Fixed price flatlining
When a customer hears ‘quoting’, everything is hunky-dory, right? But the second you say ‘fixed pricing’, the conversation flatlines, and the door slams shut in your face.
The reality is… they’re the same thing? So why do customers react so strongly?
There was a time in recent history, where big plumbing companies were getting hit up by ACA for rorting the flat-rate system and massively overcharging. As a result, customers flinch when they hear the terms ‘Flat-rate, fixed price and upfront pricing’ and it’s becoming a real problem in our trade industry.
It’s sad when a few bad apples ruin an excellent system for the rest of us. However, the onus is on us, the tradies, to rebuild the trust lost with customers and demonstrate that fixed-rate pricing isn’t a rip-off.
What is a flat-rate?
A flat-rate model charges the customer a pre-calculated price for a job that is completed regardless of the time required to complete the task. A basic way to determine your flat-rate is to calculate the number of hours or minutes that a project will take to complete, then multiply it with your hourly rate, plus the materials required to perform the task. It’s essentially a quote.
An alternative cost structure is Do & Charge — with the key difference being the billable amount is calculated after the job is completed on hours spent on the job.
Do & Charge
Many plumbing businesses use the ‘Do & Charge’ model of pricing instead of fixed rates. It essentially puts you on the clock.
At Dr. DRiP we used to use this formula and set out the following structure.
- Call out fee
- Set amount $ for the first hour
- Then, $X for every half hour after that
However, there’s a reason many businesses don’t thrive on this model and why we eventually made the switch to fixed pricing.
If the job was finished in under an hour, which many tasks can be, the customer would feel overcharged and crow “but it didn’t take you the full hour, so I shouldn’t pay the full amount” OR worse, they would “find” other additional jobs for you to complete.
These additional jobs would have additional fees because of fittings, or they couldn’t be completed in the remaining time. This frustrated customers even more because it sounded like we were making excuses or trying to rack up a higher bill.
Flat-rate is in, Do & Charge is OUT.
Dr. DRiP made the switch to flat-rate pricing in 2008 and found that the benefits massively outweighed clients’ potentially adverse reactions. However location is key, in metropolitan areas flat-rate is becoming more accepted, however in more rural areas, you still may receive some strong push back.
However, if you explain the key benefits below, they may just come around!
Increase in profits
But not from ripping people off, but from time-saving. We see more customers per day, spend time with each of them, build relationships, and provide extra value.
Improved cash flow
The price is agreed on upfront; they pay on completion, so you never have to chase an invoice again. As a result, this gives you back more time!
Improves staff efficiency
Everything is now measurable every day. Each employee’s work output can be monitored, and you’ll KNOW exactly how much is coming in and going out… whenever you need to.
We love it because the customers love it. There’s an agreed price, no surprises for them.
Education is key
You’d be surprised how little push back Dr. DRiP now receives on flat-rate pricing. Once the key benefit points are explained to the customer and they understand that it’s within their best interest, people put away their preconceptions and approve the quote.
As the trade business owner, you need to be upfront and clear on your pricing structure and be transparent about it. This is how we will, as an industry, rebuild trust with our customers.
- Regardless if you are a plumber or electrician, having a flat-rate pricing structure is a better business model than Do & Charge in metropolitan areas.
- The onus is on us to rebuild trust with customers by educating them on the benefits of flat-rate pricing.
- Flat-rate pricing benefits both us, the trade business owners AND the customer.
- We can assist in structuring your flat-rate pricing, and customer education.
As trade business owners, the aim is to get the most profit we possibly can from our business. So the question is, do you know if you’re making money on each job… and are you using the right business formula to get optimal results?
If that sounds like you, we’ve got you covered with our live event, Lifestyle Tradie Live. This FREE training course is jam-packed with insider tradie knowledge YOU need to thrive.
Click HERE to find an event near you!
During the course, you’ll learn about the right hourly rate for your business, hear about key financial mistakes every tradie makes and get a sneak peek into our Dr. DRiP financial dashboard. PLUS we cover what systems, sales techniques and technology you need to get the most out of your trade business.