The Complete Truth About Flat Rate Pricing

The Complete Truth About Flat Rate Pricing

Field service experts agree that flat rate pricing is essential. That's because customers will always compare their hourly pay to your hourly rate.

They sound the same don't they?

You'll never be able to justify a reasonable price for your skilled work.

We know it will work in your town because you flat rate now. Every time you walk up to your customer and try to explain what you found, you're interrupted with one question.

They ask "How much?" So you give them a range to fix it. You just used flat rate pricing.

What is Flat Rate Pricing?

Flat rate pricing (as our industry usually calls it) is simply offering to sell a finished product or service for a guaranteed price. Approximately 35% of the HVAC and plumbing industry uses flat rate pricing in their service departments. Essentially 100% already use it in their installation and maintenance departments.

Flat rate pricing is nothing new. It's been around about as long as money has. It is certainly not unique or unusual. Many industries use it including dry cleaners, tax preparation, accountants, auto repair, TV and VCR repair, computer service, copier service, computer programming, home warranties and so on. Even manufacturers use it to pay their dealers to perform warranty repairs. That’s because it makes sense. T&M is actually more unusual and less popular than flat rate pricing. Have you ever bought a home, car, or even a meal on T&M? Our industry seems to be one of the last remaining holdouts, clinging to T&M.

Eight out of 10 service departments are losing money and are a real drag on their companies’ bottom line. For years, service has been viewed as a necessary evil if you wish to be in the installation business. Businesspeople are anxious to convert their service department from a loser to a winner. Flat rate pricing is a tool that can help.

Call us today on 1300 307 413 to find out why business owners are turning to Flat Rate Plus or Contact Us.

Why Flat Rate Pricing is Absolutely Essential

You can’t charge enough. That’s why! Most companies don’t charge enough for labour to cover the overhead associated with that labour.

Even if you knew how much it costs you to provide an hour of labour (and you would be surprised how high it is), you could not get it using the flawed time and material presentation.

Every time you quote an hourly rate, your clients compare your hourly rate to their hourly pay. That’s an unfair comparison isn’t it?

You will never have a chance to explain overhead. Most customers know nothing about overhead. In fact, they confuse gross profit with net profit. You must get that hourly rate business out of your vocabulary. The customer is really only interested in the final price.

Call us today on 1300 307 413 to find out why business owners are turning to Flat Rate Plus or Contact Us.

An Itemised Invoice Invites Criticism

Have you ever quoted your hourly rate and heard the customer say “$75 per hour, who makes $75 per hour? How can you get away with that?” Anytime you itemise an invoice, you are inviting unfair criticism from uneducated consumers. You will never be able to justify your labour rates.

With flat rate pricing, you will solve that problem. Customers will no longer make unfair comparisons. In fact, based on what other industries charge, our industry is a real bargain.

How Flat Rate Pricing Makes You More Money

Flat rate pricing can give you the opportunity to charge a little more for your great service without the customer becoming unreasonably concerned about it. Consider this example.

 

Time and Material

Flat Rate Presentation

Change

Retail Price of Repair

$ 225.00

$ 255.00

+ 13%

         Labor Charges

$ 100.00

Not Shown

 

         Material Charges

$ 125.00

Not Shown

 

Cost of Material and Labor

$   90.00

$   90.00

No Change

Gross Profit

$ 135.00 (60%)

$ 165.00 (73%)

+ 13%

Overhead (fixed)       

$ 112.50

$ 112.50

No Change

 

 

 

 

Net Profit

$   22.50 (10%)

$   52.50 (21%)

+ 233%

Who cares whether you quote $225 or $255? I’ll tell you who cares. Your family. That little amount means nothing to your customer, but it means everything to your future.

Besides, if the customer complains about $255, they will complain about $225. The idea here is to get another $20 or $30 out of an average service call. This very small increase of just 13% will increase your profits by about 233%!

A flat rate price will make the change imperceptible. Time and material pricing will make the change very perceptible.

Call us today on 1300 307 413 to find out why business owners are turning to Flat Rate Plus or Contact Us.

You Already Flat Rate Now

Every time you write up a proposal or a maintenance agreement, you are using flat rate pricing. Whenever you are asked to quote a fee, that’s flat rate pricing. Quoting a price is flat rating and most companies quote 65% to 85% of their annual sales.

Answering The Phone—How The Fees Are Explained

Flat rate pricing allows us to give a clear explanation of what the customer is expected to pay and what they can expect to receive. You no longer talk about hourly rates, portal to portal, travel charges, 15-minute increments, minimums, or any of that kind of garbage. All of those work to create confusion and skepticism.

The Flat Rate Pricing Answer

“Our technician will thoroughly diagnose your system, and tell you the problem for a diagnostic fee of only $69.00. He will then show you exactly what the repair will cost before the work starts. This is better for you because you won’t be charged any more if the repair takes longer than expected. Nothing will happen without your approval. Spell your last name please.”

Call us today on 1300 307 413 to find out why business owners are turning to Flat Rate Plus or Contact Us.

Speaking To The Customer—How The Serviceman Explains The Charges

Servicemen hate to explain time and material. The customer demands a price, the serviceman gives them a range of, for example, $150-$200 and the customer thinks they were just quoted $150. Ask any serviceman. This a fact.

Under flat rate pricing, the serviceman figures out what is wrong and quotes the price for the repair out of the book. He or she mentions that when this repair is made he will complete the rest of his diagnostic procedure. This covers him if other repairs are needed.

Flat Rate Pricing Example:

“I need to replace your fan motor. Your total investment is just $255. Once I make the repair, I will operate your system and complete the rest of my diagnostics”

Nothing else will happen without your approval.

Increase Customer Satisfaction

Each time you explain to a customer what needs to be fixed you are interrupted with one question (Hint, it's not "where did you go to college"?). The question is "how much"? Servicemen attempt to explain their company's charges using the old time and material song and dance and they look unprofessional at best.

Customers are nervous about financial situations that are out of their control so they demand that your techs give them a guaranteed price. Under pressure, your technicians offer the customer a range, perhaps $200 to $300. He just quoted them a price of $200 and the customer is timing their every move. Your techs don’t deserve that.With flat rate pricing your serviceman explains the options to the customer and quotes a firm price up front. Having full control, the customer can decide what they want done and offer their approval. Who could complain about that?

When you quote out of the book, the maths is already done, the proper spelling is right in front of you, and the customer is assured that they are paying the same price everyone else is paying. There are fewer math errors because the prices include parts, labor, sales tax and discounts.

Call us today on 1300 307 413 to find out why business owners are turning to Flat Rate Plus or Contact Us.

You Will Improve Collections

Collections are a breeze. Have you ever noticed that most of your complaints come from invoices that were filled out after the tech left the job site? Very few people complain about invoices they have already paid!

How Flat Rate Pricing Increases Efficiency

Another important reason to use flat rate pricing is to allow your company to benefit from fast, efficient repair work. Have you ever noticed that your fastest techs bill out the least amount of money and enjoy the highest hourly wages?

We call this the Backward Equation. You hire a technician, train them, supply them with tools and equipment, and they get good and fast. The better they get the more you pay them.

The faster they get, the fewer hours they bill on each call. You are losing money on great technicians. Flat rating rewards the efficient and penalises the inefficient.

The Backward Equation On How Better Service Technicians Are Less Profitable in a Service Business Using Time and Material Pricing instead of Flat Rate Pricing

T&M Limits Your Success

T&M sets a limit on your profitability. No matter how good you get, that limit still exists. No one ever got rich being paid by the hour.

Unfair Comparison of Rates

Another reason to flat rate is so you can charge what you are worth (and only what you are worth) and not be unfairly compared to an ignorant competitor that is cheaper. You will catch more telephone shoppers. You see, someone will always be cheaper and customers often do not know what else to ask about except price.

Taxi cabs routinely bill out well over $110 per hour and the cost of operating a taxi cab doesn’t even compare to a $50,000 “hardware store on wheels” driven by a tech who is almost impossible to replace. And the taxi driver expects a tip! How can they get away with those rates? Simple, they don’t charge by the hour. In fact, many large cities actually require cabs to provide guaranteed flat rate pricing to major destinations. These government mandated rates are well in excess of what most service departments ever dreamed of charging by the hour.

It’s impossible to provide high quality parts, trained personnel, and excellent service, 24 hours per day and still be cheap. It can’t be done. Stop allowing the public to compare your hourly rate to that of your most ignorant competitor. You can sometimes outsmart the competition but you can never out-dumb them.

Call us today on 1300 307 413 to find out why business owners are turning to Flat Rate Plus or Contact Us.

Some Flat Rate Fallacies

You don’t have to use flat rate pricing 100% of the time. You can still quote an hourly rate for certain diagnostics and repairs. Who said it was all or nothing?

You set your own rates. When we provide you with books or software (to print your own books) you set your markups and profit. We don’t! We can and will offer advice but only you make the final decision on what to charge.

Do ‘Flat raters’ charge too much? No. Flat rate pricing is no excuse to charge more than what your company is worth. You charge whatever the market will bear or whatever you are worth.

Some are under the impression that a flat rate book would be hard to create and that the book would have to be huge. Neither is true. Deal with a flat rate provider that has actual experience in the field and has used the book they sell.

What’s Wrong With Flat Rate Pricing

Why would anyone be against flat rate pricing? Some people say flat rate pricing is not good but we wonder how many of these folks demand a guaranteed price for themselves? How many of them would drop off their service trucks for repairs and not demand to know the cost of the repair prior to authorising the work? We doubt many people would go for this.

Complainers often say that the only people that recommend flat rate pricing are the people who sell flat rate pricing systems. If this were a legitimate argument, then doctors could not recommend surgery or medication, and so on. The fact is that there are many experts that recommend it but don't have a financial interest in selling it. Most top experts recommend flat rate pricing. In our case, we recommended it long before we developed one to sell.

Advocates of T&M will tell you it’s not fair to charge a customer the “average” price when a job goes better than expected. Is it fair to your customer when your techs don’t have the right tools, parts or training? Maybe they’re a little slow because they’re hung over from last night’s big party. Is that fair? With T&M, you tell the customer what the repair costs when the job is complete. With flat rate pricing, you tell the customer the price before the work starts. Which is more fair?

Call us today on 1300 307 413 to find out why business owners are turning to Flat Rate Plus or Contact Us.

How The Flat Rate Books Are Created—Size Matters

Here is where size truly matters. Hand your technicians a huge, heavy flat rate book with hundreds of pages (some have thousands) and you will have a riot on your hands. Get a book that is too small or too simple, and your technicians will drive you nuts with questions and errors. The last thing you want to do is spend weeks or months fixing a book that is poorly designed. Don’t trust anyone except a real world contractor to the job. Look for a company with actual experience in the field. You’re looking for people who have served as employees and owners—not simply consultants or lecturers. This is absolutely critical to the creation of a good flat rate price book that your people will enjoy and you can trust.

Your Options on Flat Rate Pricing

Basically you can have books printed for you or you can print them yourself. Don’t be fooled by a low price offered on “introductory books” or “starter systems”. The ‘low’ price will be a distant memory after you have spent months fixing them. If you do oil, boilers, refrigeration, or anything special, be careful. Many flat rate companies seriously lack experience in these areas.

Having the books printed for you is a nice option if you are a very small company and don’t like computers. You have no way to change these books however. You must also pay for changes and updates. Typically you are going to pay a minimum and a per-book fee. There are usually annual fees and other charges that can eat you alive.

Most folks prefer the control and flexibility that only software can provide. In the long run, flat rate software is usually the least expensive choice because annual fees, changes, and reorders will kill you. Don’t deal with a company that charges annual licensing fees or the software stops functioning. Beware, they are out there.

Call us today on 1300 307 413 to find out why business owners are turning to Flat Rate Plus or Contact Us.

What We Can Do For You

1. PRINT FLAT RATE BOOKS.

We can print flat rate books for you based on your specifications. You pay for each book you want and you can use them for as long as you wish. There are no annual fees. We can reprint them for you anytime you wish for a nominal fee.

2. FLAT RATE BOOKS ON CD:

We can create your books just like we described above except we save the books to a CD in PDF format. This allows you to print the books. The advantage is that you can print as many books as you wish anytime you want. You may even take the CD to your favorite printer and have them do it for you.

3. FLAT RATE PRICING SOFTWARE:

Finally, we can sell you the same software we use to print flat rate books. You have full control over the books. Change your labor rates or markups anytime. You print as many books as you want, anytime you want. Thousands of people like you have selected this option. This is our most popular choice and it may be the best selling flat rate software in Australia.

Call us on 1300 307 413 and we can discuss the details of these options. We will work with you any way we can.

Still On The Fence?

In the final analysis it is all going to come down to “who do you trust the most”? Since 1996, thousands of people have selected Flat Rate Plus™ and the only place that you can get it from in Australia is Service Professionals Australia!

Service Professionals Australia's considerable experience as service technicians, business owners, and large staff of support professionals, assures you that we are the right choice.

There are three types of people; those who make things happen, those who watch things happen, and those who wonder what happened. Which one are you?

More About Us

At Service Professionals Australia we are dedicated to your Growth and Profitability.

That’s our motto and our Guarantee is, “If You Don’t Profit you Don’t Pay”. Call us to find out how we can deliver this promise.

Call us today on 1300 307 413 to find out why business owners are turning to Flat Rate Plus or Contact Us.