Are You Charging Enough?

smellslike$tome

Hello everyone,

This is my first post so without further ado I'd like to offer myopinion, the first of many. Here it is, and I am only talking about residential service work here. Most residential service plumbers, whether it's one guy and a truck or 10 trucks, are so worried about losing business to the other guy that they end up trying to low ball the work just so they can have the work. This ends up causing the quality of the customer service to plummet because they have to work twice as hard and try to move twice as fast to bring in the same amount of revenue. We need to stop this! It's a big reason that plumbers have a poor reputation. We charge a lot of money for service and then show up and it's like a race to see how fast we can get done and get out of there when what we should be doing is pricing the job appropriately to begin with and then taking the time to make certain that everything is right. If we would do this then it's true we would schedule fewer calls in a day but we would bring in as much or more revenue for that day, our customers would be happier with the attention and service they receive, we would have fewer callbacks, we would get more referal business which means lower advertising costs, we would have less time that technicians spend riding around in trucks, less fuel consumption, less wear and tear on those trucks, and so on and so forth. Another thing that bothers me is the way some companies handle service call fees. We all know that the customer is going to pay us for the time it takes to drive our truck to their house. We ought to be honest and upfront about it with them instead of hiding it in the repair cost or even worse telling them that "we'll waive it if you authorize the work", I can't understand how anybody could believe that in the first place! And how many companies say they give free estimates but make up the cost of the "free" estimate on the next customer when the first customer says "thanks we we're just trying to find out what it might cost, we're not sure right now whether or when we might do this work." DON'T GIVE FREE ESTIMATES!!! Are you a professional or not? Have you or anyone you know ever gone to your doctor and said "I'm not going to pay you for the time and knowledge and skill it takes to figure out what it'll take to fix me but if you will do it anyway I might use you to cure me that is as long as you're the cheapest". We are not doctors but we contribute significantly to the public health and well being. Our time, knowledge, and skill are valuable. Stop worrying about losing a call to someone else. There is plenty of work to go around! Be professional, do it right, and be paid what you are worth! No one but a plumber will drive to your house and then handle without flinching the most disgusting, vile, and dangerous things things that come out of the human body! I'm done preachin' for now. Thanks for listening.

Peladu

Welcome to the site....good to have you...

....remember...Peladu is your friend.....but not a plumber

...just wanted to welcome you...I'll let the plumbers answer your post....

MinConst

Hi Smells,
You opinion fits more than plumbers. It seems to fit all aspects of this business.
Welcome aboard.

__________________
Paul
Minichillo's Construction
Website
I will never leave you hanging!

nadonailer

Ditto, Smells! Everyone needs to suck it up and charge what they're really worth

__________________
"History does not long entrust the care of freedom to the weak or the timid”.
Dwight D. Eisenhower

mdshunk

Smell's dissertation sounds like the prelude to a pretty good arguement for flat rate pricing for service work.

Nathan

Thats the whole point of this site.

Welcome to the site!

__________________
Nathan

"He is no fool who gives what he cannot keep to gain that which he cannot lose." - Jim Elliot

smellslike$tome

Well thank you for the welcome everybody! And you're right, MD, I get a little verbose sometimes. You're also correct about flat rate. Does anybody in service work still use time and materials? If I call you to my house to install some recessed lighting, or whatever, as a consumer all I want to know is how much it's gonna cost me, how long it will take, and what sort of warranty do I get. If you start writing numbers in the air and counting on your fingers and toes to figure out how much your materials and time are going to be, it makes me think maybe you've never done this before. If you look everything over, ask all the questions you need to ask, and say "we will install X number of cans at such and such, blah, blah, blah, and it will cost you 47 kazillion dollars, now I know exactly where I stand and I can say yes or I can say no. But if you say, "well it's gonna be around 14 kazillion for the supplies and I think about around 16 1/2 hours for the labor at 2 kazillion an hour. Yes it looks like it's gonna be around 47kazillion dollars, give or take 10 or 20 kazillion. If you say something like that to me, I'm really worried that I'm being set up. Very unprofessional, and what am I, the consumer, gonna think when I refer you to my neighbor because I loved your work and a week later I find out he only paid 37 kazillion for the same job because you sent the A crew to his house and they got done faster. T & M just doesn't work well AND IT'S NOT WHAT THE CUSTOMER WANTS. I'm done preachin' now. Thanks for listening.

Bjd

I have been in this business for 30 years, and yes my TM is very competiave with your date rape excuse me "flat rate" pricing.

How in the world can you factor in for the "unknown"?

You take the worst case and use that as a base to price, this may work in areas that are mostly the same however around here we have many vairables in each case that have to be factored.

This makes it inpossible to do over the phone, unless like you use a crystal ball and just pull a price from the air.

The work that I have lost to flat rate is few, and to be quite honest with you the few that I have lost most have returned.

You can buy a hamburger from any fast food place for $2.00 and it comes wraped in paper, you can also get the same hamburger from the Outback for $12.00 dollars the funney thing is people will go for the quality rather than the price, they like presations and the only way to get that is to meet them in person and not price over the phone.

BJD

smellslike$tome

Whoa there Bjd! You must have completely misunderstood me because I NEVER give a repair price over the phone. I do of course let them know about the service call fee on the phone but I do not give repair or installation prices on the phone period. Even if it sounds like the simplest, most straight forward task, as soon as you say a price the customer's ears tend to close up. This is exactly my point about T&M, as soon as you say "I think it's gonna be $500.00", in my experience, that's it as far as the customer is concerned. So when you come back with $650.00 because you ran into problems that were unforseen, generally it doesn't matter how much you tried to explain that possibility beforehand, the customer heard $500.00 and now at the very least they are disappointed and at the worst they are angry. I don't ever want my clients to experience either of those emotions when I hand them the bill. Now I'm virtually certain that no one is hiring your company under the terms that "you'll let them know how much it is when you get done" so you are already using a quasi flat rate system anyway, in that, you are telling people beforehand "it should be ..." or "I expect it to be ...". The down side of this, in my view, is that it leaves room for dissatisfaction as previously stated, whereas, with a true flat rate system, when I tell Mrs. Jones that it will cost $500.00 before I begin, and then when I am finished I hand Mrs. Jones a bill for $500.00 she is perfectly satisfied, assuming my work was good, because I delivered precisely what I promised at the exact price I promised. Now this is a double edged sword, have I been on jobs that went haywire and instead of the 2 hrs it should have taken, it ended up being all day, absolutely. When it happens you just suck it up and honor your word. Mrs. Jones still gets the price I quoted her whether it takes 30 min or 3 days! Does my pricing cover me for some level of unforseens, which may or may not happen, of course it does. If I was rough on T&M in the previous post, believe me I wasn't trying to hurt any feelings, especially since I'm the new kid. You are absolutely entitled to run your business however you wish. I've run mine using both methods and I've found that flat rate is way better for me. T&M nearly put me out of business. Now when a customer stands around and watches me work it's actually a pleasure. I don't feel all the pressure to get it done because the clock is ticking. It gives me opportunity to converse with the client while I work, which allows me to deepen the report with the client, which increases customer loyalty. OK I'll let it go now but please don't call me a date rapist. If I am able to charge more than you for a given service because the customer has perceived value in hiring me, it doesn't make me a rapist. I don't hold a gun to anybody's head. I tell them how much it will be and they hire me or they don't. Remember, there is a whole lot more to customer service than simply changing out the faucet. A lot of people want the $12 hamburger. I'm done preachin' now. Thanks for listening.

fez-head

T/M is the best for me….and in my mind it is fair to everyone involved. But as you mentioned I do charge accordingly and never compete with price. My outstanding customer service and positive attitude sells the job almost every time.

I have had several people get pissed about not getting a free estimate but they are not the type of clients that I am looking for. I think this Free Estimate crap needs to be niped in the bud....even a $10 estimate fee will weed out most of the price shoppers.

Technician man-hours billed by Kirchhoff Handyman Solutions shall include all of the productive labor time normally associated with the customer’s project and any other time spent on behalf of the customer, including but not limited to:

• Evaluation of project (at owners request) to provide Owner with an estimated cost for completion.
• Technician hourly rate of $60 per man-hour (special discounts may apply), with a minimum charge of one (1) man-hour. Time incurred over one hour will be billed at fifteen minute increments.
• Pick up and delivery of materials, plus standard 20% markup over cost for materials purchased by Contractor on behalf of the customer. (Owner can save money by having materials onsite, ready for installation)
• Disposal fees for any material which cannot fit into a standard 30 gallon trash can.
• Small service fee of $30 applied to all individual invoices.
• Payment is due upon completion unless prior arrangements are made before work begins.

Bjd

I have begun to use the design/build program, in this process the customer is in charge of the price. I set a limet on the project, IE say $2500.00 if we do not enconter any real problems and things kinda of fall into place then the price may be lower than quoted, this gives the owner options that they can use for other projects.
This program works even better than T&M as the customer will always add to the list when they know whats left.

BJD

ATS

smells, why don't you just tell us how much $$ your flat rate program costs?

smellslike$tome

I'm not sure what you're asking me. How much do I charge or what do I pay for the system? My original point with the post was that plumbers, in general, based on what other plumbers tell me, is that plumbers don't charge what they could be or should be charging. They do this for various reasons, but I think it's mostly due to fear, sometimes it's out of some warped sense of morality, "that's too much, it wouldn't be right". They think they'll go out of business if they charge more than Billy Bob's Plumbing does and I'm telling you it's not true. Or they think of themselves as dishonest or theives if they charge more than a certain amount, but there is absolutely no dishonesty or thievery in giving someone a price for a service up front and then doing exactly what you promise, or more, for that price! The market will determine how much is too much and what I'm saying is that we should be exploring the upper end of that limit instead of just trying to stay afloat in business. Now if you don't do anything to differentiate yourself from Billy Bob and you try to charge double, then yes, your going to run into trouble. But the problem with a lot of plumbing companies, and remember I'm talking strictly about service work, is that the owners are plumbers and not really businessmen. I fit in this category, I am an average plumber and a below average businessman, but I'm learning all the time and getting better at running the business all the time. Everybody starts out as a green helper somewhere, even if you're 14 and help your uncle on the weekends, as time goes by you learn your trade, you pursue your certification and become a journeyman and then a master. Then one day you think "I can do this for myself, why is the guy I'm working for making all the money", so you "start your own business". Now you might be the greatest tech in the world but you don't know squat about running a business, so what do you do, you start trying to find out what other people are charging instead of figuring out what it's going to take to run a successful, profitable business. You don't have work lined up as far as the eye can see and you've got a wife and two kids to feed so you think "If super mega king of the plumbing world is charging X then I can cut him by 50% and have tons of work or else you look at SMKotPW's prices and think "man that's outrageous, that job only cost $20 in parts, how does he sleep at night?" without having the slightest idea how he arrived at that price. Now this is probably a perfectly natural transition for trades people who go into business for themselves, the problem is that an awful lot of them never seem to grow out of it because the're afraid no one will pay the higher price and they will go out of business and have to go work for someone else. HOGWASH!!! Alright this is getting long so I'll try and wrap it up. Here's the thing, if a plumber can charge $500.00 an hour, to put it in T&M terms, and he's doing excellent work, providing appropriate warranties and honoring them on the rare occasions that it might be necessary, and the customer is happy, then why shouldn't he charge $500.00 per hour? If the market determines that $1000.00 an hour is the absolute limit of what enough customers will pay to keep me profitable then why do I want to keep charging $75 - $100 per hour like so many of them do? If you're going to take the risks of being a small business man then at the very least you ought to have a nice house, decent vehicles, health insurance, your kids ought to be able to go to college without incurring 20 years worth of student loan debt, you ought to be able to take at least one quality vacation each year, your retirement fund should be steadily growing, your employees should be the highest paid in your market with a broad and generous range of benefits, and oh yeah your company ought to be making an absolute minimum of 20% profit. But you will spend your entire business career running like a mad man trying to generate enough revenue to keep everything going and have nothing to show for it when you finally have to give it up if you don't conquer that fear and expand your thinking about what you should be charging. These are my views on the subject, you might agree or you might disagree but at least Peladu is still my friend. I'm done preachin'. Thanks for listening.

ATS

Actually, I was under the impression that this was a sales pitch to market a flat rate program. I have heard and read numerous spiels on this subject and yours sounds the same as all the rest. If I'm wrong, I apologize, just sounds like a pitch to me. If it isn't, I agree that many tradesmen are not charging what they should, for many of the reasons you gave. I like the flat rate notion myself, for some jobs, others do require a T&M approach. Depends on the circumstances, service work included in my opinion.

John B

Smells,
Like ATS, I am under the impression that this was/is/soon will be a sales pitch. Apologies to you IF I am wrong.

But, I gotta tell ya something don't smell right to me.

smellslike$tome

Ha ha, yea I get it, "doesn't smell right", you made a funny! No apology is necessary, but no, I am not selling anything, unless you need some kind of plumbing install in north central Alabama. All I really want is to get plumbers in my area to stop charging $75.00 to $100.00 an hour and basing it only on the actual repair time. The sooner I can get them to start charging a service call fee to come out and start charging $150.00 an hour starting from the time they put their truck in park and ending when they put their truck back in drive, the sooner I can start getting $200.00 an hour. When it comes right down to it I don't care what system you use. Anybody who wants to compete on price never has to worry about me because I will always do everything I can to make certain that I am priced in the highest 25%. I'm perfectly willing to let the drunks and hacks take the lower 25% because their customers learn valuable and often times expensive lessons from them. It's the middle 50% of scaredy cats and "but this is how we've always done its" that I'd love to motivate to something better. Am I on a crusade? No. But we live in the wealthiest nation in human history and there is no reason for any business to leave one nickel on the table that they don't have to. Indoor plumbing and sewage removal has added many years to the human lifespan but all you really have to have to enjoy the benefits of these things is a single water pipe w/cut off, one toilet with a bucket, and one shower drain in the floor. Everything beyond that is pure luxury and if you don't believe it just ask anybody in the third world. Just because we all take it for granted doesn't mean we have to have: whirlpool tubs, dual master bath lavatories, dishwashers, garbage disposals, hot water recirc systems, bidets, barsinks, specialty faucets, multiple shower heads, ice makers, do you get the picture? If people want these things, great, I want to give it to them but I ought to make a handsome living doing it and I'm convinced that people will pay more than they are now to have them. When bottled water first came out I laughed my head off but now there is a constant supply in my house. When gasoline shot up to well over $2 per gallon in my area I moaned and groaned just like everyone else but I didn't change my driving habits or mode of transportation not one bit. People will pay very nearly whatever they have to to have the things they want or think they need. I think there is a lot more upward room for the average pricing structure to move and I see no reason why it shouldn't. One last thing, I am not overlooking the reality that sometimes you will come across someone who really needs to be given a break. If you, as the opportunity arises, do charity work within your trade or take a substantial cut in order to cut somebody some slack because they are dealing with an unsafe situation but really can't afford to pay your price, I have nothing but ataboys for you. Grace and mercy ought to follow us wherever we go. That's really what corporate welfare ought to look like, 100% voluntary, hidden from the applause of men, always going out and never coming in, but if you don't build your annual budget to account for these things you will not be able to do them for very long and your budget ought to be what determines your price structure whether it's flat rate, T&M, or anything else. It's very difficult to cut a poor widow any slack when you're just scraping by yourself. I'm done preaching. Thanks for listening.

Mike Finley

LOL,

Good luck convincing anyone of that here. I've been preaching the same gospel forever. For some reason there are far too many guys in construction that would rather be starving artists than be business men.

smellslike$tome

Well, Mike, it's nice to know I'm not alone.

Hey!!! I said that in less than 5,000 words! Woohoo!

Bjd

What did you do take a Frank Blau course or a Mike Diamond?
I will tell you it would be hard pressed for the guys up here to price fix, so as to give each one of us the same figures.
Funny thing is that when I do bid jobs, seems I am always up against the same numbers we may be off a few hundred, and yea ounce in a while a guy will come in way below us and get the work ( this guy is the one that always seems to be changing his name and in most cases he cannot complete the project)

If for some reason one of my trucks is left in the driveway during the work week it kills me to think that its not makeing me any money. However the flat rate guys around here who have 3 or more trucks seem to have a lot of time on there hands, as most of them seem to set in there shops.
I get more calls from thier help looking for work for varios reasons, some just cannot accept the role of having to make the customer pay for service before they leave the job. Others cannot seem to be able to take the flack from customers due to price.

I try not to get too involved with residential service, you can have as much as you want most of mine is commercial.

BJD

smellslike$tome

Now I finally understand Bjd. I couldn't figure out why the hostility was coming my way. Well I'm still not really sure why that was happening, but I think I do understand now that you are commercial plumber and have no desire to do residential service, which is what I specifically said I was talking about at least twice. Be that as it may, I can certainly see now why you would think you would have a qualified opinion to offer about work that you have no desire to do. We live in different worlds. I've done virtually everything in plumbing, not that I'm the old salty seaplumber, but what I mean is I've spent time in most every area of plumbing. When I went into business I would accept any kind of plumbing work and I did a lot of new construction. I settled in residential service because it's what I enjoy most. I like the frequent change of scenery, I like the variety of problems to solve, and I like the people. It's a good fit for me. It also pays better and faster. I don't have to submit to compulsory, free, 30 - 60 day loans. If you don't like that work then don't do it but why do you want to beat on me because I want to do it and be well paid for it?