied fan - assuming that the original fan was properly mounted. (I explain this to the customer). Home Depot and Lowes charge $99 for the first one and $79 or 89 for each one thereafter.

Smokes: $50.00 each
CO/Smokes $79.00 each

Replace wall mounted sconces/garage lights: $49.00 each

Replace small ceiling mounted lights/chandaliers/pendants: $69

Larger chandaliers (especially with long chains on high ceilings: $125.00 and up.. requires more time to satisfy customer with exact height -adding/removing links, etc.

Really large chandaliers - requires two guys and a large ladder... $200.00

Chandaliers with crystals that need to be hung are not flat rate priced!

Post lamp and photocell (basic plastic lamp) $99.00 other lamps are obviously more.

Remove flourescent light and replace with recessed lights/high hats: $150 each

Hope this helps...

You must have the lowest operating costs on the face of the earth.

Those prices look extremely low; 25%-50% of what we charge for same tasks. Some of those prices are a little more in line w/ our additional task rates, but still lower.

I can't imagine one service tech being able to do more than $2300/wk at those rates.


As far as being a tool to "rip people off"; when implemented properly I can't see the possibility of that happening. Flat-rate ensures an equal price for all on the same tasks.

 

[jmsbrush]

I agree, most people that view flat rate as a rip, most likely have never truly used a cost calculator and allowed for all expenses in running a successful service department. Maybe they did look over the expenses but did not departmentalize their operation in their business.
Therefore contractors that have invested in software and education know that their prices are higher than their competition, yet they charge what they need to charge to run a successful business and not letting what people say or think to deter them from running a successful shop.
Whereas the outside perceive, they are rip off artist because they could?ve installed that service much cheaper.
What is the old clich?? ?If you charge to little, you are a hack. If you charge too much, then you are a rip off artist.?

 

[satcom]

I agree, most people that view flat rate as a rip, most likely have never truly used a cost calculator and allowed for all expenses in running a successful service department. Maybe they did look over the expenses but did not departmentalize their operation in their business.
Therefore contractors that have invested in software and education know that their prices are higher than their competition, yet they charge what they need to charge to run a successful business and not letting what people say or think to deter them from running a successful shop.
Whereas the outside perceive, they are rip off artist because they could’ve installed that service much cheaper.
What is the old clich?? “If you charge to little, you are a hack. If you charge too much, then you are a rip off artist.”

Many of the guys that look at Flat Rate as a rip, are not going well in their own attempt at business, and refuse to learn basic business practices, and understand that you need to produce more then a week to week just get by income, to grow a business into something that will grow, and provide salary plus benies, like medical vacation, and retirement funding.

 

[brantmacga]

. . . .and provide salary plus benies, like medical vacation, and retirement funding.

That's the key thing that none of these guys think about. Those prices listed in the post I quoted above seem far too low to adequately compensate a good service tech and earn the company a good profit. I don't see how one tech could turn over $3k a week in sales at those rates; which raises the question, just how little are the techs making? Hourly rates or commission are definitely important, but type of medical insurance are they providing, how many vacation days, and how much retirement are they earning? Can't be much.

 

[jmsbrush]

What I have found is that most small electrical contractors are great electricians. One day they decide to follow the American dream an become an EC.
Great electricians do not mot make great business men. It took many years to become great a electrician. Becoming a great business man or a success in your business does not happen overnight.
There are many paths you can take to quicken the process. I see many times that business decisions are made by feeling and not logic. I feel that, until us as EC?s as a whole, start educating ourselves on how to run an operate a successful business, things will remain the same.

 

[satcom]

That's the key thing that none of these guys think about. Those prices listed in the post I quoted above seem far too low to adequately compensate a good service tech and earn the company a good profit. I don't see how one tech could turn over $3k a week in sales at those rates; which raises the question, just how little are the techs making? Hourly rates or commission are definitely important, but type of medical insurance are they providing, how many vacation days, and how much retirement are they earning? Can't be much.

At those low rates, they don't have a business, they have a job, and a very poor one at that, many of our area electrical, and some of the mechanical service companies have base rates of anywhere from $150 to $200 that they use to estimate the flat rate tasks with, and even at those rates they are on the edge of break even costs, so the guys with $79 or $89 rates are really in the mud, and unless they have some other income, they, they are going to have a rough go at it.

 

[Rewire]

Flat rate pricing has its uses, however it can be a vehicle for dishonest employees to rip people off. For some things I use flat rate...e.g.:

Paddle Fans $89.00 each with customer supplied fan - assuming that the original fan was properly mounted. (I explain this to the customer). Home Depot and Lowes charge $99 for the first one and $79 or 89 for each one thereafter.

Smokes: $50.00 each
CO/Smokes $79.00 each

Replace wall mounted sconces/garage lights: $49.00 each

Replace small ceiling mounted lights/chandaliers/pendants: $69

Larger chandaliers (especially with long chains on high ceilings: $125.00 and up.. requires more time to satisfy customer with exact height -adding/removing links, etc.

Really large chandaliers - requires two guys and a large ladder... $200.00

Chandaliers with crystals that need to be hung are not flat rate priced!

Post lamp and photocell (basic plastic lamp) $99.00 other lamps are obviously more.

Remove flourescent light and replace with recessed lights/high hats: $150 each

Hope this helps...

Lowes charges a cut throat price and you undercut it by ten bucks???

 

[satcom]

Lowes charges a cut throat price and you undercut it by ten bucks???

His prices are not flat rate, they are just plain flat, by looking at the prices he had, you can see he has no idea, how flat rate works, he must be loosing money on every job he does, and has no idea he is bleeding to death, but this is common for anyone that does not understand how step pricing works, or how adjusting to job conditions, can change a price, and a safe bet is he has no idea, what his break even costs are, and likely thinks every customer is looking for a low ball price, not service.

 

[Leestarkweather]

NTE Can work, too

NTE Can work, too

I see flat rate pricing as another method of getting at the same result: a fair price. I prefer to figure my bids on more of a T&M basis because that's what works for me. I can't believe the end result would be that much different either way. Finite mentioned "not-to-exceed bids." Now that's trouble waiting to happen! A client once told me he wanted me to do a job T&M with a not-to exceed price. I just laughed and pointed-out that if everything goes perfectly, he wins and if there are problems, I lose! Then I said he was basically saying to me: "let's flip a coin...heads I win, tails you lose!" Homey don't play that!

I do T&M with NTE a lot for my corporate clients. Many jobs have so many unknown conditions, if I bid it lump sum CMA for all worst case possiblities, it's way too high. But if I give (my existing, long time) customer a NTE that is 50% higher than my "everything goes perfect" lump sum bid would be, I always come in below the NTE and get paid for all the unknowns.

Typical job: 40,ooo SF Indus. Bldg. with EMT run on 2x4 blocks on roof around parapet. Bldg. was reroofed and roofer F****D up all emt feeding signs and Roof AC's. Was called in to replace an existing exhaust fan. Took pics of (very dangerous-sign ckts @277V and A/c's at 480V) EMT laying all over roof, and told Owner he better get fixed before rainy season. Of course bean counters want a lump sum bid. Told them I might have to replace all sign emt (400 Ft.) and #10 wiring, maybe a lot of HVAC runs, too. I told Owner $10,800 lump sum, or $9,200.00 NTE at T&M. Did job for $8,600, reusing some EMT (but not any couplings or wire) and fixing broken LT Flexes to A/C Disconnects. Owner was happy, Purchasing was happy, and I'll have the customer for another 15 years (just like the last 15).

 

[Rewire]

I do T&M with NTE a lot for my corporate clients. Many jobs have so many unknown conditions, if I bid it lump sum CMA for all worst case possiblities, it's way too high. But if I give (my existing, long time) customer a NTE that is 50% higher than my "everything goes perfect" lump sum bid would be, I always come in below the NTE and get paid for all the unknowns.

Typical job: 40,ooo SF Indus. Bldg. with EMT run on 2x4 blocks on roof around parapet. Bldg. was reroofed and roofer F****D up all emt feeding signs and Roof AC's. Was called in to replace an existing exhaust fan. Took pics of (very dangerous-sign ckts @277V and A/c's at 480V) EMT laying all over roof, and told Owner he better get fixed before rainy season. Of course bean counters want a lump sum bid. Told them I might have to replace all sign emt (400 Ft.) and #10 wiring, maybe a lot of HVAC runs, too. I told Owner $10,800 lump sum, or $9,200.00 NTE at T&M. Did job for $8,600, reusing some EMT (but not any couplings or wire) and fixing broken LT Flexes to A/C Disconnects. Owner was happy, Purchasing was happy, and I'll have the customer for another 15 years (just like the last 15).

So basically you left $2200.00 dollars on the table and you hope the customer stays with you until the next lowballer walks through the door.

 

[Leestarkweather]

So basically you left $2200.00 dollars on the table and you hope the customer stays with you until the next lowballer walks through the door.

That's your way of looking at it. My way is that the customer got very fair value for his money, didn't overpay and didn't get anything for free. I know I would rather have 10 repeat (longtime--over 10 years) customers that trust me completely than getting that extra $2200 out of the one job and finding out that I'm bidding against "the next lowballer" that come thru the door and says they could have done it for $10K.

I've been in business 30 years now, and over 30% of my work has been T&M for corporate clients, over 50% has been Design Build on a negotiated basis where I'm the only bidder, and less than 10% on competitive bidding. The fact that I don't wring every last penny out of every opportunity that presents itself lets me use the business model I prefer:
Last 10 years of sales: 18 Million Last 10 years of bad debt uncollectible $0
Last 10 years of advertising/marketing" $0 Last 10 years lawsuits against me or me against a customer: 0
Last 10 years of profit: I aint' gonna say, except it's above 10% net after my (avg. $150K) salary.

 

[Rewire]

That's your way of looking at it. My way is that the customer got very fair value for his money, didn't overpay and didn't get anything for free. I know I would rather have 10 repeat (longtime--over 10 years) customers that trust me completely than getting that extra $2200 out of the one job and finding out that I'm bidding against "the next lowballer" that come thru the door and says they could have done it for $10K.

I've been in business 30 years now, and over 30% of my work has been T&M for corporate clients, over 50% has been Design Build on a negotiated basis where I'm the only bidder, and less than 10% on competitive bidding. The fact that I don't wring every last penny out of every opportunity that presents itself lets me use the business model I prefer:
Last 10 years of sales: 18 Million Last 10 years of bad debt uncollectible $0
Last 10 years of advertising/marketing" $0 Last 10 years lawsuits against me or me against a customer: 0
Last 10 years of profit: I aint' gonna say, except it's above 10% net after my (avg. $150K) salary.

I,m a doctor ,I,m a lawyer ,I,m a movie star, I,m an astronaut and I own this bar......

 

[brian john]

T&M NTE with long term customers is a win, win, we have many customers we work utilizing this method and have been very successful satisfying the customers needs, making them feel they are getting the most bang for their buck while we make a profit.

There are many methods for making a buck in this business, not all methods work for all, but if you know your overhead and profit margins and track your work, there is no reason not to use this method.

Not all customers want bottom line, low price, many want reliable long term service from a contractor they trust.

 

[electricmanscott]

There are many methods for making a buck in this business, not all methods work for all, but if you know your overhead and profit margins and track your work, there is no reason not to use this method.

Good luck convincing the "my way is the only way" guys here.