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#158484 - 06/14/06 08:30 AM How exactly does flat rate work?  
PE&Master  Offline
Joined: Feb 2006
Posts: 138
I'm trying to put together a schedule of quoteable costs, i.e. flat rate book and have a couple of questions on pricing structure.

Replacing a service with a 200 amp lends itself well to flat rate but sometimes we'll do a call of just replacing a GFCI receptacle. The job may take 20 minutes from the time you hit the customers door and the GFCI cost is around $10.00 and with markup call it $15.00. If your cost to do business requires a charge of $80.00/hour then the labor for this 20 minutes is $26.66. You can't charge the customer $41.66 to make the replacement and stay in business. Now $41.66 may be a good flat rate price for the next one but if you only have one to do it's not worth the trip. How does flat rate take care of the job that bills out for less than, say, $60.00?
Would you have a show up cost?, or a minimum billing?, or something else to 'pad' the cost of the trip?

Business, Office, Estimating, Legal:

#158485 - 06/14/06 09:56 AM Re: How exactly does flat rate work?  
renosteinke  Offline
Cat Servant
Joined: Jan 2005
Posts: 5,316
Blue Collar Country
"Flat Rate" is the practice of giving the customer, in advance, a firm price for the job. Simply put, you just say "I'll do it for $123." When the job is done, you expect a check to be ready.

Some folks put together "price books." These are the results of experience, and condense routine jobs into a form that can be consulted, and provided to everyone in the fleet. The advantage is speed and consistancy.

How you arrive at your price is another matter entirely.

#158486 - 06/14/06 11:11 AM Re: How exactly does flat rate work?  
mahlere  Offline
Joined: Nov 2005
Posts: 507
New Jersey

That job does not take you 20 min. It takes min 60 min. You have travel time, you have the time it took for you to either order the GFI (or stop and pick it up) You have the time on the phone to set the appointment. etc.

So you would typically have a min labor time of 1 hr or 1.5 hr or 2 hrs. It's up to you.

And look at it this way, that money has to come from somewhere, so don't be afraid to charge for it.

Good luck.

#158487 - 06/14/06 05:53 PM Re: How exactly does flat rate work?  
Jps1006  Offline
Joined: Jan 2004
Posts: 615
Northern IL
As I understand flat rate you assemble the price based on the componets. $37.50 to show up, 41.66 for the replacement, 35.00 for the multifamily with remote parking, and 15.00 for the mirror back splash. Now once your there, add another GFI for 41.66 in drywall.

Actually, I don't know how Id' handle the remote parking, because if they keep adding stuff while you work, your trips (time) to the van could get excessive.

[This message has been edited by Jps1006 (edited 06-14-2006).]

#158488 - 06/14/06 06:06 PM Re: How exactly does flat rate work?  
Tiger  Offline
Joined: May 2005
Posts: 706
Crystal Lake, IL USA
It's a good point that you need to cover your expenses and have a profitable business.

Some contractors have a minimum charge. Some have higher first hour rates. Some have a service charge or travel charge. If it involves troubleshooting, you can have a troubleshooting charge...whatever works for you to keep you in business.

If I called a plumber or HVAC guy and he came with a truck full of tools and parts, I'd expect to pay $200 minimum. From the stories I hear, plumbers in this area charge around $600 for a toilet installation and $400 for an exterior faucet replacement(each about an hour job).

Every few years I raise my rates. I lose a few clients and gain a few new ones. If you work for pennies, you only hurt yourself.

Like anyone, you want enough money to raise a family, pay for their education, healthcare, and save for retirement.


#158489 - 06/15/06 10:45 AM Re: How exactly does flat rate work?  
A-Line  Offline
Joined: Jul 2004
Posts: 272
Utah, USA
You have an initial or first task price. Then you have add-on or additional task prices for other work while there.

Example: Replace receptacle with GFCI

1st receptacle $190.00

Each additional receptacle replaced while there $65.00

The more work you do while there the more the customer will save. If the customer wants you to wait and come back another time to replace the other receptacle it will be $190.00

So its to their advantage to have you do them all while you're there.

#158490 - 06/15/06 02:31 PM Re: How exactly does flat rate work?  
TNSunny  Offline
Joined: Dec 2005
Posts: 44
I agree with A-line's post. I've been working on my flat-rate price book for several months now and have learned quite a few things in the process.

I started off with a framework that I found online for one of the flat-rate systems that you can purchase. They showed the main pages that only had the general categories, so I printed those and used them as a start. I then set up a spreadsheet in Excel using these categories (which I have now modified to better fit my needs). I have columns for account codes; description; general information (such as color, what's included in the price, etc.); my cost (including tax); sales price; estimated labor time (in tenths of an hour - estimating books can help here); labor rate ($100/hr); and total installed cost. Excel is pretty easy once you get the hang of it, and you can set these columns up with formulas so that when you enter your price it will automatically calculate your markup. (I charge a 40% markup - I divide my price WITH TAX by .6) So, by looking at my book, I can see that a 20A GFCI breaker costs me $14.26 with tax; my sales price is $23.77; it takes approximately .4 hours (24 minutes) to install in a box that already contains wires and a receptacle; and that I should charge $63.77 per receptacle installed.

Like you, however, I realized pretty quick that I couldn't just charge $63.77 for a call to change one receptacle and make any money. So, I also charge a $65.00 trip charge for going out to the house. Sometimes I call it a troubleshooting fee, depending on the circumstances. However, it really doesn't matter what you call it, as long as you get it!

The other thing that I realized is that rarely ever does two jobs work exactly the same. So, I don't have too many "assembly" prices listed in my book - mainly just individual prices. For example, I know that 99% of the time that I cut in an old work box I'll also be installing a standard switch or receptacle with a cover, so I have an "assembly" price listed that includes all of them. The main reason for doing this is that it helps me to get prices together more quickly. But on things like junction boxes, I never know ahead of time how many NM clamps that I'll need - or what size. So, my book lists the price of each individual clamp installed. I also charge a flat $5 on each job to cover such things as wirenuts, caulk, tape, etc. - unless the job is unusually large.

Wire is listed only by sales price per foot (w/40% markup), as some wire pulls are much easier than others. After I look at the job, I figure approximately how long it will take me to pull the wire, add 20% for those unforeseen problems that always arise, and multiply that by my $100 hourly rate to get a labor price for wire installation.

So, when I get to a customer's house, I go in to evaluate the problem and decide what I need to do to fix it. Then, I go back to the truck and quickly make a list of what materials I need and use the price book to get my price. I then write it up on a service agreement that the customer will sign before I actually start the work. For example, it might list:
Qty. 2
Description: 7102 20A GFCI Replacements
Total: $127.54

Qty. 2
Description: 1301 1G Old Work - 20ci
Total: $33.24

And so forth. (I also set my Quickbooks Pro up with these account codes. It makes inputing the sales receipts into the computer a breeze.) I also have an area on the form where I write a description of the work to be done, and an area for express disclaimers or exclusions - such as drywall repair or anything else that I want to make sure that I don't end up liable for.

I sign it, and the customer signs it before the work is started. Then, when the work is complete, the customer signs again stating that the work was completed to their satisfaction and I give them a copy for their receipt. I have always gotten paid using this system, as most people won't try to get out of it after they have signed on the dotted line.

Overall, the flat-rate system has really helped me out a lot. Up-front pricing has really impressed my customers and eased their fears as to what the cost is going to be. I've actually had several who were pleasantly "shocked" that I would actually tell them up front how much I was going to charge them - they had never heard of tradesmen doing this before.

It's also helped me to make a fair profit by keeping me from underestimating the cost of a job - which I'm pretty prone to doing. I tend to be too soft-hearted, but the book helps me to stick to my guns. And, so far, I have found it to be fairly accurate when I double-check the numbers after a job.

The worst part of the whole thing is inputing all of the data. Everytime you purchase new materials you have to input the new accounting code, description, price, etc. And everytime you re-purchase materials you have to check to make sure your prices are still current. But, I think that it really pays off in the end.

Sorry for such a long post - I just wanted to share some of what I have learned to maybe save you from re-inventing the wheel!



#158491 - 06/16/06 07:20 AM Re: How exactly does flat rate work?  
Steve McKinney  Offline
Joined: Apr 2004
Posts: 79
Marion, Illinois
thnx for "in depth" post Kevin. It helps me w/my pains of the book work. My question to you is, are you doing all the posting as well? That is my problem. Sometimes I am too tired and b4 I know it, a pile has built up again on the desk!


#158492 - 06/16/06 10:27 AM Re: How exactly does flat rate work?  
TNSunny  Offline
Joined: Dec 2005
Posts: 44

Yeah, I'm doing all of the posting myself. At first, I was doing the bulk of it in a single day each week. I'd gather up all my receipts for the past week or so and spend a couple of hours putting all of it in the computer. But now, I'm finding that it doesn't take nearly as much time because the items that I purchase the most have already been logged in. All I have to do is check the price to make sure it hasn't changed. I've just about got it set up well enough that I can turn it over to my wife (err...Office Manager) for routine updating. The only thing that I'll have to do is add new items as I come to them, as she wouldn't know what they are in order to enter descriptions, install times, etc.



#158493 - 06/22/06 10:19 PM Re: How exactly does flat rate work?  
PE&Master  Offline
Joined: Feb 2006
Posts: 138
Thanks for all the replies. They have been real helpful. I too am compiling my own book from the sample pages on the fixed price ads. I'd imagine only 30% of what they have is applicable to my area anyhow.

I guess the best thing to do is to include a service charge to get over the hump for the small jobs. $65 to show up, $45 to replace a GFCI. That'd be enough to cover my 'hour'.

Getting a signature before I start sounds like a good idea. I'll give that a lot of thought.

Without the book, I was just winging it on costs - and giving away parts. Having a summarized price makes it easier to be more inclusive. You'll never write down on a T&M sheet every screw, plastic anchor, wirenut, silicone caulk, etc that you use.

One thing that I learned early was to hand over the Quick Books to a part time book keeper. I pay her $10/hour to work approx 15 hours a week to enter all my receipts, pay bills, taxes, and do payroll. She gets little spending money, time away from her kids, and an opportunity to learn. It would take me forever to get the stuff entered in, not because I can't, just because I hate paperwork.

My wife could do it but I married her for better or worse, not for employment. Besides, there's things she's better off not knowing. hehe.

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