ECN Forum
Posted By: Electric Eagle Flat Rate Pricing vs. T&M - 12/02/04 02:13 AM
In another post A-line brought up flat rate pricing and I thought it deserved a thread of it's own. 95% of our work is flat rate or firm quoted. We don't do time and material. We used to use T&M on jobs that we knew had too many variable (problems) to give a firm quote. Now we turn these jobs down unless it's one of our best customers. We find that people will gladly pay your price as long as they know upfront. Currently we use our own price book, but we're looking into software that integrates flat rate pricing, scheduling, inventory, etc., in otherwords a system.

What do the rest of you think about flat rate vs. T&M.
Posted By: GA76JW Re: Flat Rate Pricing vs. T&M - 12/02/04 02:30 AM
I find flat rate to be a better sell than T&M also.

As you said, people like to know cost up front.

It also benefits the Electrician too, cause justifying markups and etc. get tiring.
Posted By: kinetic Re: Flat Rate Pricing vs. T&M - 12/02/04 12:40 PM
I have been switching back and forth between the two for the last year. Moving more into the service field versus working with GC's. With T&M I am finding it much harder to sell a job but your costs are covered no matter what. Even people with large wallets get bug eyed when you start talking dollars per man hour. With flat rate the customer knows what they are getting for what price and there isn't any sticker shock after the job is done. I lean toward flat rate and and would like to know if you do find some software that you could reccommend.
Posted By: A-Line Re: Flat Rate Pricing vs. T&M - 12/02/04 03:25 PM
I use Flat Rate Plus it can be purchased at Another system I hear is very good is called Successware 21 I found when I was doing T&M the customer still wanted a set price before I started the work so I would end up giving them one. So I was pretty much doing flat rate pricing anyway. Now I have a printed book with prices in it that I show the customer. It's titled Technicians National Electrical Pricing Guide. This makes it easier to sell the customer on the price. Since it's coming from a book they don't think you are just making it up based on how rich you think they are.

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Posted By: dougwells Re: Flat Rate Pricing vs. T&M - 12/02/04 05:52 PM
A-Line Thank you for the links. Would this software work for Canada also?
I found this link that answered some question if some are unsure about flat rates.
Posted By: sparkync Re: Flat Rate Pricing vs. T&M - 12/03/04 12:18 AM
I am in the process of doing a job T&M, but with no quoted price for either. It is such a job that it would have near impossible to give a reasonable bid. There were 2 attics if different portions of the building, with one extremely long, and the "access door" on the opposite end of where most of the work was to be performed. If I would have given a flat price on it, I'm pretty sure now, that I would have lost very badly. The customer is good enough and trust me and my work enough, that they didn't require a price. I cut my hourly rate considerably because of that trust.. Steve...
Posted By: Dave55 Re: Flat Rate Pricing vs. T&M - 12/03/04 11:09 PM
I'm really curious about this one. I installed a GE SpaceSaver microwave oven above the range in a 30 year old house today. The panel was in the basement directly below, and a couple feet to the side (15' AC max. from microwave to breaker). The panel was a Square D QO.

What does the book say I should have charged by flat-rate???

Posted By: slumlordworker Re: Flat Rate Pricing vs. T&M - 12/04/04 12:12 AM

our book says you should of billed

19.00 for the trip
xx.xx for permita if needed
125.00 for the actual job

144.00 plus permits if needed

by the way how long did it take you
Posted By: slumlordworker Re: Flat Rate Pricing vs. T&M - 12/04/04 03:22 AM
with 2.8 hours of total time we would of been happy with what we charged
Posted By: Electric Eagle Re: Flat Rate Pricing vs. T&M - 12/04/04 03:27 AM
We did a microwave in a similar situation the other day, but with Romex and a crawl space. We charged $350 including installing the microwave (non vented). It took 2 men 2 hours + travel.
Posted By: Dave55 Re: Flat Rate Pricing vs. T&M - 12/04/04 05:08 AM
I pulled the gas stove out completely to ease the installation. I had to run to the store for the vent duct through the wall, which I did a peachy job of sealing into the wall so grease wouldn't get in the wall. I chiseled out half a stud for the outlet (two in a row that I've had two studs very close together on the right side). I also installed the microwave, and the board on the bottom of the cabinet (cabinet bottom was only 1/4"). This is the one job I wish I had a helper!

Anyway...5 hours plus materials, $445. I think they usually take me 4 hours without the vent work, and the stud chiseling was a one-and-only.

LK...was the $270 for the service company with or without the outlet? I'd be interested in your book. $242 for the outlet sounds fine. Does it allow for a difference between near the panel, or 50 feet away...finished or unfinished basement... also for NM or EMT? It seems like there are so many variables for a book.

I bid one recently that was in a finished house from one end to the other...multi-level. I would have had to cut holes every 16", or go outside. I forget the number, but it was large & they decided against the project.

Posted By: GA76JW Re: Flat Rate Pricing vs. T&M - 12/04/04 01:17 PM
By giving the customer a T&M option, you end up with problems like this.

This guy is heck-bent that he was over-charged with T&M. I guess he doesn't realize that a helper is an added bonus to a job, but is not needed for EVERY aspect of that job. I know my superiors (Foreman, General Foreman, Project Managers, and etc.) do not say anything when I am watching a JW work.

I still say a flat rate price will get you further ahead everytime. Just add in all possible variables. If they don't like it, they can call Mr. XXXXXX.

**for those who don't know Mr. XXXXXX, he is a EC here in Metro Atl. that WAY overcharges people becasue he has catchy little commercials on TV.

Kinda catchy.
Anyways sorry for the long spew.

Thanks for reading.

(Name removed)

[This message has been edited by Webmaster (edited 12-04-2004).]
Posted By: Electric Eagle Re: Flat Rate Pricing vs. T&M - 12/04/04 02:18 PM
GA, You have to admit 1 thing about Mr. XXXXXX. Even you know his phone number without openning the phonebook. I hope 1 day my company can be just as successful only with fairer pricing.

An example of Mr XXXXXX pricing: I bid $225 for a job that XXXXXX wanted $800 for. Another time XXXXXX wanted $110 per breaker to change 9 circuit breakers to the proper brand. What would that take? An hour if you had to go buy the breakers? By my calculations that's $945 per hour plus materials. Not Bad.

(Name removed)

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Posted By: GA76JW Re: Flat Rate Pricing vs. T&M - 12/04/04 11:08 PM
The fairer pricing is a plus, but not always the case. Apparently people are paying his prices or he would go out of business. If Mr. XXXXXX set the prices, we would all be rich and able to retire.

I brought up the Mr. XXXXXX thing, because I have been working with another guy at work on the side. We use that all the time. "If you don't like the price you can always call Mr. XXXXXX."

Kind of take the Prudential approach to pricing, If you don't like my rates you can call this guy. I hope it proves to be successful.


(Name removed)

[This message has been edited by Webmaster (edited 12-04-2004).]
Posted By: LK Re: Flat Rate Pricing vs. T&M - 12/05/04 01:20 AM
When you say the fairer pricing is a plus, fair for who? When you are in business, you have operating expenses, and fixed overhead, this is what sets your pricing, then you add on a profit figure, the profit amount will determine if you can grow, or just get by, the average customer, works for an hourly pay rate, and uses this as a measure of what he thinks other should make, they never consider what it costs to operate, they assume the entire hourly rate you charge goes into your pocket, when in fact, only a small percent of that amount is profit, so fair is a state of mind, not a business practice.
Posted By: Admin Re: Flat Rate Pricing vs. T&M - 12/05/04 03:08 AM

Please don't use any real Names in these discussions.

Posted By: GA76JW Re: Flat Rate Pricing vs. T&M - 12/05/04 12:48 PM
Well LK, I understand that fair is a state of mind, but triple charging a job is also ludicrous. I also understand the whole overhead thing. Employees need to be paid, Insurance needs to be paid, gas need to be put in the trucks and so on.

Does it really cost $110 per breaker to change 9 breakers to the proper brand to cover the company overhead?

Someday I will be working for myself and I am slowly sliding my foot in the door now.

Everyone wants their company to prosper, but is price gouging the answer? Does this next small job really need enough profit to get you to Aruba..ERR.. I mean pay for your overhead? [Linked Image]
Posted By: iwire Re: Flat Rate Pricing vs. T&M - 12/05/04 01:06 PM
Everyone wants their company to prosper, but is price gouging the answer? Does this next small job really need enough profit to get you to Aruba..ERR.. I mean pay for your overhead?

I think calling Mr Xs prices gouging is not the correct term, the price was high plain and simple.

Good for him if he can get it and shame on his customers for not price shopping.

IMO and I may be wrong, price gouging is when you charge an inflated price at a time when the consumer has no choice but to say yes.

Other than that, IMO charge what you want, the consumer has a choice to say no.

Is it price gouging when Nike charges $150.00 for sneakers that cost them roughly the same to produce as the $15.00 Walmart sneakers?

In a recent Consumer Reports they showed a home toaster for about $225.00, it ranked low, the best toaster was about $20.

It will still sell as some people like to pay high prices, they think it makes them special. [Linked Image]

Posted By: GA76JW Re: Flat Rate Pricing vs. T&M - 12/05/04 01:18 PM
I will admit "price gouging" is not the correct word. According to an online defintion:

Price gouging occurs when a business charges more for goods or services than its regular selling price.

So in turn since these are his everyday prices then he is just overcharging.

My whole thing is, if some of his prices were a little more reasonable, would he not have gotten more work and in the end made more money?

Is it a good idea to direct your bussiness in a direction where you will only be dealing with filthy rich people instead of middle-class got some money people?

[This message has been edited by GA76Apprentice (edited 12-05-2004).]
Posted By: iwire Re: Flat Rate Pricing vs. T&M - 12/05/04 02:44 PM
So in turn since these are his everyday prices then he is just overcharging.

You say overcharging I say charging what the market will tolerate.

He does not put a gun to the customer head.

No big deal here, this is America he can run his business as he wants (to some extent) and you will be able to run your business how you want. [Linked Image]

His high prices make the other business prices look good.


By the way, check the hourly rates of plumbers, they usually get more. [Linked Image]
Posted By: Dave55 Re: Flat Rate Pricing vs. T&M - 12/05/04 05:26 PM
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.

Posted By: Electric Eagle Re: Flat Rate Pricing vs. T&M - 12/05/04 06:26 PM
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
Posted By: A-Line Re: Flat Rate Pricing vs. T&M - 12/05/04 06:35 PM
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).]
Posted By: dougwells Re: Flat Rate Pricing vs. T&M - 12/05/04 07:27 PM

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
Posted By: A-Line Re: Flat Rate Pricing vs. T&M - 12/09/04 05:26 PM
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.
Posted By: LK Re: Flat Rate Pricing vs. T&M - 12/10/04 12:10 AM
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.
Posted By: kinetic Re: Flat Rate Pricing vs. T&M - 12/10/04 03:41 AM
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.
Posted By: GA76JW Re: Flat Rate Pricing vs. T&M - 12/10/04 10:23 PM
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.
Posted By: A-Line Re: Flat Rate Pricing vs. T&M - 12/10/04 11:51 PM
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.
Posted By: A-Line Re: Flat Rate Pricing vs. T&M - 12/11/04 12:21 AM
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.
Posted By: A-Line Re: Flat Rate Pricing vs. T&M - 12/11/04 12:32 AM

I like your way of handling this. That is probably the way the tv repairman would have handled it if it would have taken him longer than expected to diagnose.
Posted By: LK Re: Flat Rate Pricing vs. T&M - 12/11/04 12:50 AM
There is no secret to it, the auto repair industry has been operating this way with sucess for years, why try to re-invent the system if it works, there are many, we will show you how to suceed companies out there, and they are using tried and tested methods of operating, but none of this will work unless you apply them to your business.

And the auto repair shop, does not come to you, we have to support a truck along with all it's expenses, including a trained techinical person, so before we get there the meter is running.

So the guy charging a higher rate for service work knows all his expenses, no dart board or what is the area getting misinformation.
Posted By: Active 1 Re: Flat Rate Pricing vs. T&M - 12/11/04 02:09 AM

I was in the auto industry before. Some places didn't charge to "look at things". They would pull the car in. Figure out sometimes shortly what the problem is. Price it out. Then the customer says that's what it needs and does it him self. Shop makes $0. The mechanic did not want to spend much time to conferm the suspect part is the cause so the wrong things got repaired. So then they went to a dignostic fee to look at it which included the first hour of dignosis and customers were told most things are descovered in the hour. It it took 2 hours they were never charge more. But if was a big mystery then the customer is called and told something like "There is a problem with this system. It could be a bad this, this, or a bad connection. We need more dignostic time and $200 to find the cause and get you a repair estomate." The customer allways went for it cause they were allready $80 into it. After that they still fix it for more $ cause they got $280 into it.

I sould do that with my customers.
Posted By: kinetic Re: Flat Rate Pricing vs. T&M - 12/11/04 02:22 AM
Not exactly a good way to keep customers though. The referrals would go through the window in my opinion. Drives me crazy when people do that to me.
Posted By: Active 1 Re: Flat Rate Pricing vs. T&M - 12/11/04 04:38 AM

Maybe I did not explain it well enough. I thought I was agreeing with you about maybe charging a dignostic fee. Also I'm saying once you are there you probibly have the repair work.

A shop would charge a standard dignostic fee included in that was a list of tests and up too 1 hour time. Even if it took a few hours to find the problem nothing more would be charged. Once in a while you have a nightmare vehicle. What makes cars difficult is because of movement, vibration, tempitures, and the lower voltages the problems can be very intermitant. It can take a lot time for a problem to act up before anthing will test bad. For these cases the customer would have to be called to get more $. Dignostic laber was never the money maker. The money is in the repairs. The customers never seemed to have a problem with this. If your asking where I worked I can give a long list of dealers and independant shops.

I can't say that is how every place does it. I'm willing to bet if you called some shops and said my car stalls sometimes on cold days how much to fix they would give you one number but they will not look at it all day or longer for that number.

Posted By: Jps1006 Re: Flat Rate Pricing vs. T&M - 12/11/04 05:04 AM
This topic and others on this new forum are making me rethink entirely how I am doing things. Thanks to you (electrical)veterans.

How would you diagnostic quote a call like this: "I have some lights not working in my foyer. There was a lightning strike in the driveway and it hasn't worked since. Then while your here, I'd like you to look at some other things too, a doorbell and a door buzzer, and some other things when you get here"

Do you insist on an itemized list before you dispatch? Then what happens when you get there and they still remember "this" or "that"? Is it $139 for each item?

The more I read these and think about it the more I agree with these ideas. I think I used to bid T&M out of laziness. I just didn't want to think through the job, or I was too busy to think through it. Recently, with this and other posts in mind I have been quoting everything. donr pretty well. The key is to not quote too low, and not be afraid of them saying I'm too expensive.
Posted By: A-Line Re: Flat Rate Pricing vs. T&M - 12/11/04 04:35 PM

Sounds like you have been using flat rate pricing successfuly for quite some time. I just started using it about 3 months ago. So far it has been working out much better than T&M. I still have a lot to learn about using it properly. My prices are in a book that I show my customer. They see the price right in the book making it an easier sale. Do you show the customer the price in a book? If you do how would you add the extra diagnostic charges to the repair price listed in the book. Seems you would not be able to show them the price in the book.

Posted By: Jps1006 Re: Flat Rate Pricing vs. T&M - 12/11/04 06:08 PM
Okay, what about this scenario:

You are called to troubleshoot, and it takes a few hours. You open every box. You find something very simple to fix like a broken wire or bad splice. To “fix” the problem is no more than a minute. Do you quote to repair it at a price then that covers your extra time that it took to find the problem?

Does this diagnostic fee only apply to resi work? An industrial machine could take a lot longer and require changing certain parts to really narrow done the problem.

Okay, another case: “I have a new two story foyer fixture I’d like you to install. Also I have a fixture lift to install as well. How much?” We just told them T&M. from our experience these lifts require a dedicated circuit, and we didn’t know what it would take to get it up to the second floor. How would you flat rate this? Les, do use actuals instead of a book, or combination of the two? A-line, where do you get this book you use?
Posted By: LK Re: Flat Rate Pricing vs. T&M - 12/11/04 06:10 PM

Our price book has two level pricing, on a service call that requires more trouble time we use level 2 pricing, your price guide should show you this method, it recovers the additional time.
Posted By: A-Line Re: Flat Rate Pricing vs. T&M - 12/11/04 10:45 PM
I use Flat Rate Plus software. It can be purchased at It costs $2,500 and you print your books from the software. It is geared for the residential and light commercial market. I haven't used it for industrial machinery. You could create a new catagory in the software for industrial machinery. The software lets you choose what you want included in the book when you print it so you could print a seperate book with just the insustrial machinery catagory in it.

What flat rate system are you using?
Posted By: Dave55 Re: Flat Rate Pricing vs. T&M - 12/13/04 03:59 PM
At a party last Sat. a friend told me he had the local large mechanical outfit install a toilet for him. The toilet was $300 and the installation was $300. He said it took an hour. The toilet probably cost them $125. I REALLY have to give some serious thought to a flat rate system.

Have any of you done it on your own without a book? The book seems a good crutch to justify the prices to your customer.

Posted By: Dnkldorf Re: Flat Rate Pricing vs. T&M - 12/13/04 08:12 PM
Hello everyone.

Just my thought here. I only do T&M work, no bid jobs at all. I do not have to buy software to do estimating, no worries of loosing money on jobs because of unforseen events, and mostly, no estimating times that may or may not get the job. I try to do an honest job for an honest price. That is my niche. Some other folks make a living by job pricing, but I have found the repeat business is lost when the customer feels gouged in any way. I built my busines on repeat business. It works for me, may not work for someone else.

Just my thought on this..
Posted By: slumlordworker Re: Flat Rate Pricing vs. T&M - 12/13/04 08:56 PM
so since you don't give estimates do u ever have potential customers look else where?

I use flat rate but didn't have to buy some fancy and pricey software. I fill that flat rate is the best of both worlds. I have a gooday instead of only getting lets say 15.00 for a switch I get over 50.00. I have a bad day I don't have to charge 200.00+ to chnage a recpt
Posted By: A-Line Re: Flat Rate Pricing vs. T&M - 12/13/04 11:22 PM
If I call the contractors advertising in the phone book in my area and ask what their hourly rate is I get anywhere from $40 to $60 Per hour. When I was doing T&M I was having a hard time getting my customers to accept a rate of even $40 and hour. At $40 an hour I am losing money. When I went to flat rate my hourly rate went to $80 per hour and now I am at $100 per hour. I want to get it up to at least $130 per hour. I don't think I could ever do this charging T&M. I could see the look on my customers faces when I tell them that will be $130 per hour plus markup on materials. I'm not sure how long it will take. Right now I need to charge $65 per hour just to break even with no profit. This is based on paying me a salary of about $60,000 per year. I want to do more advertising and grow my business and have a personal income of at least $100,000. To do this I will need to bill out at $130 per hour or more. I don't see how I could do this with T&M.

[This message has been edited by A-Line (edited 12-13-2004).]

[This message has been edited by A-Line (edited 12-13-2004).]
Posted By: Dnkldorf Re: Flat Rate Pricing vs. T&M - 12/14/04 12:44 AM

No, I have my own niche thing going on. I don't do too much advertising either. I have about 2 dozen customers that are repeat customers over and over again. Any new work I take on is strictly reference only. If someone I do work for refers me, generally it is someone who doesn't want to spend the time talking to 3 or 4 people, and wondering who is BSing them. They just want it done.

Like I said, I found a little niche of people and that's all I want.I know it sounds crazy, but I work off a H/E ratio, not a P/E ratio.

Mine is headaches to earnings ratio, where most business's are going for a profit to earnings ratio.
Posted By: LK Re: Flat Rate Pricing vs. T&M - 12/14/04 01:08 AM
You have a good point, working for time and material, will never grow a business after all the expenses are paid, and that includes your salary, with contract pricing, we have the profit built in, running a business on T&M is working for hourly pay, and just making the overhead payments, I would think you could make more, working for someone on the clock, and have a lot less headaches, this is no way to build a business, that can reward you, or your employees.
Posted By: A-Line Re: Flat Rate Pricing vs. T&M - 12/14/04 02:56 AM
One of my customers during my 1st month in business:

Customer: I would like to replace this old panel and add some more outlets in these rooms. I also have a few oulets that don't work and need to have them fixed. How much will this cost.

My Reply: $40 per hour and 20% markup on materials.

Customer: Are you kidding me. My usual electricain that I use only charges $20 per hour. $40 per hour is his emergency rate.

My Reply: Why are you not using your usual electrician.

Customer: He said he lives too far away.

My Reply: I could be living in the basement and it would be too far away for $20 per hour.

Customer: I only make $15 per hour I cannot afford to pay you $40 per hour. Just give me a total price for all the work so I will know wether or not I can afford to have it done.

This is only one of many such responses I got from customers when giving them an hourly rate.
I still get complaints about the price even with flat rate but I get them less often and at least they don't compare the price to their hourly wage.
I think you will always get complaints about your prices. It's normal for people to complain about the costs of things. I do it everytime I fill my truck with gas, buy groceries, pay my insurance premiums etc. but I still pay. I just accept things are expensive and if I want or need it thats what I need to pay to get it even if I don't like how much it costs. I still prefer to know the total price before I purchase things though.

[This message has been edited by A-Line (edited 12-13-2004).]

[This message has been edited by A-Line (edited 12-13-2004).]
Posted By: slumlordworker Re: Flat Rate Pricing vs. T&M - 12/14/04 03:11 AM
charging 20.00 an hour he had to be an uninsured hack
Posted By: Active 1 Re: Flat Rate Pricing vs. T&M - 12/14/04 03:19 AM
I'm thinking I should make my own flate rate book and never again give an hourly charge. I'm ready for this is my price take it or leave it.

Customers allways want to break down your prices. How much to do this? How long will it take? How much ar just the materials? How much do you charge per hour? The other day I saw 2 guys at a store saying "The electrician charged me $12 for a GFI, I think he ripped me off and I'm going to tell him to take it back. Oh I guess they do cost about that".

Or my foverate "I thought it was $60 an hour for both electricians". Like I would come to their 1,000,000+ home and charge less then JW wage and still run a company.

Posted By: LK Re: Flat Rate Pricing vs. T&M - 12/14/04 04:03 AM

Your right, you could tell the customer $16 an hour, and they would think it is too much if they are making $15 an hour, T&M may work for some commercial, or industrial accounts, but on residential, they compare everything to their hourly income, what they need to hear, is the total cost, so they can see if it works for their budget.
Posted By: CalSparky Re: Flat Rate Pricing vs. T&M - 12/14/04 05:54 AM
Flat rate pricing is the only way to go! Very simply, when you tell someone $70 an hour plus %110 on material cost, they go nuts. I hear customers respond with "Boy, I'm in the wrong business" and the like. I love the book idea! I could definitly see how customers would appreciate the fact that you have a menu of services with prices as opposed to feeling like you just whipped a price out of your a^&. How do you handle phone quotes with a book? My guess would be that you would ask very pointed questions, give them a bid that is based on the information that the customer gives you and modify the bid if need be once you get to the site. Further you would let the customer know ahead of time that a phone quote may be less than complete, but that you will be able to use a price book and some diagnostics up front to sharpen the quote upon arrival if need be. Am I on the right track?
Posted By: LK Re: Flat Rate Pricing vs. T&M - 12/14/04 06:19 AM

Once, you quote over the phone, that customer is gone, not to be heard of again, no mater what the price is, you have to give the quote up front, after looking at the job.
Posted By: A-Line Re: Flat Rate Pricing vs. T&M - 12/14/04 06:27 AM
You never qoute a price over the phone.
A sample call would go something like below:

Thank you for calling A-Line Systems my name is Janet, how may I help you?

Customer: How much to have work done? or How much do you charge per hour?

At A-Line Systems we use upfront pricing. This allows us to give you a guaranteed price for a job before any work is even started.
For an investment of $39.50 we will send a licensed electrician to your home.
He(or she) will conduct a free safety evaluation of your electrical system, evaluate the job you requested and determine the price.
Everything will be put in writing and all work is guaranteed.
Nothing happens without your approval.

[This message has been edited by A-Line (edited 12-14-2004).]
Posted By: Dnkldorf Re: Flat Rate Pricing vs. T&M - 12/14/04 12:48 PM

Don't get me wrong here, but that is the problem I here about the most.

Free estimates that cost $39.50?

I know it pays for travel time and fuel costs.

Who else here charges for estimates?

The other thing I here about people complaining and refering to local authorities is the use of "special Deals".

These include signing up for service contracts for "cut rate" pricing and never hearing from the contractor again?

They tell me it sounds good in the beginning, but over all, they never saved any money. The Contractor also never gets return calls for more work. A lost customer. This leaves the Contractor always looking for a new customer to survive. The catch a fish for the day theory.

How do you guys feel about this?

I couldn't operate without return calls...
Posted By: Dnkldorf Re: Flat Rate Pricing vs. T&M - 12/14/04 12:58 PM
One more Question for you guys,

How many of you that are doing flat rate pricing do mainly resi work?

Is that what I am missing, flat rate for resi works best?

I do mainly commercial, light industrial stuff. Very very very few resi.

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

I often wanted to "break into" this market, but have found that in this area, the amount of available skilled people are not here.

I pass it on to my buddies who do this for a living.

Anyone else have labor issues?

Anyone find using sub contractors a better way to handle labor issues than employees?
Posted By: slumlordworker Re: Flat Rate Pricing vs. T&M - 12/14/04 02:09 PM
flat rate works well in commerical and industrial HVAC.

charging for estimates is something I think you have to do. if you go out to a person home or bussiness and end up spending an hour or more there trying to sale the job you are losing money. I started charging a fee for HVAC installations and if I get the job I just deduct it from the bill. I had to do this since people are always price shopping and want you to explain **** over and over again plus they want equipment literature. So to cover my a I had to charge
Posted By: A-Line Re: Flat Rate Pricing vs. T&M - 12/14/04 05:01 PM
There is a local plumber in my area that has been charging a $39.95 Service/trip charge for years and he is doing very well in his business. There are articles about him in the successful contractor magizines. I've heard of some contractors successfuly charging $59 for a service/trip charge.
The tv repairman that came to my house told me on the phone that it would be a $40 trip charge and $40 diagnostic charge. Then he would give me the price for the repair.
I used to go to the customer's home and not charge anything at all to give them an estimate. This was costing too much money and time to do this for free so I started charging the service/trip fee of $39.50 the estimate is free.
I added the safety evalutaion as a tool to sell more work such as installing GFCI recpetacles where needed. It's just a quick walk through checking for the obvious and checking the loadcenter.
There is an electrical contractor in Atlanta Georgia that only does residential service work. He has 53 employees and 27 service trucks. He does $6,000,000 in sales anually. There is money to be made in this type of business you just need to learn how to do it properly. Another benefit of this type of work is that you are collecting your money daily from the customer. You don't wait 30 days or more trying to collect as you do from most GC's and industrial jobs where they need to process the invoice.

I had an appraisal done on my home. The appraiser spent less than 30 minutes at my home and the cost was $250.00 I've heard this is one of the cheaper appraisals some cost more.

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Posted By: dougwells Re: Flat Rate Pricing vs. T&M - 12/14/04 07:31 PM
A Customer had called me this morning,He has a failed dimmer so he said ,#1 problem is the fridge has to be moved to access the switch,he has disco all the wires for Kitchen light and out side light.

He Attempted to install another dimmer and breaker would trip and also outside was slow to come on and would be dim. He also lives 45 minutes away from my shop. I quoted over the phone that he would be looking at a minimum of 200.00 for the repairs and he couldn't believe that it would cost that much to "change" a switch.

I do not feel that this was overcharging as 1 would have been at least 2.5 hours doing the job. I also think that there must have been some diy kitchen Reno's because of the location of the switch. He is now price shopping at the moment.
Posted By: Dnkldorf Re: Flat Rate Pricing vs. T&M - 12/14/04 08:01 PM
Thanks for the info guys......

Gives me something to think about on the resi end of things.

Happy Holidays.....
Posted By: A-Line Re: Flat Rate Pricing vs. T&M - 12/14/04 11:01 PM
Is anything really free?
The time & expense of giving free estimates needs to be included in your overhead. Your overhead needs to be included in your prices the customer pays. So in the end the customer pays for the free estimate.

Have you ever seen the ads that say free labor with your carpet purchase? Who pays for the labor? You the customer does. It is included in the prices of the carpet they sell. So the labor really isn't free.

Free dvd player with the purchase of a big screen tv.
Purchase one pizza and get the second one free.
Free car wash with every full tank of gas.

All of these require you to purchase something to receive your free item.

Above all don't do what the most successful businesses do or you just might wake up some day and find you have become just as successful. [Linked Image]

[This message has been edited by A-Line (edited 12-14-2004).]
Posted By: Electric Eagle Re: Flat Rate Pricing vs. T&M - 12/15/04 02:23 AM
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.
Posted By: A-Line Re: Flat Rate Pricing vs. T&M - 12/15/04 03:44 AM
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).]
Posted By: LK Re: Flat Rate Pricing vs. T&M - 12/15/04 04:42 AM
"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.
Posted By: Dnkldorf Re: Flat Rate Pricing vs. T&M - 12/15/04 12:10 PM
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.
Posted By: LK Re: Flat Rate Pricing vs. T&M - 12/15/04 09:56 PM
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.
Posted By: Pat@Amber Re: Flat Rate Pricing vs. T&M - 12/16/04 12:47 PM
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!
Posted By: sparky66wv Re: Flat Rate Pricing vs. T&M - 12/16/04 07:26 PM
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.
Posted By: LK Re: Flat Rate Pricing vs. T&M - 12/16/04 09:47 PM

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.
Posted By: A-Line Re: Flat Rate Pricing vs. T&M - 12/16/04 10:25 PM
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).]
Posted By: Pat@Amber Re: Flat Rate Pricing vs. T&M - 12/19/04 11:47 AM

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!

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

Posted By: A-Line Re: Flat Rate Pricing vs. T&M - 12/19/04 05:02 PM

In my area the going rate is between $40 & $60 per hour. I was charging $50 per hour doing T&M and was getting plenty of complaints about how much money I was making even though I was broke. When I switched to flat rate I went to $100 per hour and I'm getting fewer complaints.
Showing the customer the price in the book is very important. They seem to accept the price much better when then see it in a book. It gives them the impression that this price is standard in the industry.

I started making my own books but this was too time consuming and I decided I was better off spending my time getting and doing jobs not making books.

The software makes maintaining your books very easy. It's easy to update material prices, job prices or job times. You can add or delete tasks. Choose different ways to print out your books etc.
I didn't have $2500 laying around either but I don't think I could have told all my customers I was raising my rate from $50 per hour to $100 per hour without doing it this way. Now they get the exact price that they want and they see it in a book so they don't think I'm pulling it out of my a#*.
I've only been using it for about 3 months now but so far the results have been positive.
Posted By: Joey D Re: Flat Rate Pricing vs. T&M - 12/19/04 10:50 PM
A line, I like the flat rate idea and I try to use it at all times, but how does the books cover finding problems in an old house that ends up being a bad splice that takes a couple hours to find? Is it a win some lose some deal?
I think T&M is only giving yourself a salary and not going to give you the added income of job profit.
Posted By: LK Re: Flat Rate Pricing vs. T&M - 12/19/04 10:51 PM

The personal shopper works for accounts that have some wealth, so they are hitting a target market, maby we should do that.
Posted By: A-Line Re: Flat Rate Pricing vs. T&M - 12/20/04 01:03 AM

Occasionally you will have a job that you lose money on. Your prices have to be high enough to cover the occasional job that goes bad. When I was doing T&M I was losing on all my jobs. So which is better?
If you find that you are losing money on a job too often then you need to increase your labor time in your book.
Example: If your book says a job will take 2 hours but most of the time it takes you between 3 to 4 hours then increase the book time to 4 hours. If most of the time it only takes you 3 hours and your book says 4 hours you are now getting more than T&M. With T&M the faster you complete the job the less you get paid for doing the same job.
You could set your prices high enough that you would never lose on a job but you might not be able to sell it to the customer.
Some have their prices quite high and still seem to be able to get plenty of work. I guess it just depends on how good you are at selling.

I think of it like gambling in vegas. The house doesn't win every hand but the house always wins the game.

[This message has been edited by A-Line (edited 12-19-2004).]
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