Flat Rate Pricing, Fixed Pricing or Upfront Pricing. What is the difference and how can it benefit you as a tradesman?
What do you think when you hear these terms? Flat rate, fixed price and upfront pricing? Does ‘rip off’ come to mind?
Sadly these words have a negative connotation in the plumbing and electrical industry, but I’m sure you don’t think the same when you hear the word ‘quoting’. The thing is, they mean the same thing.
So, why is it that ‘flat rate’ has such a bad name? It seems to be those in the industry that don’t know ENOUGH about it that give it a bad rap.
They are the ones that claim that businesses that use the ‘flat rate pricing’ structure are simply ripping their customers off.
Well, I might have thought the same once upon a time, but now I have a different opinion… stay with me and I’ll explain what I mean…
For years of operating our plumbing business we used the ‘do and charge’ model of pricing. We would charge a price as a call out fee, then a set amount$ for the first hour, then $X for every half hour after that.
I thought we were doing ok profitably, and our customers were happy.
Well, didn’t I learn a thing or two…
Perhaps you can relate to what I’m about to share; back then, in the ‘do and charge’ days, we would book in enough time for each job based on what I thought we needed to allow to get the job done. For example: if the job was to change a set of tap washers, we would allow an hour on site to complete the job, and then we’d have to race on to the next.
There was a serious issue with this structure.
The customer KNEW we were charging for the first hour, so I found if we completed the work within 30minutes, the customer was finding things for us to do for the remainder of the hour to complete ‘their time’. It was in OUR interest to finish faster than the allocated hour, but not so for the customer.
We were often changing MORE tap washers, or even performing a completely new job simply because of the time, and not charging any additional money for it (which we should have!), or the reverse, the customer would say ‘Andy, while you’re here, could you have a look at this and this and this?’.
We’d NEVER have time to stick around to complete the work they wanted simply because we had commitments to move to the next customers home. Alas, an upset customer.
Although we’d book a return visit later in the week, we had ultimately disappointed our customer because we couldn’t do the work then and there, PLUS we wasted MONEY simply having to move on. We would have made MUCH better money if only we could have stayed on site and not drive anywhere else.
And then there was the whole other issue of upsetting a customer when the invoice would blow out a little based on staying ‘an extra hour’. All they heard at the beginning was $80 per hour (or whatever), and the next minute the invoice says $220 and they can’t understand why the price is more… can’t they calculate how ‘fair’ it was that we ONLY charged for the time we were on site?
Talk about baffled….
But then the PENNY DROPPED.
This ‘flat rate’ thing perhaps needs to be taken more seriously.
The more I researched, the more I worked out there were major benefits to flat rate.
Having used this system now since 2008 we have experienced the benefits that I’m about to share with you now… we call them the ‘6 Big Business Boosters to Using Flat Rate/Upfront Pricing’…
Business Boost #1 – Increased Profits
We see 4 customers per day, spend more time with each one of them, build a relationship and provide extra value with our systemised “Plumbing & Safety Inspection Report” that increases the average dollar sale per job.
And here’s the thing…everyone wins…we work fewer jobs per day yet earn more, the customer is happier because they receive a comprehensive, reliable service and a check on things they haven’t the time or skill to do themselves…our income increases, staff are more focused, less rushed…sure as hell beats flying from job to job under time and materials, hey?
Business Boost #2 – Improved cash flow
The price is agreed upfront, they pay on completion…no more handing the invoice over to the customer hand shaking hoping they’ll pay…you walk away with payment and don’t spend your valuable time chasing $$$.
Business Boost #3 – Reduced Customer Complaints:
The bane of every tradies’ existence!
No more…you face any unlikely complaint first, they sign off on the job before you begin and you walk out the door money$$ in hand with a thank you and a friendly smile, not retreating to your truck hoping there’s no nasty “surprise” about to hit you. Puts you in control.
Business Boost #4 – Creates more time
If you’re not chasing money, naturally you’ve got more time to devote to cash generating activities…at last you can work ON your business and not IN it!
Business Boost #5 – Helps with systemisation
The more systemised your business is, the less it depends on you…hello time freedom. With all the information at their fingertips in the Pricing Manual your guys can do all the quoting, ordering, invoices…they are happier, more responsible and challenged in their work.
Business Boost #6 – Improves staff efficiency
Everything is now measurable, everyday. Each person’s work output can be monitored and you’ll KNOW exactly how much is coming in and going out…whenever you need to.
I love it because the customers love it. There’s an agreed price, no surprises for them. We give them options and… …Best part… “no” is rarely an option…we lose far less work than ever before.
So, if you’re a plumber or electrician working in the maintenance field and have ever considered switching to the ‘flat rate’ system and want to know how we did it, or want to know where we got our Pricing Books, then drop us a line. We’d be happy to help!
The flat rate system is only the beginning of how you can streamline and increase profits in your trade business.
- Join our Kick-Ass Tradies Facebook Group, for access to trade business specific conversations, tips and resources, plus a like-minded community of tradies.
- Book a 15-minute Game Plan Call with Andy, owner of Dr. DRiP plumbing and co-founder of Lifestyle Tradie, to clarify your priorities and get clear action steps.