This is the second in a series, and deals with the secret to charging enough in order to make a profit. The answer is not to shed service, but rather charge enough to make money in service. The way to do that is by flat rate pricing the service rate. This way it takes the focus of your company away from the “per minute” rate and puts it on the quality of your company.
Contractors have told me their customers want:
- Prompt service
- Thorough service
- Things fixed right
- The fix stays fixed
- Fair Price
You cannot do the first four by undercharging your customer. So what is a fair price? Consider when you offer the customer a $65 or $70 per hour rate, that is BELOW cost in many situations. Customers might complain because THEY DO NOT MAKE THAT AMOUNT IN THEIR JOB! And if they do, they sure don’t want their pool guy to make that amount!
The only way to charge your customer is by quoting them a single amount for the entire job that includes all labor, parts and expenses – Before the repair is performed. In the construction or remodel part of your business it’s called a quotation. In the service department it’s called Flat Rate Pricing
Flat Rate Pricing is advantageous because the customer doesn’t nit pick your hourly rate or what you’re charging for the part. The key is to focus your company on the quality delivered, not on the per hour rate that you are charging.
With flat rate pricing you can go up to an hourly rate that is ABOVE your breakeven. You can now make a profit on what you sell. In addition, there are other financial benefits to flat rate pricing.
Each flat rate repair has a time allotment that is based upon what a journeyman tech would take to do a repair under normal working conditions, with a little time added for working conditions. If the tech finds 2 or 3 items that need work, there are economies of scale because the tech should do all items in less time
Check Back For Part 3: Looking at a Sample Service Call