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Joined: Jan 2004
Posts: 615
J
Member
I would sum it up this way...

A flat rate price could always be considered a contract price, but a contract price is not necessarily a flat rate price.

When some one in the industry refers to a flat rate they imply a more specific method of arriving at the final price, more specifically some of the methods described above. A contract price can be arrived at using various methods, one of which could be flat rate or some other way.

Latest Estimating Cost Guides & Software:
Joined: Dec 2004
Posts: 1,064
D
Member
Flat rate would be like a Chilton manual. Manual with pre-determined prices based on what ever you want to charge.


Contract price is determining how long a job takes in hrs X hr rate, adding material and profit.


T&M is self explanitory.

IMO only

Joined: Jan 2003
Posts: 1,429
L
LK Offline
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"Contract price is determining how long a job takes in hrs X hr rate, adding material and profit"

So when you complete the contract, you give the customer a flat rate, a fixed price, a total amount, a final figure, contract total, whatever wording you like, flat rates prices are the final amount of an estimated job, you present the customer with a contract on flat rate work.

A flat rate price is figured the same as a contract price, a work sheet is used, with labor units, and material prices.

How you present it to the customer is the only difference, Mr Jones this is our contract price, Mr Jones this is our flat rate.


Same dog different trick.

Companies have made a business, out of offering estimated prices printed in book form, and billing it as Flat rate books, Flat rate software, and some call it a system, it is no more then job assemblies indexed for easy access, with this information you can write your contract, for some that find estimating jobs, either time consuming, or difficult, price sheets may be a great way to go, to write your contracts.



[This message has been edited by LK (edited 09-23-2006).]

Joined: Jan 2005
Posts: 5,445
Likes: 2
Cat Servant
Member
It occurs to me that, on a routine and well defined job (say, replacing a box, then installing a ceiling fan), that the figures off the "flat rate" sheet, and the price as figured by T&M, ought to be fairly close to one another.

With a known task, it's possible to tell the customer ahead of time what they can expect to pay. Customers generally like this.

Of course, tasks are not always so clearly defined. For example, a comercial remodel goes through multiple changes, with walls being added, removed, and shifted as the job progresses. The, the equipment that arrives is different from what was ordered....

These are the sorts of jobs that T&M excell at. On the flip side, if the job involves substantial shop time, and other work out of view of the customer, T&M can easily lead to disputes.

Joined: Feb 2006
Posts: 138
P
Member
I believe the type of business would help define whether you use flat rate or contract. I'm not talking about larger jobs, say over $1,000, you need a contract signed, and 50% down for that work.

Service contract work is more for 1-2 man shops where the owner does most if not all the field work. He can swag a price for the job and confirm his price once on site. He don't need a book 'cause it's all in his head. Granted a large shop can have an estimater who would give nothing but quotes but I've found this is not advantageous for a new business, too much overhead. Empower the man in the field and trust him, advise him when needed.

Flat rate is required when the owner isn't doing most of the field work. He must transfer his pricing experience to the employees. Most employees (electricians) are not comfortable shooting from the hip with quotes and will typicall underestimate the time it takes to do a job. I believe they're more comfortable with a (flat-rate) book to use as a go-by for pricing. This helps take them out of the price equation and the customer is not thinking of dollars/hour but can he afford to do the job or not.

You get your tires balanced and they charge you a flat fee, not by the number of weights they add to each tire. You go to a restuarant and buy off of a flat rate menu - not how long it takes the chef to cook your food.

T&M is a loser in most cases for service work. You tell the customer you charge $95/hour, that's $180,000 per year in his/her mind. They don't make this much why should you? Though we know billable time doesn't always relate well to hours spent working. It's almost impossible to include all the misc. materials you use on a job and it's nuts to waste time writing down every screw and plastic anchor you use. You charge them $4.00 for a plug that they cna by at the farm store for $1.25. They're no fools.

I started as T&M and then migrated to giving prices (quotes/contracts). I was hanging two ceiling fans an hour, charging the customer $100 for the 'hour' and was going broke fast. Changing to flat rate and canning some under motivated employees has turned my business around in 6 months. It's also well worth your time to allow yourself set hours to collect delinquent accounts.

Joined: Jul 2002
Posts: 717
M
Member
I don't offer my customer's a T+M price. I also don't offer my customers a "flat rate" price. Now I call it "Upfront Pricing" which I saw in the yp of a true business genius operating locally. This simple wording change from "Flat Rate" helped alot. This seems to go over with potential customers much nicer. My thanks to the guy I learned from.

Joined: Dec 2004
Posts: 1,064
D
Member
Here's another question people would have different views on.

What is service work?

Does service work include installations, or just repair of existing equipment?

Or does everything you do be considered service work because your providing a service?

Joined: Jan 2003
Posts: 4,391
I
iwire Offline OP
Moderator
Quote
Same dog different trick.

In your view yes, in my veiw no.


Bob Badger
Construction & Maintenance Electrician
Massachusetts
Joined: Sep 2006
Posts: 23
E
Member
Man...looks like i found this subject a little late. One of my favorite subjects,so I will have to comment [Linked Image] I have worked for a few flat rate companies and I think the word flate rate might be a generic way to bid small jobs. Like a "fancy way to say "You will pay only this amount Mr.Customer. This system makes $$$ by making the customer feel at ease that they wont get some hourly guy taking his time at an hourly rate. So when I think of flatrate I think of someone giving a bid price so they can make better money on this small job.

Joined: Jan 2003
Posts: 1,429
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LK Offline
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"This system makes $$$ by making the customer feel at ease that they wont get some hourly guy taking his time at an hourly rate."

It may be, the word SYSTEM is why people have a different view.

Companies selling contract pricing, as a system, as if it was some new way of doing business.

Try this, "This CONTRACT makes $$$ by making the customer feel at ease that they wont get some hourly guy taking his time at an hourly rate."





[This message has been edited by LK (edited 09-24-2006).]

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