jmsbrush
Senior Member
- Location
- Central Florida
From reading your background, this is why you believe that Price books do not work. Is it true that are price books are not created equal? Yes.
A good book or program will cover any situation that an electrician will encounter in residential and light commercial work.
There are thousands of succesful companies who use flat rate pricing on a daily basis.
Here are some reasons why, companies flat rate.
If you are against flatrate for service work, here are a couple of things that you will need to conquer if you run any employees on T&M
1. Pricing in front of your customers. The idea is not to look at the job with your customer, and then say I?ll be right back and go to your truck and figure a price. The idea is, is to take out your customized pricing manual right in front of your customer so they can see that you are pricing from a standardized book. They will have a peace of mind knowing that you are giving them fair prices and you are not just making them up based off of, who they are, where they live and ect.
2- Billing, for all paid hours (if the tech is only on the jobsites for 4-5 hrs a day, how do you cover the other 3 hrs that he is getting paid?) Regular estimating software does not do this. T&M does not do this.
3- Getting Paid - how can you fully expect a customer to write you a check on the spot if they didn't know what the total would be? They figured the job would be $300. You quoted them $70/hr, but it took you 6 hrs +mat. You give them a bill for $600. They don't have the money right now. They'll send you the check. With flat rate, they know up front how much. If they don't have the money, they wait.
4- Employee motivation ?As an employee, if I work for a T&M contractor, I know exactly how much money I?m going to make today, tomorrow, this week, next week, etc. I also know that everyone else is making the same rate. What's my motivation to work harder or faster? If I bust my hump and get jobs done quicker, who wins? The customer, because they get a lower price. I get punished by getting sent to another job.
But if I take my time and go slow, who wins? I do. I get the same pay, but for less work. Who loses? The customer, they pay more for the same job.
With flat rate, I give the customer a price. I get done faster and we both win. The customer gets back to their normal lives faster and I get better pay. I get to move to another job and make more money. The customer knew they were paying $X whether I was there 2 hrs or 2 days. The longer I was there, the more of a nuisance I became to the customer.
5- Quality of work - how can you really say that quality is you main goal when T&M is all about fast and cheap. Give a cheap hourly rate (that's what the customers have been taught by contractors) and get it done fast. The entire time the customer is watching the clock and seeing their bill rise higher and higher. They don't know the final outcome. The longer it takes, the more worried they get.
6. Your Expenses - Good Flat rate software will help determine your selling price based off of all your indirect and direct expenses to run your company.
Customers always undervalue what something will actually cost (wonder where they learned that?) How many times has someone called for a problem and you come to find out they figured it would cost about $50 to fix? (that is total charge for travel, repair, parts, etc)
How you expect them to really understand that the 4 recessed lights they wanted in the upstairs bedroom (that they thought would take you about 2 hrs to do -at your $70/hrly rate- and should cost about $250-$300 with the parts) actually took you about 5 hrs(because their attic was full of junk, floor boards were nailed down, there were cross braces in between the beams, etc) Now you give them a bill of $500 - after you busted you tail in their attic- and they think you ripped them off for $200.
And they say "I won't pay more than $300. You worked too slow" And to top it off, it's an employee of yours that was there (so you don't even know what actually happened) But you already invested your material and labor. What do you do? You don't have a signed contract for any total amount. You have no legal leg to stand on.
7. Employee?s now can price jobs correctly, the idea is to send every tech out with the flat rate manual so that they can do the estimates. You personally can probably do 5 estimates on a good day. Now imagine have 5 techs in the field (each doing 2 estimates/day) and doing the work.
Flat rate books are a way for you to put your knowledge in a book form to send with them. If it's just you in the field, you should know your material costs well enough and be able to judge your install time well enough to give a total price for just about anything you do. Your techs will not. So the book is a way for you to give them your knowledge and help grow your company.
Flat rate manuals are based on your business and cost As a matter of fact, one of the things that needs to be done in order to create your flat rate manual is that you need to actually figure out your costs. Unlike T&M where most guys call around and get everyone else's rate and charge around the same price.
You will almost never get a customer to agree to $125/hr plus material. However, every day our customers agree to $400 for a job that takes us 2 hrs and had $50 in material. Simply because they know the total cost. I tell them $125/hr and they get scared. I tell them $400, no matter how long it takes, and they can either deal with it or not. But at least there is no fear.
