ECN Forum

t&m vs. flat rate for service?

Posted By: jdot77

t&m vs. flat rate for service? - 02/23/09 03:04 AM

hey guys im new to the forum. I just started a small elec buss. I was wanting any feedback on how you guys are charging cutomers. any thoughts on T&M vs. Upfront pricing would be greatly appreciated!
Posted By: dougwells

Re: t&m vs. flat rate for service? - 02/23/09 03:55 AM

I am a Flat rate company Upfront pricing is listed in all my advertising. Now saying that I am my own worst enemy when quoting from a price book. i start to second guess my final price
why am I more concerned about the customers ability to pay than my own operating expenses.. I think I need one of those Charlie Greer seminars smile
Posted By: renosteinke

Re: t&m vs. flat rate for service? - 02/23/09 04:43 AM

T&M requires a great deal of trust between the customer and the contractor. It can only work after a long standing relationship has developed.

As for "flat rate," we ALL like to know ahead of time what we can expect to spend. Would you roder at a restaurant, without knowing the cost?
Posted By: jdot77

Re: t&m vs. flat rate for service? - 02/23/09 03:49 PM

Now with a flat rate pricing, do you go to each customers house with a estimate, or do you give estimate over phone without seeing project? running around not getting jobs could be and issue, unless you could give price over phone. I like the idea of flat rate, but seems like you would be losing alot of time on the road as well.
Posted By: dougwells

Re: t&m vs. flat rate for service? - 02/23/09 07:11 PM

Generally flat rate has a dispatch charge attached to it. It is not a good Idea to quote task prices over the phone you need to see the job.
Posted By: jdot77

Re: t&m vs. flat rate for service? - 02/24/09 02:36 AM

how do you combat the contractors that are giving free estimates. With the dispatch fee you may not get to see alot of jobs available. Customers that are looking for an electrician will tend to be looking for free estimates.
Which is not hard to find! Basically it sounds like the dispatch fee is a charged estimate.

Thanks for all the input on this topic
Posted By: dougwells

Re: t&m vs. flat rate for service? - 02/24/09 04:19 AM

Thanks to Aline for posting this link at another forum.
It helps to determine how to apply a dispatch fee to go look at a site.

http://contractingbusiness.com/ar/cb_imp_13003/
Posted By: jdot77

Re: t&m vs. flat rate for service? - 02/24/09 06:03 AM

hey thanks, thats was very informatable.
Posted By: leland

Re: t&m vs. flat rate for service? - 02/24/09 03:51 PM

Thanx Doug. That was great.
I have long been Leary of a flat rate. This article (as opposed to others)Has really got me thinking.

I don't think I ever had the full grasp of it before.

I have walked away after a T&M job shaking my head at all the money I didn't make.
Posted By: macmikeman

Re: t&m vs. flat rate for service? - 02/24/09 10:11 PM

Originally Posted by leland

I have walked away after a T&M job shaking my head at all the money I didn't make.


Leland, if it is any consolation, I have walked away after some flat rate calls shaking my head at all the money I didn't make either. It doesn't always work out, but by far it does based on percentages of times it does. Trick is do not "flat rate" at only what you think it will take to do the job and make a profit at it. Figure the worst case scenerio into it and flat rate based on that. Then you start making money at flat rate cause it will even out the ones you don't figure enough time into to get it done right and to super service. One thing about that Charlie Greer article , If you drop your trip charge and then bury it back into the primary task, isn't that the same thing as "free estimate" when in fact you end up charging for that free estimate in price of the job....
Posted By: leland

Re: t&m vs. flat rate for service? - 02/24/09 10:56 PM

Oh Ya, "free estimate" (my back side!). It is always rolled in.

Even T&M, I (most)always give a 'not to exceed', so that is probably as close to flat rate that I have come.Usually I do ok,But.. Sometimes...
Just trying to fine tune things now for reasons beyond my control.

necessity breeds invention (or modification at least).
Posted By: sid123456

Re: t&m vs. flat rate for service? - 04/04/09 08:28 PM

Doesn't really work so great here in Florida in my opinion. Too many different situations and too many little guys out there to compete. Free estimates or t&m work for me.




www.pewiring.com
Posted By: A-Line

Re: t&m vs. flat rate for service? - 04/05/09 12:19 AM

Originally Posted by sid123456
Doesn't really work so great here in Florida in my opinion. Too many different situations and too many little guys out there to compete. Free estimates or t&m work for me.




www.pewiring.com

Check out page 20 in this magazine. It's about a flat rate contractor starting up in florida. http://www.thesuccessfulcontractor.com/backissues/08_WINTER.PDF

I wonder how he's doing in florida.
Posted By: renosteinke

Re: t&m vs. flat rate for service? - 04/05/09 12:54 AM

Amazing how hard it can be to have a productive discussion, when definitions keep changing!

"Flat rate" is simply telling the customer "I will do the job for $X." This is essentially what Mr.Sparky does - with the addition of a service charge to go look at the job. No free estimates there.

Just where does that 'flat rate' price come from? Invariably, there is some reference to your past experience, and allowance for whatever complicating factors there might be. Given a large enough sample base, you can fairly state that a certain task will take "H" hours, use "$P" in materials, require the use of certain equipment (surcharge there), and come up with "$X" as your price.

The advantage to various software and franchise operations is that they allow you to draw upon a larger sample size, and have a support system to help keep material costs up to date.

T&M is an arrangement akin to a blank check; that's something you won't trust to just anyone. It has its' uses - especially when an established contractor has a project of unknown scope and duration.

For example, painting the Golden Gate bridge is an instance where T&M can work well - that job never ends! By contrast, painting your house ought to lend itself to 'flat rate' pricing.

Another key to the Mr. Sparky approach is to have the guy doing the estimate arrive in a fully stocked truck, ready to do the job RIGHT NOW. There is pressure- if nothing else, that service call fee- to get the customer to commit right now to having the work done. Such immediate service can allow you to charge a premium.
Posted By: mahlere

Re: t&m vs. flat rate for service? - 04/05/09 04:12 AM

Originally Posted by renosteinke
T&M requires a great deal of trust between the customer and the contractor. It can only work after a long standing relationship has developed.

As for "flat rate," we ALL like to know ahead of time what we can expect to spend. Would you roder at a restaurant, without knowing the cost?


reck roh...:D

that being said, i've been to a bunch of restaurants in NYC that you do order without a menu and without pricing...some of the best italian restaurants are like that...
Posted By: A-Line

Re: t&m vs. flat rate for service? - 04/05/09 07:46 PM

Originally Posted by mahlere
Originally Posted by renosteinke
T&M requires a great deal of trust between the customer and the contractor. It can only work after a long standing relationship has developed.

As for "flat rate," we ALL like to know ahead of time what we can expect to spend. Would you roder at a restaurant, without knowing the cost?


reck roh...:D

that being said, i've been to a bunch of restaurants in NYC that you do order without a menu and without pricing...some of the best italian restaurants are like that...

Often times when people are spending money on entertainment and recreation they have a tendancy to not worry so much about the cost.

They're out having a good time, they don't want to spoil it by stressing over how much it's costing them.
That's why they'll pay 2 bucks or more for a hot dog.

Generally they'll stress over it the next day after the hangover wears off and they realize how much they spent. smile



Posted By: sid123456

Re: t&m vs. flat rate for service? - 04/15/09 01:48 AM

He won't survive here. Too many local contractors. How many people can you sell a 6500.00 panel upgrade to? Can anyone say ripoff. I lived in Atlanta when he started. I just don't think it can work here. When I moved here I thought it would be a great model but I don't think that anymore. Time will tell.
Posted By: dougwells

Re: t&m vs. flat rate for service? - 04/15/09 01:58 AM

Originally Posted by sid123456
He won't survive here. Too many local contractors. How many people can you sell a 6500.00 panel upgrade to? Can anyone say ripoff. I lived in Atlanta when he started. I just don't think it can work here. When I moved here I thought it would be a great model but I don't think that anymore. Time will tell.


I didnt see where Mister Sparky charges 6500 for a panel upgrade/swap out,if he wants that for the Panel I wonder How much the 200 amp overhead service upgrade is on top of that 6500.00
Posted By: A-Line

Re: t&m vs. flat rate for service? - 04/15/09 02:51 AM

Originally Posted by sid123456
He won't survive here. Too many local contractors. How many people can you sell a 6500.00 panel upgrade to? Can anyone say ripoff. I lived in Atlanta when he started. I just don't think it can work here. When I moved here I thought it would be a great model but I don't think that anymore. Time will tell.

At what price point would it no longer be considered a ripoff?
6000.00?
5500.00?
5000.00?
4500.00?
4000.00?
3500.00?
3000.00?
2500.00?
2000.00?
1500.00?
1000.00?
500.00?

Who determines whether it's a ripoff or not?
The customer?
Other electricians?
Other electrical contractors?


Posted By: sid123456

Re: t&m vs. flat rate for service? - 04/15/09 03:02 AM

Market average. Walmart sells 4 tires 4 $400. Sparky sells same 4 tires for $3,000. ????
Posted By: A-Line

Re: t&m vs. flat rate for service? - 04/15/09 03:38 AM

Originally Posted by sid123456
Market average. Walmart sells 4 tires 4 $400. Sparky sells same 4 tires for $3,000. ????

The key word here is "same".
Same quality of materials, same workmanship, same service.
I've seen some pretty poor service upgrades, didn't meet code, etc. and I've seen some really high quality service upgrades.
I've also seen some contractors that provide terrible service and some that provide superior service.

We're not selling panels, breakers, wire, boxes, receptacles, switches, etc.
The customer can buy these at Home Depot cheaper than what we sell them for.
We're selling service. This is what the customer is paying for.

I've seen some of the work customers have said they got a great deal on. I personally wouldn't have paid a dime for some of the crap I've seen. In fact I would want to be reinbursed for having to rip out all the crap they installed and have it done right.

I believe it's ultimately up to the customer to determine whether or not the price they paid for the quality of the work and the level of service they received was a ripoff.

When you go out to dinner you can go to a really cheap restuarant or you can go to a really expensive restuarant. Are the really expensive restuarants a ripoff?
There are plenty of people who don't seem to think so.
I can go to the store and buy my own steak a lot cheaper than the what the restuarant is selling it to me for.

The end result is always the same. It all flushes down the toilet the same.
So why would anyone go to a really expensive restuarant just to flush it down the toilet a couple of hours later?

Who determines the market average?
The customer?
The electrical contractor?

So if all EC's sold service upgrades for $6500.00 than it's not a ripoff?

If I sell service upgrades for $1500 but you sell them for $3000 does that mean your a ripoff?
What if I do a crappy job, don't show up when I say I'm going to, don't call the customer to let them know I'm not going to make it and the customer took of work that day only to have me not show up?

Some people place a high value on their time, don't like to have it wasted and are willing to pay more.
Some people also want a top notch installation and not some half fast scabbed together installation that barely meets code if even that.

If the customer paid $6500 for the same crappy service they could have gotten from the guy that would have charged much less then yes they got ripped off.




Posted By: jdot77

Re: t&m vs. flat rate for service? - 04/15/09 03:43 AM

Sid, where in Florida? Im starting in Tampa area.
Posted By: sid123456

Re: t&m vs. flat rate for service? - 04/15/09 02:32 PM

Hey Jason, I'm over here in Pinellas
Posted By: gfretwell

Re: t&m vs. flat rate for service? - 04/15/09 05:14 PM

You guys should look into joining the Fl IAEI. I assume the Sun Coast chapter is like the Gulf coast chapter. They have a lunch meeting once a month where people in the trade can get together and talk about what is going on in the business. It is an excellent "networking" opportunity and you can usually pick up some CEUs from time to time.
Posted By: bigpapa

Re: t&m vs. flat rate for service? - 05/02/09 06:48 PM

Residential wiring and service is usually a race to the bottom to see who can be the cheapest. I honestly can't see how you guys can make Monet at this unless you have a supply of really cheap labour.
Posted By: bigpapa

Re: t&m vs. flat rate for service? - 05/02/09 07:08 PM

Or maybe the t&m guys lose money and flat rate guys make money.
I see contractors in my area advertising $30 per hour shop rate for residential work. That's crazy.
Posted By: Tesla

Re: t&m vs. flat rate for service? - 05/03/09 03:37 AM

The only time I can see that T&M makes sense is when it is clear that bid risk is too great:

Extensive fishing in old work...

Projects way outside one's experience...

Tracking down and fixing broken underground circuits...

For them I go with a minimum fee, T&M and a worst case maximum fee.

Everything else is bid work; it's the only way that I can get my per-hour rates where they need to be.

I normally will not even bid a T&M ticket unless it's for an established account. It demands mutual trust.

Posted By: A-Line

Re: t&m vs. flat rate for service? - 05/03/09 06:25 PM

Originally Posted by bigpapa
Residential wiring and service is usually a race to the bottom to see who can be the cheapest. I honestly can't see how you guys can make Monet at this unless you have a supply of really cheap labour.

For some contractors commercial work is a race to the bottom.

http://www.thesuccessfulcontractor.com/spring09-article07.asp

http://www.thesuccessfulcontractor.com/index.asp
Posted By: mahlere

Re: t&m vs. flat rate for service? - 05/03/09 06:53 PM

yep, for the right type of person, residential is the largest cash cow you could ever hope for...

but one thing to keep in mind: the attributes needed for success in resi service are very different than the attributes needed for commercial construction...

very rarely does one person have the attributes required for both sectors...which means, as a small EC, you best learn what attributes you have quickly...like before you go bankrupt:D
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