ECN Forum Forums General Topics of the Trade Business Related Discussion Flat Rate Pricing vs. T&M

Although I've been in business for myself for 20 years now, I'm a much better electrician than financial manager (but I'm learning). When a company has TV ads, custom-painted vans, sharp uniforms, and top-quality tools they have a higher overhead than mine. They will have higher rates. If they expect to stay in business they will also have a profit so they can build their business.

Personally, I'm glad for companies with overhead and charges greater than mine. If everyone worked out of Mom & Dad's house with a hacksaw and screwdriver, I'd be competing with that. This way I have a profitable business with a decent income and benefits.

Dave

It is possible that Mr X needs to charge these high rates. His overhead is off the charts. He has double full page ads in probably 20 yellow page books. He runs TV commercials during prime time and radio ads all day long.

I would like to thank Mr. X for raising the bar on pricing in our area.

Also, I am guaranteed to get the job if his guys have already quoted. Thank You Mr. X

A company that started in 1996 and has grown alomost 2,000 percent, served more than 40,000 customers, operates more than 25 service trucks and does 6 million in sales each year with 20% profit or more is a great inspiration to me. His company appeared in Inc. magazine's list of the 500 fastest growing companies. Apparently many of his customers do not feel they are being overcharged. Too many of us are charging far too little for our services. His company is like a role model for me. I just hope I can be half as successful as he is. Could he get more work by reducing his prices? He might be able to, but more work does not necessarily mean more profits. What ever he is doing seems to be working very well for him. I've calculated my expenses for my business and caculate I need to set my hourly rate for service work at $120.00 per hour just to break even with no profit for the company. This is based on a personal income of $60,000 a year. As a maintenance electrician I was making $70,000 to $80,000 a year plus I had good benefits such as 401k retirement plans, vacation good health insurance etc. I worked 50 to 60 hours a week without the hassles and headaches of running a business. I don't know about anyone else but I feel that to make it worth being in business my personal income should be over $100,000 per year. I feel if you are not charging at least $100 per hour for service work you are not charging enough. I need to become a better salesman and business man. I'm not doing this because I want to spend less time with my family. I'm doing this for the money so I can provide a better life for me and my family. Make enough to be able to send my kids to college etc.and hopefully retire some day. I also like the challenge. I also thank the guy for showing me what can be done. He made me realize that I don't need to charge the going rate. Someone has to be the most expensive. That would be great if it could be me.

[This message has been edited by A-Line (edited 12-05-2004).]

A-Line

Thank you very much for putting this subject in prospective.I understand that somehow other trades have managed to raise their service prices over the years and somehow electrical service Companies has stayed somewhat in the dark ages.They are still charging 10 year old rates.Thanks again for your encouraging input to make electrical service a more challenging and profitable career choice.I also have a young family member that i would like to see go to college

Another benefit of flat rate pricing over T&M is that with T&M as you get faster at completing the job the amount you get paid for that job goes down. You are completing the job in less time and getting paid less for the same job because you have become more efficient. With flat rate as you become more efficient and complete the job faster you still get paid the same amount from the customer. You worked less hours for the same pay.

with a contract price, your customer, and your employee is happy, the customer knows upfront just how much th work is is going to cost, your employee is working a book priced job, where the hours have been tested by previous actual work, so everyone knows where they stand.

What do you charge on a flat rate for a light that is no longer working? How do you charge for torubleshooting and miscellaneous materials on a flat rate? I am running into to many things lately that I can't put into a flat rate. Just trying to work out how I would even begin.

Troubleshooting is usually done at an hourly rate. I would not think you could charge a flat rate for something that you have no idea of what is involved.

I would also say there are a few other areas where at least time is needed to be accounted for.

With flat rate pricing even the troubleshooting is done flat rate. Most problems can be diagnosed within an hour. So you have a flat rate for Level 1 troubleshooting of say $50.00 If the tech thinks it will take longer than 1 hour for him to diagnose the problem than this would be considered level 2 troubleshooting and might be a $100 These fees are for troubleshooting only. When the tech finds the problem he would then quote a price for the repair. There is demo software on the internet that you can download or request a copy that shows you how this works.
Keep in mind with flat rate pricing you will not always complete the task within the allowed time. This should be rare however. If it is happening too much then you would need to adjust the time to complete the task.
You should be completing the tasks in less time than is shown in the book most of the time. This will make up for the rare cases when you don't.

I have a big screen tv that was giving me problems. I called a tv repair shop. They qouted me a $40 travel charge and a $40 diagnostic charge to come out. He determined the problem in less than 15 minutes. He then qouted me a price for the repair of $350. If I declined to have the repair done he would collect the $80 and leave.