The last 2 blogs looked at the importance of generating a profit in your Pool service business, and how to utilize flat rate pricing to make that happen. Now let’s look at a sample service call scenario. A tech goes to a home in response to a noisy pump. The tech finds the bearings on the motor are bad, but also finds that the burners on the heater need cleaning and the time clock mechanism has rusted to the point of keeping the pump running continuously. In a time and material scenario the tech goes to the house, changes the pump and then goes on to the next service call. At $75 per hour, the contractor billed out $304 for the motor and $75 labor for an invoice total of $379. This will yield an approximate Gross Margin of 53.3%, which for most service companies is close to breakeven.
In a flat rate scenario, the tech charges the customer a diagnostic fee, takes the time to thoroughly analyze the entire pool and spa system, and then makes recommendations for all repairs. This gives the customer options to buy suggested repairs. With the finding of dirty burners and a defective time clock mechanism, the repair is larger than just replacing the motor. Now the call went to $786, taken from the flat rate manual based upon $100 per hour (not a rate shared with the customer) which includes $391 for the motor, $100 for the burner cleaning and $246 for the time clock mechanism, PLUS $49 for the diagnostic. This repair yields a margin of 63.65%. Now the service company makes a profit! For most this would yield a Net Operating Profit of 10 – 15%, which is fully acceptable. If your costs are more or less, you can modify the parts markups or labor rates by which the books are generated to more closely match your market. It’s also based upon a labor rate that can be higher if you choose.
Good news, right? Well the better news is that the customer PREFERS the flat rate scenario because you gave them the option to accept or decline the repairs before the job was started AND they fully knew how much the cost would be prior to commencement of work. This is far more preferable to the imprecise time and material method.
Ok, in 3 short blogs we have raised margins by 19.4%. Time well spent and a business strategy worth exploring. Ready to dive in?
Learn More: Callahan Roach’s: Pool & Spa – Flat Rate Pricing