Plumbers have two choices when determining how to charge for their services: hourly or flat rate. Although the debate about which is better is nothing new, determining which will work best for your company can make or break profits and your relationships with customers.
Factors to Consider
“The difference between [charging] flat rate and hourly is that with a flat rate, the business takes all the risk, and in hourly, the customer takes all the risk,” says Shawn Bucklew, owner of In-House Plumbing Company in Dallas.
“To go flat rate, you have to know what all the possibilities are because you have to factor in the worst-case scenario,” he says. “If you don't have enough experience, it would be better to stay hourly and let the homeowner bear all the risk.” Bucklew also suggests considering whether your technicians and plumbers are paid hourly or on commission. If they’re paid on commission, flat rate might be the better choice.
What customers appreciate about flat rate pricing is that they know exactly what they will be charged before the plumber knocks on their door. They don’t have to worry about the price of the job rising should a problem occur. But to avoid risk on the contractor end, plumbers should ensure their flat rate price encompasses all that could go into a particular job.
Determining the Right Price
In setting flat rate pricing for a particular job, it's essential to follow the same line of transparent thinking. How many hours will the job require? How much is the plumber's labor worth? What parts need to be replaced, and what are the prices for those pieces? But transparency in flat rate pricing becomes difficult with unknown risks.
“You must factor in hourly rates and materials, and give a price. At that point, you can do a couple of things. You can say, well, let's add in an extra hour just in case, or you can just leave it and make up [any added costs] another time, on another deal,” Bucklew says.
Finding the Right Balance
Building a trusting relationship with a client requires transparency, but when the customer wants a flat rate, the challenge is remaining honest without assuming added risks.
“It's one of those delicate situations,” Bucklew says. “I mean, we do [charge flat-rates]. There are some jobs I won't do hourly — that our guys could finish in an hour, but that hour won't cover everything they did [and] all the knowledge the job required. There are other factors than time, labor and overhead costs. We have 10 years of experience [in the field]. You should be paid for your experience as well.”
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