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

We are working on going to a system where we charge for the estimate and no phone quotes. Currently we are selective on phone quotes. If they tell us that Mr X (the 27 truck guy in Atlanta) has quoted already, we freely give a phone quote and get the job 100% of the time. Referrals and existing customers also get a phone quote. New customers sometimes get a ballpark, but mostly get a paid estimate. This has been working fine, but we need consistency. One problem with $39 or even $49 for an estimate is that it doesn't even cover our cost, but you take the good with the bad.

I agree that $39 or $49 does not even come close to covering your expeses for doing a estimate. That is why I wouldn't call it an estimate fee. It's a Service/Trip charge. The estimate is free. You have to figure your expenses for the estimates into your overhead if you don't charge for them. This overhead will get factored into your prices. So your prices will cover the estimating expenses. Your customers pay your prices so in the end they are the ones paying for the estimating exspenses.
I've heard the reasoning behind charging the service/trip charge is to weed out the people that are just price shopping or only care about the lowest price. It can be hard to quote a price over the phone unless it is for an existing customer and you are familiar with their residence.
It seems that the business we are in are one of the few businesses that will drive to someones home, spend 2 hours talking with them, drive back to the office and complete an estimate without charging them for it.
I don't know the best way to handle this but I figure if I do what the most successful companies are doing I have a much better chance for success. After all they didn't become so successful by accident.
If the most successful companies are doing it that way shoudn't I?
If they're using flat rate shouldn't I?
I don't want my business to rely on me answering the phone so I can qoute prices over the phone. I would like it so that anyone can answer the phone and follow a script to try to sell jobs. I wouldn't expect my call taker/office person to be able to give estimates over the phone.

I don't think very many customers would be willing to pay what I would need to charge to cover all my expenses for an estimate.

When they call what would I tell them that it will be $200 for me to come out and give them an estimate for the work?
I think they would just hang up.



[This message has been edited by A-Line (edited 12-14-2004).]

Quote:
"I can't afford the time driving, doing estimates, talking to someone for 2-3 hours."
____________________________________________

No business can afford the driving time, and as far as talking for 2-3 hours, try 10 minutes.

We charge a trip charge, on all calls, no charge for the estimate, if the work is over $500 then we drop the trip charge, this only works with serious buyers ,not with price shoppers, the trip charge lets you know who is a buyer, and who is pricing.

LK,
I must be doing something wrong then.

When I did estimates, I found from the time I left, talked to the customer, showed them options and pictures of fixtures, drove back to the office, called for pricing and returned the sales call to the customer, it easily ate up 2-3 hours.

Thats why I gave it up for the most part. I could of added that time to the price of the job, and then I would of been too high.

I guess I could hire a salesman to do all this leg work, and pay him on commision based sales. That would leave me to do other more pertinent things.

Let the customer supply the fixture, if you are to supply the fixture, you will have to add on all the costs, 300 to 400 percent on the fixture, and additional labor for shopping, the better deal for the customer is do their own shopping, a shopping assistant, in my area gets $80 to $120 an hour.

I always ask the customer to buy their own fixtures except for recessed lights. This avoids many problems. I don't have time to be a personal shopper!

If I had an extra $2500 laying around to spend on a program that may or may not solve my problems, I'd have a really hard time convincing myself that a financial problem existed!

If ya got money, you can make money, and if ya ain't, ya ain't.

Pat,

It appears the personal shopper, is doing better then us, as you get closer to the city their rates go up, I can't belive people pay, to have someone do their shopping, the ones near me charge the lower end, which is still $80 an hour.

Just raise your prices a little to cover the $2500 you spend on the software.
Figure out how fast you want to pay back the $2500 or how much the monthly visa bill will be and raise your prices enough to cover it.
After its paid for don't lower your prices back down. Now you're earning more money.
After I bought the software and printed the books I doubled my hourly rate and plan to increase it more.

[This message has been edited by A-Line (edited 12-16-2004).]

Les,

Let's start a personal shopping service then. No trucks, no employees, no insurance and $80-$90 per hour! We'll retire in a couple of years!

Sparky66,
Imagine how quickly you would make that $2500 back if you doubled your rates because of that book. After that, pure profit for years.

Pat