Houston we have a problem.
A typical situation that we see among struggling contracting businesses goes something like this. A small family-owned business is running their day-to-day operations. It’s a bit disorganized and usually one or two people are trying to act as the service tech, the accountant, the office person. There’s lots of paperwork, not a lot of cash flow and lots of living check to check. Many times the owner isn’t even drawing a check because they are trying to grow their business. There is barely time to visit the restroom let alone figure out how to streamline processes and make sure the employees are productive and happy.
The techs are charging the customers using time and materials. The customers sometimes push back once they find out the “exorbitant” hourly rate they are charging. Sometimes the customer will hang around and shadow the tech, watch the clock, and ask how much longer the job will take. Pricing becomes all over the place as some techs will discount their services depending on the customer complaints. Your business does really quality work and many of your customers have sung your praises. It’s this word of mouth business that is driving you to succeed. So what can be done, how can this situation turn itself around?
What’s this “#1 Thing” You Speak of?
We’ll get there. You know those big gender reveal parties that are sweeping the nation where an expectant couple invites all their excited friends over for a party and they reveal their baby’s gender via a blue or pink cake? Yeah we’re not doing that here. We’re just going to tell you.
FLAT RATE PRICING.
There you have it. Switch to flat rate pricing. Now. Yesterday. Months ago.
We have witnessed thousands of our customers switch to flat rate pricing from time and materials and we can’t recall one saying that they regretted the move. More cash flow? Greater profits? And here’s the big one: happier customers. Really. Let us show you the way.
There are 3 main components to the flat rate pricing model.
You’re in business to make money right? Of course. A profitable business is a happy business. Unfortunately in the HVAC industry, for example, 15,000 go out of business every year and 15,000 new ones start up. In the HVAC industry 4% net rate is average. With Coolfront Mobile flat rate the average rises to 10-15% net rate.
Pricing out each job separately depending on parts and time is just plain inefficient. With flat rate pricing, your field staff will be equipped with an extensive database with profitable service pricing that takes into account your business’ overhead.. With a flat rate pricing field software software, like Coolfront Mobile, office and the techs can be synchronized eliminating all the mistakes that come with paper tickets or different techs charging different prices. It can also streamline other processes like QuickBooks entry for office staff and credit card payment processing in the field. When everyone is on the same page, business operations are streamlined.3. Consistency
Are some of your techs pricing a job one way and several others doing it differently? Is everyone using the same process with regards to the employees back at the office? With flat rate pricing every tech is performing the job the same way for the same price. Once the upfront flat rate price is delivered before the work starts it’s just a matter of doing the job. No negotiations about time, parts or materials.
The 2 Question Dilemma
Customers only have two questions when they have a breakdown. “What’s wrong?” and “How much?” The problem with time and materials pricing is that it has all kinds of factors affecting the final price. How good is the tech and how long will it take them? Will they run into any snags? Why are the parts quoted cheaper on the Internet? Flat rate pricing is easier, more efficient and much more profitable. Customers want a price and they want it fixed. Flat rate gets the job done.
Here comes the “happy customer” part of the story. Here's the number from a study:So why do we try to confuse them with the old “We charge $125 an hour plus parts and labor” explanation. With flat rate pricing we blend together the labor at your desired labor rate and parts needed after your markup to quote the repair fee upfront before the work is completed. The blended price allows you to confidently quote repair fees upfront. Most importantly - it also allows you to make a profit.
The Flat Rate Fix
So why is flat rate pricing such an easy decision? Let’s look at 3 reasons:
- More Profit
Flat rate pricing generates more profit for contractors because labor rates together with part markups are set at the levels required to earn money.
- Happy Customers, Employees, Owners
Everyone is happier when repair prices are clearly communicated and agreed to before work begins. Customers don’t worry about how long the repair takes, technicians don’t have to deliver bad news about the price after the work is complete and owners make higher profits which can help the business grow.
- Fewer Callbacks
With flat rate pricing, field staff do a better job diagnosing repairs and performing the job when they aren’t up against the clock and under the pressure of giving the customer the price after the job is completed.
Flat rate pricing also allows the service business to account for the full job, not just the time the tech is at the house. There’s all kinds of overhead that needs to be accounted for such as driving costs, unapplied time, van maintenance, etc. Combining all the expenses into one price increases efficiencies.
So you start with a service call fee or a diagnostics fee. This allows the tech to assess the situation and determine the repair. Always collect this fee whether or not the customer decides to go ahead with the job. We recommend a lower service call fee and a higher labor rate.
The Coolfront & FieldEdge software solutions can take care of your needs throughout the life of your business. Whether you’re just starting out with 1 or 2 trucks or have graduated to the 20+ truck big leagues we have your back.
Coolfront caters to the small-and-medium-sized HVAC, electrical and plumbing contractors with a flat rate, zero-cost solution.
FieldEdge is the answer for medium to large sized contractors. It’s a subscription-based software that provides full dispatching capabilities, QuickBooks integration, GPS tracking, marketing spend reporting, and much more to help streamline business operations.
Both software options utilize the best flat rate parts and repair database in the industry—we’re talking over 35,000 repairs and 16,000 parts.