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	Subject - T&M v.s. Flate Rate John A. Peters Service calls There has been quite a bit of talk about how the customer will not understand they find out that the tec's hourly rates are approximately double what they would be on a multiple day contract job. I am beginning to think there's another (better?) way. Basically the problem is one of education of the consumer. It took quite a bit of reading on the forum, before I realized that the reason some people charge hourly rates of more than double what other people charge, is simply the fact that you're running a service business where it's very common to only achieve 4 billable hours per 8 hour day. Obviously, if you can only bill four hours but you pay your man for eight hours then the hourly rate charged to the customer needs to be on the order of double the normal rate. If the consumer were provided an a price schedule that showed the declining rate when they provide enough work for more than 8 hours, I think they would begin to understand. It properly presented price schedule might simplify the whole service call procedure and allow us to continue charging hourly rates AKA T&M or time and materials. Currently we charge a rate for the first hour that's higher than the additional hours. This higher amount covers the travel time, set-up time, dispatching costs and so on. 1) Do we really need all of relative complications of a flat rate book? 2) Are we overlooking some advantages of flat rate book? The only advantage (other than making the rates more palatable) that I'm aware of by the use of the flat rate book is that it can be left on the table for the customer to look through just like a catalog and this makes it easier to sell up or add items like a whole house surge protector, thereby increasing the billable hours for the same travel charge set up dispatch expense. Are there any other advantages to the flat rate book assuming the customer understands that the hourly rate has to be at that relatively high level in order to cover the costs of a small one or two-hour job? wilkie Perhaps all of your price justification is just in your head. Have you considered the possibility that our customers do not purchase on price alone. Is it possible that if they are treated in a professional manner, once presented with the price, they will simply ask, "can you do all of this today?" The reason I say that John is that is what we normally hear. It is a very rare occasion that we need to explain our prices. Even in those situations, we do not break out the material and/or time costs, nor try to justify our rates with business model/loss time debates. We simply give them thirty reasons why they should buy from us, and help them determine what they want to buy. Now I know our businesses are completely different, and I wouldn't say you are wrong. I will say while running flat rate, following a proven method of successful in-home service is a must. T&M is a whole different model. Are you trying to pick the best from both and create something here? John A. Peters Yep wilkie Can you elaborate? stedder It may take a days worth of politics with the customer to get a day or two's worth of work (if they're receptive at all) I think that is some thing that must be discerned in the first hour (second, minute) of discussion service work and subsequent "extras" must be billed at an appropriate rate to cover the non productive time. The education of the consumer is the biggest argument as you have both directly or indirectly stated, even with a commercial job that is a bid, there has to be a reason why, even though your not the lowest price, you are the best value. AND if you believe in yourself and your abilities, the selling is eaiser. JMO John A. Peters I will elaborate, but too busy now. Wirenutz i suppose the best comparission is the dealership mechanics flat rate here? they got together and assumed a standard from the manufacturer's , which they use for component changes, etc the element of time is what became problematic, because it was not only applicable to the customer (i.e- your water pump is $300 flat rate) it was also imposed on the mechanic (i.e-a water pump pays you 2 hrs, if you can do it in 1 hr you still get paid 2) essentially, this made poor mechanics out of good ones ~W~ NonLinearLoad Gentlemen, Have any of you ever had a vehicle serviced at a dealership? If you have, did you see the invoice, broken down to exact tasks, all come right from a factory flat rate book. The technicians are on a pay scale that is per hour, per flat rate hour. Book says R&R transmission on model XYZ-7.2 hours, tech does it in 5.9 hours he had a good day, he does it in 8.3 hours, he better pick up the pace on the next job. I have buddies in the auto tech field, they are set up to typically work in the same area of expertise all the time, makes them better and faster, makes them good money, makes the dealership good money. Typical friends are doing 60-80 hours billable flat rate hours in a 40 hour work week. I could never figure out how they seemed to make so much money at their hourly rate until I asked them to explain how it all worked. That is also why I can call on the phone and ask how much a job will usually cost, here's the symptoms, and here's their flate rate price going on the information I supplied them. John A. Peters I am trying to learn as much as I can on how others handle thier service calls. On bid jobs, I already use a modified version of flat rate via my computer estimating program on jobs that are larger than a service call. The estimating program uses modules or assemblies and each item has an associated flat price. It is very similar to the way the mechanics use flat rates, as mentioned previously. I am trying to avoid the cost of purchasing of flat rate book just for the service calls. A good flat rate book provides additional information for the consumer to read, that makes it easier to get a good price for the work you're doing. Flat rate books also are setup in a way that helps get added work tasks on the same trip. It avoids the problem of the consumer being concerned about how much time is passing an hourly rate. The area I'm concentrating on right now is small service calls. We follow the ESI method by asking for a door charge before we go there. We let them know that the technician will quote a price after he sees the work. The price we show them on the clipboard is actually for the first hour at a fixed rate. The only time flat rates do not come into play is a during the second hour which is quoted at an hourly rate. If I can educate the consumer to understand that a relatively high labor rate is good for them in the same way that the more expensive lawyers have more expertise and knowledge and this gives them a better chance of winning a case then I'm OK. I can use the same methods to educate consumers that are contained in the ESI model, among them all kinds of features like warrantees, uniforms, well-stocked trucks and so on. All have to do is make sure that the consumer understands that high labor rate is worth it. The second issue to make sure that the Tec understands that high labor rate can be good for the consumer. sheppard electric Where do you get a flat rate book, is this something you can purchase or you make up your own? We took a course and the instructor said to get a flat rate book, but have never seen or heard of it. John A. Peters If you click on the search function at the top of this forum you will be able to read all about it and go to some selected URLs. Please report back here with your findings and in-depth questions. I tired it and unfortunately quoted strings like "flate rate book" do not seem to work so here is a start. You can get information on flat rate pricing at www.mrhvac.com Start here http://www.electricalknowledge.com/forum/topic.asp?TOPIC_ID=995&whichpage=1&SearchTerms=rate,book wilkie John, Buy the books. You will get your return on investment within the week. John A. Peters Actually IMHO I think my flat rate computer program is better. Care to debate it? (Just for fun and educational value) No personal ax to grind.