Hi,
I am ironing out Flat Rate Book rates vs Variable Flat Rate Spot Pricing. I am chief cook and bottle washer at my place! (sole prop)
Sometimes a job is worth more than others.
If you have a preset flat rate for replacing a 200A panel this would seem to restrict you from keeping up with several issues like changes in fuel cost and commodities.
ALso it would prevent you from making more profit from the same task.
Say I get a job to replace a 200A panel burnout in an old house...the job is for a little old lady who is living alone and has no insurance or deep pockets.
then you have the same job at a newer house from a young couple who just bought the house and both are professionals and they have insurance to cover the damaged panel replacement.
you get the same call from another woman who is living in an old house that is filthy and cluttered, smelly, nasty funk.
it doesnt look as if the woman has any money at all to spend on the work. I shoot a high price because I do not really want the job..low and behold she accepts!( come to find out this lady just won the lotto for $250K and has plenty of cash) just goes to show that looks can be deceiving.
These three examples (the third is true)demonstrate where I can make three different quotes. Each paying different.
Whereas if I quoted all three the same price I am leaving money on the table.
The cost would increase with each case from the first to the last.
There is probably a name for this practice and I wonder how ethical it is?
I am sure there are those who will be SHOCKED! I am not the only one who uses this method am I?
regards
Greg
[This message has been edited by mustangelectric (edited 02-03-2005).]
Greg,
What are you going to do when you have 20 techs. Are you going to let each tech make his own judgement call?
You mention you want to set your business up like a franchise. This would not be a good way to operate a franchise. A franchise is a business system that produces the same results over and over again. You would never now what price a tech might qoute the customer.
Everyone should pay the same price unless they get a seniors discount, have a maintenance agreement or a coupon.
When you go out to dinner and a movie they don't adjust the price based on how you're dressed or what your car looks like.
If you find someone you truely feel needs help you could make an exception but I would not make this the norm.
Hi,
I am the one considering setting up the francise not me buying one. I want to sell my ideas and methods.
There are PLENTY of Mr. Electrics out there. What there is NOT is Mr. Electric. The single guy. If a person decides to hire more people then that is ok.
Most companies do not allow the hands to bid on work. I know there is a book here but you are leaving the door open to losing your britches if you run across a couple deals where the book did not work out.
Most outfits will have a guy or two who will go ut and visit the job and come up with a estimate or proposal.
Your major income is not going to come by having the hands in the field quoting cost. Sure you will get this from time to time.
My situation is that I am the guy who is making things happen.
I just think that there are a lot of one man shops out there that could benefit from this method of pricing.
If I can bid $2000 on a $1000 job I will do it. Why not car salesmen, realestate, lawyers, doctors do it every day!
If I sell it great if I dont I move on.
I am sorry but I say you are sadly mistaken when you say "Everyone should pay the same price". That is in a perfect world.
We do not live in a perfect world. Thats not news.
There are very few contractors that log in the same amounts each day for work. No two receipts are ever alike!
If I get twenty hands, I will hold meetings with them and give each one a way to stay in touch. I will also share my profits with my hands. The employee can make or break you.
Regards
Greg
That's where me and A-line differ.
The old lady gets a break no matter what. To me, she earned it.
However, she and the military folks are the only ones who get breaks, everyone else is the same price, give or take on the complexity of the job.
Giving breaks to the eldery and the military may not fatten your wallet now, but the return in word of mouth advertising is priceless, and to me, it is the ethical thing to do.
Aline, I'm not knocking you here, I'm just telling mustang what I do.
Dnk.....
ps. I have been known to pull into a driveway and noticed a POW tag on the car. All the work was free.
[This message has been edited by Dnkldorf (edited 02-03-2005).]
Hi,
i do not mind giving breaks and I do all the time. I also know that EMOTIONS and business do not mix!
I can support the troops and help the ones who need it but I am in business to make a PROFIT.
I see no real problem with variable pricing.
I already know what T&M will do to you!
Cost Plus or Variable Spot Rates!
Regards
Greg
I didn't say don't give little old ladies a break. This is what a seniors discount is.
I give a seniors discount to all elderly people male or female. I feel they both have earned it.
You could also have a policy of giving a discount to military personel also.
The flat rate system I'm describing isn't something I made up.
It is a proven system that works and many successful businesses use it.
If you want to be successful why not do what the sucessful businesses have done?
They didn't get where they are by accident.
I want a business that can still operate even if I'm unavailable. I may get injured and laid up in the hospital or may want to take a vacation overseas somewhere. It would be nice to still have jobs being priced and sold while I'm gone.
I don't see how you can sell a franchise if you're the only guy that can make things happen.
[This message has been edited by A-Line (edited 02-03-2005).]
Hi,
A-line..what do you mean I couldnt sell a franchise?
You said: "I don't see how you can sell a franchise if you're the only guy that can make things happen."
I do not even have the faintest idea what you mean.
If I have a good name, good practices, and can make a profit then what about that is not marketable and would be even more profitable?
I am working on a good name now!
Have you ever heard of tupperware or avon?
There are a lot of folks out there who are not doing so well in the EC biz and most of them would be willing to listen to a way to increase profits.
What part of that would not sell?
I know lots of sole proprietors who got twenty guys and 10 trucks and they are no longer with us. I also know a lot of sole proprietors who are making a living but want to make more and have a vacation and some extra money at the end of the month.
Its not all about twenty hands..
But I hear you...
regards
Greg
[This message has been edited by mustangelectric (edited 02-03-2005).]
Hi Greg,
Yes I have heard of Tupperware & Avon.
I'm not sure how they operate so maybee you could answer a question for me.
Does the founder of Avon visit each customers home and adjust the prices of the products based on what he sees or does a sales rep visit the customer's home and present the prices to the customer from a catgalog or book?
Does the sales rep adjust the prices in the Avon catalog based on what the customers residence looks like?
If there is a situation where the book will not work the tech can then call back to the office for help. Your techs do have to be well trained on how to use this system.
Edited for typing errors.
[This message has been edited by A-Line (edited 02-03-2005).]
I used to work at a Coca Cola bottling plant.
2 elderly gentlemen pulled up to the dumpster in a beat-up old station wagon.
They started rummaging through the dumpster and digging out unbroken bottles.
I thought that they were going to cash these in for money. Looked as if they needed some. I found out they were the owners of the company and were digging out these unbroken bottles so that they could chew out the manager for throwing them away.
Looks can be deceiving.
A-line, where do you get these books you speak of?
I would like to get one and see how you guys in the resi market are doing it.
The curiosity is killing the cat here.
Dnk......
My system is software not just a book.
I print the books from the software.
The software allows me to make adjustment at any time to the book.
I use Flat Rate Plus
www.flatratesystems.com I've heard Successware21 is very good.
www.successware21.com
You could add colums for different prices based on what the customer's home looks like or what he drives.
Example: You could have one price column for a customer who drives the old beat-up station wagon and another price column for the guy who drives the mercedes.
I recently purchased (and returned) the software from Flat Rate Plus and found it full of errors and omissions. One that sticks out in my mind is a material list including wire nuts for 30 amp and larger circuits. The whole thing needed a good proofreading by an electrical contractor. The labor seemed all over the place (over 1/2 hour each to install breakers?). The 200+ pages I printed out ended up going through the shredder. The main ommisions were a lack of variety of service panels, and no pages for IMC. All the pages for "Rigid" were PVC. Their "Master Electrician" argued with me about the need for a second ground rod. I think they should stick with what they know (HVAC), or consult with a real electricain.
Dave
I too have cut prices to customers who didn't have the resources available but desparately needed the work done to maintain safety. I think this is it's own reward. I don't feel the need to fleece the next well-off customer to make up for it. In giving these "breaks" over the years I have been duped a time or two. I changed out a burned fuse box once for a self described "poor widow". I gave her materials at cost and labor for next to nothing all the while listening to her whine about scraping by on SS and a small pension. When I was done she was so pleased with her bill she told me she was going to use me for the maintenance on her 30 rental houses she owned all over town. I have a friend whose father bought a rotary well drilling rig in the 70s when rural home building was booming around here. He told me that he charged by the foot and the depth of the water well greatly depended on how well-off the customer was. When drilling a new well for an existing home, if there was a Dodge Dart in the driveway it was going to be a 70 footer. If there was a Caddy it may well go 200 feet! I would sure hate to be done that way. A few years ago I had lightning take out my submersible pump. I had originally installed it when I built my house but was pressed for time as I was doing a set of condos on a deadline. So I called a plumber I had worked on a few jobs with and asked him if he could send someone out to hang me a new 3/4hp submersible pump. My casing is above ground and I had installed a pitless adapter. 2 guys came out and yanked the 70' of plastic pipe out and replaced my Gould with a Red Jacket and dropped it back in the well. Total time on my property- 1 hour. Bill came to $1650.00! I called the plumber and asked why a $200.00 pump and labor for 2 man hours added up to $1650.00. He said normally it would have run around $500.00 but since it was on my homeowner's insurance, he always jacked it up. He said I would have to only pay my deductable of $250.00 either way so why did I care? I care because it's not right and those practices are one of the reasons homeowner's premimums go up every year. An old electrician who helped me up the trail when I was just getting started on my own gave me some good advice about charging for service work: "In a lot of ways customers are like sheep. They pay attention to the dog doing the most barking. They will usually go along with what they see all the other sheep doing. And you can shear a sheep several times but you can only skin him once." That plumber who "skinned" me has never gotten a referral from me and never will. When customers ask for a plumbing referral I don't bad-mouth him but I sure talk up a couple of other guys who have done me fair. Not cheap, but fair.
Dave,
I totally agree with what you are saying about the software. I like the software but the preloaded data needs to be changed.
I figured that no matter what software I purchase I would still need to make changes to adjust for time and materials that better reflect what I do.
For the cost of this product I expected it to better than it was.
I have gone through the tasks and modified them for my needs.
They claim that it can be used right out of the box. I found that this was not the case.
[This message has been edited by A-Line (edited 02-03-2005).]
Hi,
Thanks for the replies.
A-line...I do not know anything about tupperware or avon other than the analogy i was trying to make that ONE PERSON CAN MAKE THINGS HAPPEN!
I am just talking here...
the systems we are talking about are both better than T&M and they both could use tweaking.
" A man who enriches others, shall so too be enriched".
I live by this rule.
I also make money when I see an opportunity. I am sorry.
If a person uses a system that is great.
I want to make it a little better.
By the end of the year my Flat Rate Spot Pricing will out perform ANY FLAT RATE BOOK!
You must be smart enough to spot an opportunity. It is like gold..."it's where you find it". Nothing ventured nothing gained.
If you sell a 200 A service for $1200 and I get $1800 one day and $2000 the next then, I have already put a hurt on your book.
I just do not see how every job is the same.
I will have to go check out this website. I am glad you told me about it.
That is the great thing about America, you have the right to shop around if you want to. I do not force feed or hardsell anything.
I hate to call it FLEECING! Couldnt we agree on a different term?
How about "profit mining"?
Regards
Greg
Qoute:
"If you sell a 200 A service for $1200 and I get $1800 one day and $2000 the next then, I have already put a hurt on your book."
What if I sell a 200 amp service for $2500 every time. With the book price most of the time the job will be completed in less time than the book time. There will be times when the job will have complications and will exceed the book time. These should be few though.
In the end it should all average out. If not you need to make adjustments to the book so that it does.
It's kind of like gambling in vegas. Sometimes the house will lose a hand but the house always wins the game.
Why would I want to sell a 200 amp service for less the next day if I can sell it for the same price that I sold it for today.
[This message has been edited by A-Line (edited 02-03-2005).]
Hi,
A-line...That is great...I wish I could sell a 200A service for $2500! Maybe I will try it next time!
This is an excellent point that you made...
Consider this..
Your book may not work so well in my neighborhood..it may work well for certain areas but you must be able to adjust that price cant you?
My Spot Rate variable pricing allows me to instanly deduce what that particular job is worth and what I think I can sell it for.
I raised my price for a $200A service recently from $1200 to $1800. If it is underground then your looking at $2800 for no more than 100 feet of trench.
That 200A service is the basic install...If I can sell them a CSED then I get another $750. The panel only cost a few bucks more, throw in a 30A breaker, a clip, and an WP outlet and you just made another $500!
I am sure that the system you are using is making a few bucks because the numbers are above the average.
I am not only an electrical contractor but an ENTREPRENUER!
Regards
Greg
[This message has been edited by mustangelectric (edited 02-03-2005).]
Just a couple of observations...
The "good book" say "one law for all, rich or poor"
A successfull lady told me her best business lesson was when she "charge what you're worth, and be proud of it." Don't be embarrased to admit that you might be worth more than someone else.
Customers will never let you raise a price...better to give them a discount AFTER they've earned it.
Always leave something on the table...that way, everybody's happy, and no one feel they got "took."
A friend with a 7-11 taught me "the guy who comes in every day for his coffee and donut is what makes my business work." A good customer is one who can be relied upon for regular small jobs and prompt payment. They pay your bills.
Here's an article I came accross on the internet about a combination of flat rate and T&M. A hybrid of the two.
http://www.4youradvantage.com/t&m.htm Greg,
Is this something like what you are putting together?
[This message has been edited by A-Line (edited 02-03-2005).]
I agree with the part in that article that with T&M you'd better over-estimate for happy customers. It's tha part about "I charge $100/hour" that I don't think would go very well.
Dave