My long time appliance repairman John at Austin Appliance informed me today that he’s only coming into Austin once a week now, and will eventually stop serving Austin altogether. He lives in Spicewood and mainly works Marble Falls now.
Darn it. My veteran vendor team people keep getting older and retiring on me. John’s also working now as a fishing guide on Lake LBJ. Sounds better than fixing dishwashers and refrigerators I must admit. I’ve use him since the early 1990s, and I hate to lose a trusted service call vendor.
So today I put my feelers out for a new appliance company or person. I’ve had many good recommendations already but the problem I keep running into is the pricing structure that seems to be more prevalent now than it was 10+ years ago. It seems most service companies nowadays want to bill a service charge just for showing up, usually $50 to $92, then, once there, they want to quote a price based on the “book rate” of the repair, and then do the job only after the price is approved.
That doesn’t cut it for me. I don’t use “book rate” vendors because book rate pricing is a poor value for my property management owners. It’s inefficient and expensive, two things I despise. Maybe for Joe or Jane Homeowner who only need a service call once every few years, it’s not such a bad deal. You know the cost before the work is started and exactly what will be done. But I can’t operate a property management business under that pricing scheme. Instead, I need my guy to show up, fix the problem, and bill me a fair rate for time plus materials. I’m not worried about getting ripped off because, after nearly 20 years of managing and fixing rentals, I know what it should cost to fix things.
Here’s why my way is better and why I don’t use book rate people.
Suppose I manage your rental property and the tenant submits a repair request for a malfunctioning garbage disposal. If I can’t troubleshoot the repair over the phone and help the get the disposal unclogged and running, I’m going to send my Master Plumber Larry to the property. Larry charges by the hour.
While I have a plumber on the property, he’s not only going to fix the disposal, but he’s also going to go throughout the house and do a quick check on all of the plumbing at the property. He’s going to look under every sink for leaks, check the p-traps and make sure they aren’t loose, look at the water heater, check the commode flappers, check the washer connections, check the inside faucets for any leaks, and check the outside hose bibs for drips.
This entire preventative maintenance check of the plumbing might take an extra 5 or 10 minutes, literally, if everything checks out clean. I just bought my owner some pretty good insurance for about $10 or $15 extra time, and we accomplished the highest possible value for the service call to the property. If we do find other problems, we’ve done what we should have done and found them and fixed them while there, instead of going in to fix one thing and leaving without looking at anything else. If I have to pay somebody to drive to a property, I want more value than fixing just one item.
Likewise, if my tenant has a fridge not cooling, I’m going to ask my appliance guy to also check out the dishwasher and the range while there. I’ll also have him look at the washer hoses and connections to see if they are leaking. It won’t take more than a few minutes and will cost little to nothing extra at an hourly rate, even if billed in 15 minute increments.
Book rate vendors want to call the additional items an extra “diagnostic fee” and bill extra per item, not simply for the few extra minutes spent. So, in a pinch, when I’ve had to use book rate vendors in the past, and they tell me the diagnostic fee covers only the appliance they are sent to look at, I tell them “never mind”, and I never use them again after that job.
As a property manager, I pay well, I pay fast, and I’m about as low hassle of a customer as any vendor could want. I don’t sqabble about repairs, I just say “get it done and charge a fair price for your time”.
My owners know when they hire me that I’m not going to dilly daddle around trying to obtain permission to replace a water heater that has reached the end of it’s life, or replacing a worn out dishwasher. In fact, my plumber Larry, who I’ve also used since the early 1990s, doesn’t even have to call and ask my permission if he deems a water heater in need of replacement. He just takes care of it immediately and sends me the bill.
Sidebar for tenants: If you are a tenant, and your hot water goes out, you want a property manager like me and a plumber like Larry handling the problem because it’s going to get fixed asap and you’ll be taking a hot shower again real soon. I’m astounded that there are property managers out there who will actually tell a plumber “I need to get the ok from the owner”, and send the plumber away while he tracks down the owner to obtain permission about something for which there is only ONE choice! Meanwhile the tenant gets bent out of shape because now the owner wants a second bid and it’s been two days already. This scenario is a quadruple lose situation.
The property manager loses because he is revealed to be an incompetent idiot who can’t get a bad 15 year old water heater replaced without going through a rediculous approval process that should have been anticipated and agreed upon in advance of taking the property for management.
The tenant loses because he receives poor service for an important and time urgent repair.
The vendor loses because instead of proceeding immediately with the work needed, he has to leave not know when or if he’ll be called to return to do the obvious.
The owner loses because ultimately the work is going to cost more, and vendors don’t like wishy washy property managers who jerk them around with unnecessary bids, so in the end, the property manager has a less talented more expensive pool of vendors and thus a less efficient and more expensive property maintenance operation with which to service the managed properties.
By using only hourly service vendors who are trusted and empowered to just go fix the problem and charge a fair hourly rate, I can deliver a better quality maintenance service to our tenants (which helps retain them at renewal) and keep repair expenses and problems down for our owners.
Anybody know a good hourly appliance repairman? Send him to me, I’m interviewing!
{ 69 comments… read them below or add one }
The best appliance guy I know won’t come south of the river any more!! The guy he recommended would go any where but he worked so hard, he had a heart attack! And now is on a very reduced schedule. Sigh.
The old-timers are disappearing!!
This won’t help you Steve but as a homeowner I have discovered on-line appliance part services. I can research and order the right part without leaving home, watch videos or read descriptions about how to make the fix, the part comes to my door, and I fix it!
I save the cost of the service call and don’t spend any time wandering the aisles of Home Depot. Of course, these are fairly simple fixes, I won’t be replacing my water heater any time soon!
I agree- they quote you hourly- if you need them to take a peek at something else you may be talking a couple minutes. It’s definitely a trend that is disheartening and growing across the country.
Hi Steve and Sylvia,
I appreciated reading your perspective on book rates, which our industry typically calls flat rates. Before I offer you some suggestions in finding an appliance service professional I want to provide you with another perspective.
I am a professional appliance service company owner who also serves as the president of a national trade association (United Servicers Association) and I am the author of the Major Appliance Service National Price Guide, the “Blue Book” in the appliance service industry. I have written and spoken extensively on the topic of flat rate pricing, which is becoming the norm in many trades and appliance service is one of them.
The implementation of flat rate pricing is designed to provide the customer with price protection and peace of mind. When a company uses flat rate pricing the customer is quoted a specific trip and diagnostic charge up front which covers all the initial expense of getting the technician and his stocked truck to your house and making a determination as to what is wrong with your broken appliance. No hidden or unknown charges. No surprises! Once the diagnosis is complete the technician will quote a total repair price along with a recommendation for or against making the needed repair before the service is actually completed, again preventing any guess work surrounding the total cost. In both instances the customer is protected from unforeseen issues such as problems that are hard to pinpoint, poor manufacturer electrical diagrams and schematics, poor or non-existent technical support from some manufacturers, products that are difficult to get apart due to rust, corrosion, installation complications, hidden screw locations, and a myriad of other potential time delays in completing a diagnosis or repair. Of course when using the hourly method of job pricing these things would result in a higher labor charge without any forewarning or advance knowledge.
Flat rates are also a pretty good protection against paying someone who is inexperienced in being able to charge the customer for their “On The Job” training. A trainee or a rookie may take 2 or 3 times as long as or longer than an experienced technician to make a diagnosis or complete a repair. Customers would much rather pay the experienced person over the rookie even though in the hourly pricing model you love it works in reverse. The experienced technician is actually penalized for knowing how to complete a repair in a short amount of time. All the years they have spent in learning their trade does not serve them as they are only able to charge for the minimal amount of time actually spent making the needed repair.
There is a long history of misunderstanding and undervaluing our services, which has created a much larger problem for our industry. The average age of an appliance service technician in the US is 54+. Most small independent companies, which represent the overwhelming majority of companies in the country, have been charging substandard rates for years, have little or no retirement, and can’t afford to hire someone to train in order to take over their business. They are relying on the sale of their businesses to fund their retirement. But to their shock and surprise there is little if any value in their life’s work. The actual value of their service business is next to nothing because young people do not want to work in such a low paying industry and other business owners are looking for a reasonable ROI and there is none to be found in these small appliance service enterprises. All the owners who have dedicated their lives to providing outstanding service to their customers struggle to retire. When their small businesses are sold they bring in a fraction of what CPA’s will tell them the company is worth on paper. The old adage is true in that your business in only worth what someone will pay for it! In order to support or hire a trained technician, provide health insurance, a stocked service truck, and all the various office functions and personnel to support them in the field, professional service rates, IE flat rates are an absolute necessity.
Yes, there are exceptions to what I’ve described above but they are rare and even more so for the one and two man companies that make up the bulk of service businesses in America. The exceptions usually involve companies who have been charging professional rates so that they can hire an efficient office/admin person, buy a decent service management software package, establish a dynamic computerized customer data base, supply a solid parts inventory, provide a well maintained service vehicle, retain comprehensive insurance coverage, keep all their business practices current, maintain technical training requirements and continue to market their services to existing and new customers to mention some of the bigger issues.
Imagine in your business not being able to charge for the level of expertise and years of wisdom gained from serving as a property manager. Without knowing anything about your business I am fairly certain you charge more than the start ups who come along every so often competing for your clients. And why do clients call you? Does it have anything to do with the reliability and professionalism you bring to them? Sure it does! I certainly understand why you want to have this type of arrangement with your appliance service vendor as it is totally beneficial to you without any consideration for the service company owner or understanding on your part as to the various expenses and overhead involved in providing this level of service. Without your realization you are taking advantage of these small businessmen who have not learned to properly value the level of professionalism and expertise they bring to the marketplace.
Make a list of the things you liked in your old service company besides how they price their repairs. I will bet that professional, personalized, expert, speedy service tops the list. And like it or not, these things are expensive to provide. So you will either end up with another old timer who is going to retire soon (and who is, I suspect currently under pricing their services) or you will end up having to come to terms with the real cost of appliance service in today’s world and hire the companies who are charging “Blue Book” rates. Think about the last time you were looking for a good doctor. Did you even take into consideration how much he charged or did you make the decision to use his services based on the qualities I’ve listed above? If you dared to compare the quality of service between what the large box stores service departments provide and the small independents, the small independents win or tie every time and in every category. But the Box stores all charge about the same as the prices listed in the Blue Book! HMMMM! So the quality of service is what we really want but in the end it is the simple fact that we don’t like paying the fair market rate for these services.
The choice is totally yours. There are tons of companies out there to choose from. I know my company has had a few property management companies over the years take their business to other service companies because they were able to rationalize the trade off for the drop in the quality of service they are provided in order to get cheaper pricing. They clearly understood what they were giving up and we parted as friends. Sometimes they call us back when their other provider is on vacation, can’t get to a problem tenant soon enough, or can’t figure out the problem on a particular appliance. We gladly help them, charging our standard flat rates for the services we render.
My suggestion to you and any property management firm or high volume service purchaser, when looking for a service professional, is that you ask the prospective companies you are interviewing as potential contractors to provide you with a discount due to the volume of work you will offer them. Make sure you are clearly outlining the benefits involved in doing business with your company. You may find that there are other benefits they offer as part of a package they provide to their larger clients, such as 30 day billing and preferential scheduling, etc. Ask them to identify the added value of doing business with their company.
My company works with dozens of large property management firms. Often times we get a preauthorization limit to perform work before going into the tenant’s house. Many simply trust us to make the right decision in whether to repair the unit or advise that it needs to be replaced. It is rare that we can’t get in touch with the property manager for an okay or we don’t have an agreed to authorization limit, or a standing authorization. Some property managers require us to call for an authorization on every call. Many times, even when we can get them on the phone they have to call their client (I know this is not how you handle this) and are unable to reach them in order to get a final okay. Sometimes, but rarely we have to come back for a repair we could have completed on the first trip. This can and does happen, regardless if the service company charges hourly or flat rate.
I hope I’ve given you a strong argument in support of flat rate pricing and also a broader understanding of the appliance service business in general. Please let me know if you have any other questions or if you want to take issue with anything I’ve written. I’m delighted to have this exchange.
Dean Landers
Landers Appliance
United Servicers Association
@ Dean Landers
Thank you sir! Well said. I am just starting up a HVAC company and I was very frustrated reading this property mgr’s complaints. Bravo sir. I wont to copy this to refer back to if you dont mind. Id love to post this on my office wall too. I am looking for my own book and am some what over whelmed.
Hi Dean,
Thanks for your perspective. You made a lot of points and raised a lot of issues, but here’s the bottom line for me.
Book rate to replace a 1/2 hp disposal is $345. That’s too much for a 30 minute job that requires an $85 part. It should cost $150-$180 to replace a disposal.
If I found out someone like my Mom, almost 70 and on a fixed income, paid a plumbing company a service call plus $345 to replace her disposal (over $400 total), I’d have to say she got ripped off.
You won’t find a rental property owner or property manager in the country willing to pay that price.
Also, what I’ve observed is that the “flat rate” is only flat for easy jobs. Once a problem is incountered, the vendors want to add on to the price and blame it on something they failed to ascertain or notice before quoting the price. So, the flat rate floats up, but never floats down on easy quick jobs.
What I’ve observed over the years with so many mom and pop vendors is not that their efforts can’t be profitable, but that their administration and management of the business is sorely lacking. They are often good at fixing things but terrible at managing money. Charging more won’t fix that unless the root problem is cured first, which is budgeting and living within one’s means.
Thanks for your comments. I think you have valid points, but your industry should recognize that the book rate method really is one sided in favor of the vendor. The argument that the older more experienced vendor suffers under the per hour scheme isn’t valid because that same vendor can knock out 5-8 jobs in a day whereas the slower newbie can only do 4 or 5.
Also, I have no problem paying a higher hourly rate for highly talented and experience people. I don’t think it’s hard for a good husband/wife combo running a service business to earn over $100K per year net, before taxes and insurance, if they run the operation properly. Not bad for a gig that requires no college.
Steve
Good Morning Steve,
The Blue Book flat rate price (version 7.08) for a ½ HP Kitchen Aid disposal is $288.20 and an Insinkerator is $322.97. Both of these prices include the service charge to come and diagnose the old unit and then replace it with the new unit. You mentioned an $85 cost for the disposal and I think therein lies the problem. Customers can buy parts as cheap as service dealers today. The difference is that we had to order it and have it available on our truck and for that convenience we are entitled to a profit as well as a handling charge.
If we marked up the disposal 50% and charged $127.50 for the unit, added the $79.95 service charge and the $91.65 labor to complete the installation the total price comes to $299.10. You may be able to get a plumber to supply and install the disposals for less, in which case you can make that decision. You can also try to keep units on hand and supply your own disposals which would reduce the price $42.50.
The Blue Book pricing was compiled using real data from many different companies from all around the US. The prices reflect real life factors in determining the final cost; they are not inflated just for the fun of it all. Flat rate pricing protects from the situation you mentioned about adding to the price based on some unforeseen problem arising during the repair. The flat rate IS the final repair price regardless of any additional issues that pop up at any time in the repair cycle.
You say the flat rate method of pricing is fair only to the vendor. The Blue Book is a time tested tool that has been widely accepted by the general public in the automotive world as well as HVAC and other industries including appliance repair. If the prices were not fair to both the customer and the company they would not have had staying power!
I will not take issue with your observation about our industry being populated with poor business people. Most service company owners are converted from working for someone else into their own boss without any management training. Few if any have had any advanced business training since high school, if then. It stands to reason they would run less than perfectly efficient businesses. That does not alter the fact that they are entitled to charge the going rates for the level of knowledge they have. Most companies that I have consulted for and dealt with over the years have very little wasteful habits draining profits with the sole exception of carrying too much parts inventory which is and probably always will be the bane to our industry.
Your point about being able to do more jobs since they are quick and therefore should not be entitled to charge more than the less experienced person is so egregious that I want to point out the ridiculousness of it. Do doctors who have reached a high level of knowledge and accomplishment charge less for their services and see more patients to make up the difference in what other slower less professional, less knowledgeable doctors can charge? I went to the dentist 6 weeks ago and had my teeth cleaned (he did the cleaning himself as he always has) and was charged $95 for about 30 minutes worth of work. I went back 2 weeks later and had some teeth bonded. This also took about 30 minutes and I was charged $195. Why the difference? I had my full annual physical recently by my family doctor and he charged me $150. I had a simple outpatient surgical procedure two years ago that took about the same amount of time and was charged $1500 by the doctor alone. Your argument is flawed and doesn’t hold up to reality.
Your last comment about being a good gig for someone who didn’t go to college also misses the fact that an experienced appliance service technician is a highly trained professional who has spent years learning the trade. There are few people in all the various electrical and mechanical trades who have the skill or knowledge to be able to repair their own appliances. Appliances have become highly sophisticated. By comparison my technician’s and most I know are able to repair most plumbing, HVAC and household electrical problems. Yet we have as clients many electricians, plumbers and HVAC technicians. That speaks to their high level of knowledge and skill required to be proficient in our trade.
I would encourage you to keep searching for the type company you feel comfortable with but at the same time keep talking to the flat raters. You may find all that you are looking for with that one exception!
Steve,
After reading Dean’s comments, I realized this is a parallel to the discount realtor vs traditional priced realtor. Wow!
Thx,
Anon
I must point out that Realtors do charge very flat fees (6% regardless of quality of services or degree of services). So the same argument against appliance service providers should be the same as those toward realtors…
I do, on the other hand, agree that experienced realtors should be paid more.
Too funny… Yes, flat rate realtors and appliance repair businesses (neither require anything close to rocket science abilities) are BOTH ripping off the consumer.
As far as flat rate appliance repair goes..
I was recently quoted around $300 flat rate for replacing an A/C condenser capacitor. I know this to be about 6 times what the job is really worth and that it would take no more than 30 minutes for a competent technician with basic training to complete the job. End of story, not interested in negotiating. I’ll simply get the part and do it myself and save on the bogus ‘upsells’ too.
So, buying ivestment properties and renting them out is not that profitable after all?
PS. Anon, that was my first thought too!
Dean, thanks for your comments. I decided to run a quick survey of property managers I know from across the country to ask what the various costs were for repairs that they have made by professional, licensed vendors. There were 25 respondents and the results are below.
I’d be interested to know how these numbers line up with your book rates. I can’t find a property manager anywhere who has ever paid more than $300 for a new disposal installed, but maybe some of your other book rates are in line.
1. How much should it cost to replace a garbage disposal, including the service call and all parts?
$100 or less = 0%
$101 to $120 = 4%
$121 to $150 = 28%
$151 to $180 = 36%
$220 to $250 = 8%
$250 or more = 0%
2. How much should it cost to replace a dishwasher with a standard 3-cycle rental grade unit, including service call and all parts and materials?
$less than $250 = 0%
$250 to $300 = 24%
$300 to $400 = 56%
$401 to $500 = 16%
$501 or more = 4%
3. How much should it cost to replace a bad shut-off valve under a kitchen sink, service call, parts and labor included?
$100 or less = 36%
$101 to $120 = 28%
$121 to $150 = 24%
$151 to $180 = 8%
$181 to $220 = 4%
more than $220 = 0%
4. How much should it cost to swap out a 40 gallon gas water heater, assuming no code upgrades or other problems, including all parts and labor?
$400 or less = 16%
$501 to $600 = 24%
$601 to $700 = 24%
$701 to $800 = 12%
$800 to $900 = 0%
5. What should the cost be to check a leaking commode and replace the supply line and all tank gear. Service call and parts included?
$100 or less = 48%
$101 to $120 = 16%
$121 to $150 = 12%
$151 to $180 = 12%
$181 to $220 = 12%
$220 to $250 = 0%
6. What should the cost be for a service call to check out “A/C not working” and discover a bad thermostat wire? Thermostat is replaced with a standard programmable unit, and preventative maintenance service check is performed on the entire system while there.
$100 or less = 0.0%
$101 to $120 = 24%
$121 to $150 = 12%
$151 to $180 = 20%
$181 to $220 = 28%
$220 to $250 = 8%
$250 to $300 = 0%
7. What should the cost be for a plumber to check a clogged commode, find and remove foreign debris (hairbrush)? No parts or materials, just the service call.
$100 or less = 68%
$101 to $120 = 28%
$121 to $150 = 4%
$151 to $180 = 0%
8. Do you prefer hourly vendors or flat rate vendors? Hourly vendors usually charge a service call plus time and material. Flat rate vendors may or may not charge a service call, but once at the job will diagnose the problem and then quote a “book” price or “flat rate” bid price for repair. You might use a combination of both, but if you had to live with one or the other, for most service call repairs, which would you choose?
Hourly – I know how much repairs should cost and how long it should take and I trust my vendors to charge fair prices.
80.0%
Flat Rate – I like knowing exactly what the repair cost will be before the job is started.
12.0%
Don’t know = 8%
9. In your market, what is the average cost per hour for good, qualified service vendors? Assume a sole proprietor with company name, clean late model service vehicle and insurance, experienced and capable in one or more of the main trades such as plumbing, appliances, HVAC, electrical, etc.
$15 hr or less = 0%
$15-$25 per hour = 4%
$26-$35 per hour = 12%
$36-$45 per hour = 12%
$46-$55 per hour = 8%
$56-$65 per hour = 28%
$66-$75 per hour = 20%
$76-$90 per hour = 8%
$91-$120 per hour = 4%
$121 per hour or more = 0%
RE: Flat Rate Appliance Repair = Flat Rate Real Estate Agent.
Apples and Oranges. Not even the same discussion. Realtors only get paid for success. Appliance people get paid just for showing up. The issues are not the same.
Steve
Going back to my comment, I think there is some amount of similarity. Most home sellers really only need the following from their real estate agent to sell a house:
1. MLS listing
2. Access to sales data for CMAs (although most home owners know the comparables that have sold near them and what they listed for)
3. Lockbox access for showing agents
Flyers could be made by the owner. Or an original file provided and leave it to them to copy and refill as needed. A for sale sign is needed, but an owner could even provide this. Even if the agent provides the sign, its already a sunken cost that they’ve written off their taxes (or will this year). All the standard forms used by real estate agents in Texas are free and available for download. Digital photos can be provided by the owner. The owner can stage their home; google provides tones of diy results.
Faxing and negotiating – no value on the faxing (why isn’t this online all the time, instead of some of the time?!). Negotiating – maybe, but I’ll stick my neck out and question how much so. If the property is priced correctly at listing, the only negotiating necessary should be to extract the highest price between the multiple offers. Lots of people know of to maximize a multiple bid situation or select the strongest offer and immediately move on. If there is only a single offer, it is likely right where it should be and not way below the listing.
Sellers don’t need much else to really sell a house.
Websiter for the listing – waste of $’s – mls is available on the web. Probably not worth it even for a million dollar house.
Open house – marketing for future clients for the listing agent.
Virtual tour – waste of $’s – photos are enough for buyers.
Panoramic Sky view photos – see virtual tour, even bigger waste of $’s.
Babysit the inspector – isn’t that what the buyers agent is for?
Babysit the appraiser – isn’t that what the buyers agent is for?
I could do all this for a buyers agent as well – most of the value can be set up as an automated task now, which should lower the price to the consumer.
Hi Anon,
Like many before you, if you have a better model for mass selling real estate, design it and bring it to market. I have nothing against people who want to try different ways of selling.
But I will say that your understanding of what’s involved in selling a home is simplistic and limited. There are a lot of moving parts and a lot of things that can go wrong, and one never knows when the “easy” deal suddenly turns into a very complicated problem, which can happen to any deal at any time.
But if you can build a better mouse trap, go for it.
As for the comparaison with appliance repairs, alternatives to the book rate pricing are available, though not without some degree of frustration in finding the right vendors who are a good fit. Property managers are “professional customers” though, meaning there does exist a market for serving us. Some of the vendors at our local property manager’s association get 100% of their business from our members, and they are more than happy to complete multiple jobs each month for a single client on an ongoing bases, and they manage to run profitable businesses that do very well with charging $300+ to replace a garbage disposal.
Steve
Steve
Ray, Steve and All,
Appliance service technicians require much more extensive training than a realtor as it takes years to develop even an adequate technician and a life time to become a master. I would also argue that some of the requirements are much more in line with a rocket scientist’s job. Dramatic innovations are introduced regularly. Look at the difference between the washers that were in use even ten years ago and those in use today. Refrigerators have a reciprocating/modulating compressor that requires much more refined electronic controls. The next time you need service on an Asko dishwasher or a Thermador wall oven or a GE Monogram refrigerator take a look at the electrical components and the disassembly required to access these components. Read through some of the technical service notes and you will see what I mean!
Service technicians do not “only get paid to show up”. They are paid to provide a diagnosis and estimate of the broken appliance. This requires extensive training and knowledge, proper tools, a service vehicle equipped with adequate stock, and all the other fixed costs associated in maintaining a viable business.
The various jobs you listed are seldom included in what most appliance service companies actually do. If the repair is directly involved with a major household appliance such as a refrigerator, washer, dryer, dishwasher, range, wall oven, cook top, garbage disposal, trash compactor, ice maker, etc. then service companies will normally undertake the repair. Most appliance companies do not also do HVAC work. We also do not do plumbing on toilets or sinks including replacing main shut off valves unless it is related to the dishwasher. The repair prices listed in the Blue Book are brand specific and will vary accordingly. Give me a list of the top five repairs and the brands of appliances you have those repairs completed on and I will provide you will the book price.
You said “As for the comparison with appliance repairs, alternatives to the book rate pricing are available, though not without some degree of frustration in finding the right vendors who are a good fit. Property managers are “professional customers” though, meaning there does exist a market for serving us. Some of the vendors at our local property manager’s association get 100% of their business from our members, and they are more than happy to complete multiple jobs each month for a single client on an ongoing bases, and they manage to run profitable businesses that do very well with charging $300+ to replace a garbage disposal.” I have already stated that large property management firms and any company that can provide a large block of work to a service company can ask for and will often times receive a reasonable discount.
“Service technicians do not “only get paid to show up”. They are paid to provide a diagnosis and estimate of the broken appliance.”
But they do, in fact, get paid for a diagnosis even if they can’t fix it, and even if the diagnosis turns out to be wrong. Sounds like Steve’s a lot closer to the truth than you are.
Dear M1EK,
I do not mean to be disrespectful in my response. Please do not be offended at my rebuttal to your comments.
But …
So do doctors! But there is a big difference (and it is in our favor!) between us and doctors. Those of us in the appliance service business will actually return for free and re-diagnose a problem if we have done so incorrectly. Doctors charge regardless of how many times they get it wrong!
You can try to spin this any way you like but the facts are the facts. Because you are speaking from a lack of knowledge about the appliance service industry, I can understand how you can come to these erroneous conclusions.
Appliance service business owners typically operate small companies with 15 or fewer employees, with the majority having only one or two people. We develop long lasting relationships with our clients and even if there is an unfortunate event such as a misdiagnosis or a repair that does not fully resolve the problem, we work with our client to come up with a reasonable solution such as refunding the repair monies or returning for free or whatever the situation calls for. If you have been using the same service company for an extended period of time than you know what I am talking about because I am sure that you have had to work through one of these types of issues. If you keep bouncing around looking for the cheapest deal you can get you might end up with an unscrupulous service person.
Quality service has staying power built on repeat and referral business, just like a property management firm, or real estate agent or any business for that matter. Check references if you are looking for a reputable service company. But remember that professional, high caliber service excellence is not cheap.
“Because you are speaking from a lack of knowledge about the appliance service industry”
Blaming the customer 101.
Dean, I’ve had enough experience just as a homeowner, before even getting into the very limited landlord realm (only one property), to know that what you’re saying isn’t true in practice. Steve is obviously speaking from a lot more experience (many more properties); and if he disagreed, I’d be more likely to reconsider whether I had just been unlucky.
Hi Dean,
You said to M1EK:
> Because you are speaking from a lack of knowledge about the appliance service industry, I can understand how you can come to these erroneous conclusions.
Seems a bit condescending. Even I, a believer in full service real estate and full commission service, don’t belittle those who choose Flat Rate or Discount Brokers. All I can do is state what I think the value of my service is and leave it to the consumer to decide.
What you are attempting to do here is to say that the only sane or logical choice an appliance repair customer has is to choose a flat rate appliance repair vendor who bills service based on the rates in the book you publish. That’s just simply not true.
I found and am trying out a new hourly guy, who was referred to me by someone who apparently read this blog article!
First service call, on a property I own, in which the dishwasher was not draining properly, resulted in discovering that the tenant had replaced their own disposal (in violation of these lease, but apparently they broke it and thought they were doing the right thing) and neglected to remove the drain plug into which the dishwasher drains.
What would your service repair charge manual (book rate) say the charge should be for such a call, which was diagnosed and cured in less than 10 minutes, after which the vendor was off to his next job?
Steve
Dear Steve and M1EK,
Forgive my delay in responding. I am also the president of an industry association (the United Servicers Association) and carry a fair amount of responsibility to its ongoing operation.
As I reread my post I see I was a bit condescending. I’m sorry if I offended either of you. Please forgive me.
I was/am not blaming the customer. The initial discussion surrounded an argument that “book rate” companies were over priced and potentially even rip offs. My aim is to try and educate potential buyers of service goods. I am not trying to justify the Blue Book as the one and only method of pricing. I was providing justification for service companies to have higher charges than a lot currently charge. I’ve stated previously that if you are looking for an hourly service company, you should continue your search until you find the right person to fit your needs. They are out there.
M1EK,
I’m not sure what part of my statement you are taking issue with.
Steve,
The trip and diagnostic charge would be $79.95 and if we would have had to remove the disposal to remove the knock out plug it would have been $29.95 labor for a total of $109.90.
Hey Steve,
As a appliance repairman who had to work his way through school (nights) for three years while working full time I find it ironic for you to say you don’t need to go to college or vocational training to fix appliances.
I don’t charge flat rates, I charge by the hour, which you would probably think is too much.
I refuse to do work for property managers or apartment complexes because you always get a surprise when you get there. Examples below:
While your here can you look at that?
Can you take the part out of another appliance we have in storage?
I’ll have my guy pick up the part, we have an account.
You should give me a break because I will give you lots of business.
I’ll make an appointment and have to wait a half an hour for the property manager to show up.
Can you stop by the office and get the key and bring it back when your done?
Hey Steve I have a great Idea, when an appliance breaks go buy a new one.
I love private property owners. They are thrilled that I showed up on time, thrilled to have their appliance fixed and often offer me a drink or a sandwich while I’m there. Who needs to work for pinheads like you!
I am a flat rate HVAC contractor. Other than that difference, Dito.
Hi Joe,
> Who needs to work for pinheads like you!
Vendors like working for good property managers (not the ones you described) for several reasons.
1) You have only one relationship to maintain which provides continued, repeated access to a never-ending stream of jobs. Granny might make a good sandwich, but she ain’t gonna get you to retirement.
2) You can complete multiple jobs but have only one customer to bill. For example, my A/C Company sent me 6 invoices at the end of last month. I just mailed out payment in one check for all those jobs two days ago. We pay fast.
3) Good property managers are much easier to deal with than retail customers. I send my plumber to a job to check a leaking water heater, he finds a 12 year old unit that needs replacing, he just swaps out the heater, leaves me a message about what he did, and sends a bill. I trust him, we don’t create goose chases, which makes him way more efficient and profitable than he can be dealing with your chit chatting sandwich makers.
I know there are a lot of property managers just like those you described. You would be wise to know that there are different types out there as well, who make much better lifelong customers. My A/C company has received steady business from me since 1990, through two different owners even. We have vendors who come to our monthly property management meetings who don’t spend a penny on advertising and who stay backed up with steady work because of their networking efforts with property managers.
Call us pinheads, but we’re getting a lot of vendors who understand how to find profitable customers through the economic downturn. Property management and rental repairs don’t slow down at all.
Enjoy your next sandwich, but you might also try a local property manager’s meeting and see what happens.
Steve
4)
I have thoroughly enjoyed the banter here between all involved. I have found one thing in common. I believe all venders involved in this conversation care about the customers, and all customers understand the cost of quality and reliability. The trouble is linking the two together. For this I have no suggestions.
I CAN say that I have been a fan of both Flat rate and hourly rates in my, Going on, 23 years in the HVACR business and I think the proper method of billing by the service company comes down to geographic area. I have worked for Sears (who used the flat rate method at the time) in a huge city, and now own an HVAC R appliance repair company in a “VERY” small town. (One blinking light, everybody knows everybody) and I am convinced of one thing. The small town will not tolerate the Flat rate, if there is an hourly rate entity in the same area.
Most small town people are skeptical and typically very cunning when it comes to spending their hard earned money. They will not call you twice if you charge them $300 dollars to replace a garbage disposal. They will however reward, say, a $210 dollar replacement with LOTS of referral work.
So here is the quandary. Somewhere between big city and small town is the line between Flat rate and hourly? Easy for me cause small towns don’t get much smaller than where we are.
At 23 years in the industry, I still LOVE my job, still work my tail off, and make less money per call then the other guys, still happy with my profit margin. Don’t kid yourselves; Happy is still a factor in this business. The more detached you are from the joy of your work, the more compensation to try to justify. Our company mission statement is: Treat EVERT customer like they are your ONLY customer, or someday they might be!
I wrote this on my way to my first customer!
Anyway, I’m for which ever system fits the demographic. And that’s for you to figure out…
I have a interesting perspective. I have owned and operated a appliance repair company for 20 years and my live in girlfriend owns a property management company. I have attended training sessions run by Dean and other flat rate proponents. Dean is right that many hourly appliance companies under charge for their services. I have read over Dean’s book and the prices are fair. I charge a service call and hourly rate. Maybe I shouldn’t post this in a public forum, but I have the highest service call rate in my area, but because of my skill and expertise my completed jobs are still in the same final price neighborhood as those with service calls 40% lower than mine. While I was reading the posting I felt insulted by Steve who doesn’t seem to value a good appliance repair person. My girlfriend on the other hand thought that Steve was right on and that Dean was a slick salesman. So, I guess it depends on your perspective.
Going back to the comparison of the Realtor to the Appliance Tech. Sometimes appliance jobs do go very easy and it seems like we are getting over paid, but other times problems arise, so you take the good with the bad. Just like in real estate, sometimes houses sell immediatley, before you have done much work at all and other times you work your ass off and put in lots of time and money to sell a house. You collect your 6% whether the sale was easy or hard.
Hi Mike and Mark,
Thanks for your comments. The comparison between appliance servicing and real estate sales isn’t a valid comparison.
> You collect your 6% whether the sale was easy or hard.
Actually, we get paid zero most of the time. We weed through a lot of buyers who never buy, and thus provide a lot of information and services for people who never pay. We can’t charge a service call and get compensated for every trip we make and every bit of service we provide. The successful transactions subsidize the uncompensated efforts because the consumer will not accept fee for service in real estate.
But a group of property managers was lamenting this topic just earlier this month. We continue to be charged higher and higher rates for services that don’t measure up to what we received 15 or 20 years ago. Part of it is the cost of parts and the poor quality of modern appliances. But a larger problem are the book rate companies that don’t understand the value of a good, low hassle repeat client and instead are happy to charge too much for one job and then never hear from us again.
Steve
Hi Steve,
I have enjoyed the back and forth on this issue.
I would offer a couple of comments to what you and your other property management friends have expressed:
Unlike most appliance service businesses from 20 years ago, today most are actually run as legitimate businesses. That is to say that they know what their cost of doing business is and what they need to charge in order to stay profitable.
Appliances have a tremendous amount of electronics and require a great deal more knowledge (IE training) than ever before.
There are a larger number of repairs that require multiple electronic parts to correct the problem. This is not discovered, however until the first component is replaced only to find out that additional parts are required in order to complete the repair. This process normally involves multiple trips to the home.
Has you have pointed out, repair parts, especially the electronic components are outrageously priced.
Have a great and happy New Year!
Dean Landers
Landers Appliance, Baltimore
President, United Servicers Association
Author of “The Original Blue Book”
I disagree with hourly appliance repair and here’s why. My technician comes to my house for 70.00 and gives me an estimate. He might say the job will cost 150.00 weather it takes 5 minutes or 5 hours and the 70.00 estimate charge is waived if I have it repaired.
I have found that if the technician is slow, why should I have to pay for his speed?
I would rather have a book rate, if the technician is great he will finish faster and I can go about my day. I find that most technicians that charge by the hour go slow just to up the bill. no thanks, give me a flat rate. A great company with experienced technicians will have flat rates and they usually fix it right the first time. Hourly people for the most part are slow and inexperienced. If its a one man show that has been repairing since the 90′s he is probably great at the hourly rates, but with the newer appliances with 3 or 4 computer boards, give me a flat rate. I don’t want inexperienced technicians to waste my time. Time is money and in the long run I find that I save money using the experienced flat rate companies.
Hi Mike,
And if the technician then reaches under the sink, presses the reset button on your disposal (thus “fixing” it), or resets a GFI breaker that is preventing the dishwasher from running, you’d really rather pay the “book rate” $150 than the hourly service call?
Steve
Mike, Your perspective can be compared with the cab driver who avoids the interstate to run up the time a bit, which I completely agree with by the way. However, If there are “great companies with experienced technitians” out there, than you must agree that some of them are hourly rate. And if you agree with that, than aren’t you saving money with the hourly rate “great companies with experienced technitians” ? It seems to me that you have decided Flate rate is better because your bill will be the same whether the tech is good or bad. This is arguablely incorect. How many return calls outside of the companies labor warranty are due to bad technitians If you are capable of finding a “great companies with experienced technitians” , Than find one with hourly rates and save money. The objective of “flate rate” was to save the COMPANY money, not the customer. So how can this objective ever benifit the customer. Flate rate is based on the highest possible cost of a repair, regaurdless of the acual cost to complete it. Furnace parts for example: An inducer motor can cost anywhere between $100 and $400 depending on the manuafacture and your local market cost. Still, you will pay what ever the company has decided you will pay (which is the highest cost)
The whole thing goes back to my earlier point. Somewhere between big city and small town is the line between Flat rate and hourly? If a small town hourly rate company has a good reputation, there is only one explination for it. They have GOOD TECHNITIANS!
Now here is the spell checked version!!!
Mike, Your perspective can be compared with the cab driver who avoids the interstate to run up the time a bit, which I completely agree with by the way. However, If there are “great companies with experienced technicians” out there, than you must agree that some of them are hourly rate. And if you agree with that, than aren’t you saving money with the hourly rate “great companies with experienced technicians” ? It seems to me that you have decided Flat rate is better because your bill will be the same whether the tech is good or bad. This is arguable incorrect. How many return calls outside of the companies labor warranty are due to bad technicians If you are capable of finding a “great companies with experienced technicians” , Than find one with hourly rates and save money. The objective of “flat rate” was to save the COMPANY money, not the customer. So how can this objective ever benefit the customer? Flat rate is based on the highest possible cost of a repair, regardless of the actual cost to complete it. Furnace parts for example: An inducer motor can cost anywhere between $100 and $400 depending on the manufacture and your local market cost. Still, you will pay whatever the company has decided you will pay (which is the highest cost)
The whole thing goes back to my earlier point. Somewhere between big city and small town is the line between Flat rate and hourly? If a small town hourly rate company has a good reputation, there is only one explanation for it. They have GOOD TECHNICIANS!
I was just ripped off by a “Blue Book” appliance repair service. They charged me $262.00 to replace a freezer thermostat. They initially wanted over $300.00 to do the job. After I protested, they dropped the price. I had no idea what a freezer thermostat costs. I looked it up after the tech left and was very upset to find that it was $20 retail. The repair took less than one half hour.
In the future, I will replace my appliances rather than give these “Blue Book” thieves any more of my money!
Mr. Wright,
You are the example I was trying to point out to flat rate proponents.
If my cost on the same thermostat was $20.00, I would have charged you $60.00 (marked up for time to procure the part, risk of non payment for a non returnable part, handling any warranty replacement needed for the “one year” I would cover it’s free replacement, and of course to make a little money) If you were within 20 miles of the shop I would have charged you a $35 trip/diagnosis fee, and one hour minimum labor rate to install said part.
($60+$35+$45=$140.00)
I give you a 30 day warranty on labor to replace the part (because 30 days is usually enough to tell if you have received a defective part), and 1 year on the part itself. If it took me less than the minimum 1 hour to do the work, I still charge you $45, but I give you a credit for the remainder on your next service call. (now I have left you with an additional reason to keep my number handy)
Am I going to make money? Enough
Am I going to get rich this way? – No
Am I going to work harder to make every dollar? – Yes
Am I going to be VERY sure I fix it right the first time? – Absolutely!
Are you going to call me again? – My future literally is depending on you calling again…
Am I busy? – Good grief yes!
And if I may, Judging by how busy I am, and how many calls the office receives about how great it is to have a fair small town service guy you can trust? – People love this small town service company that charges time and materials.
(Ramble warning)
It seems to me that not only has the flat rate pricing been developed to protect the service companies, but is only desirable to the consumer because its hard to find a quality guy you can trust, regardless of what method he uses to charge.
Unfortunately companies mistake comments like the guy before us above, (paraphrasing) “I’ll take flat rate because it prevents a bad tech from running up the bill” How about not having a “bad” tech do the work. And I have some news for him. Flat rate doesn’t protect him from anything. If a job takes longer than the flat rate allows, the tech is required to add on an addition flat rate code to cover his time. You think that “bad” tech is going to say to the customer, “I have taken more time than I should putting in this part, I will explain why to my boss and I’m sure he will not reprimand me”. Nope, he will tell you some additional time will be need to complete the job and it will now cost you more.
So, thank you for you perspective and sharing your recent burglary story. Don’t get me wrong, I like money just like the next guy but, as I tried to convey to the flat rate defenders, you can’t charge every customer the worst case scenario for a service call. It has to reflect the actual repair or the customer feels robed. And to rework the flat rate books to account for individual brand names, types of equipment, and every service related variable so it IS perceived to be fair to the customer, you might as well use time and materials with a fair part mark up that makes money and is justifiable for your efforts to acquire it, etc.
Thanks for your reply Mike. I would not have any issue with the way you presented the costs associated with the thermostat repair. The price you quoted is very reasonable. The company that I used just stated that they charged the book rate and wouldn’t show me the book. If I was able to view the book, I may have felt a little bit better about paying what I did. After finding out (after the fact) that it was a $20 dollar part, and the diagnosis and repair took all of 20 minutes, I was asking them to at least show me the damn book!
I’m glad to hear that there are still honest people out there like you. Thanks and I know that your business will do well because “word of mouth” is the best advertising. Keep your customers happy and they will pass the word.
Terry,
I’m sorry someone used the name of the Blue Book to cover an unethical practice. As a service company claiming to use the book, the company should always have the book available to show the customer. The listed book price for an upright, frost free freezer lists a particular part number that has a retail costs of $97.03. Often times there are multiple potential part numbers and therefore prices. If the part number and price are less it is assumed the user will adjust the price accordingly. The idea of the book is to help service companies establish a reasonable labor and service charge rate. Since February there is now a new on line version that actually ties the current part number and price into the service charge and labor so that the total price is up to date. It would prevent a Blue Book user from neglecting to adjust the part price.
Mike,
You are the example of a company owner whom the book was developed for and whom I referenced earlier in this blog and have written about extensively in various trade magazines over the years. Please forgive me for my forthright approach to challenging your assertions. People are not using your company because you use time and material. They are using you because you are friendly, easy to deal with and good at what you do! Based on the charges you listed and my 30 years of experience in this industry as a service company owner and consultant, you are not able to sustain a viable business with a lettered, insured, stocked truck, workers comp and business liability insurance, telephone system, web site, administrative help including a customer service rep to answer the phone, paying rent and utilities, provide any benefits such as health insurance, retirement or paid sick and vacation time for yourself and/or your staff, get up to date training on current products, use the latest technology to insure a speedy and proper repair, and the list goes on and on. I am certain that you are not operating a typical company with the various costs I’ve mentioned. You can’t afford to! Maybe you work out of your house and don’t pay yourself rent for the part of the house you use for the business. Or you could have inherited the building you are operating out of. Maybe you work on your own service vehicle, don’t bother with liability or health insurance, or don’t have paid staff to help with the various duties of running a business. Maybe you make your own ethanol fuel, have a part time business, your wife has a high paying job, you receive a retirement income, or whatever, but I know you are cheating yourself by working for wages that are far below the costs of operating your business.
There are great tools available to help small service business owners determine what their cost of doing business is so that they can charge the appropriate rates to insure their longevity. I would be happy to talk with you about the legitimate costs associated with operating an appliance service business to help you understand your true costs.
I have been an appliance technician for 15 years and have worked for two companies that charged hourly and switch over to a flat rate system. In both instances the technicians, CUSTOMER, and the company the flat rate system turned out to work better. From the technician side having the ability to give an accurate estimate before starting the repairs makes you not worry about the clock and allows you to do the work required without trying to hurry the job or drag your feet. Your only concern is repairing the appliance correctly for the consumer. From my experience the customer appreciates getting an accurate estimate before the repair starts and can make an educated decision if they want the unit repaired, when I was charging by the hour this was always a difficult thing to do given, and when I had to tell a customer that I ran in to unexpected problems and the bill is now going to be more, it made for an upset customer that may never call again. From the company’s stand point it made the bottom line a little better, (trust me nobody in appliance repair has a mega-yacht) but, it also made the customer complaints go down. Nobody was calling complaining about the tech looking in his van for 10 minutes to find the part, or the time he was on the phone with a manufacturer, or God forbid he had to use the restroom. Yes these are all complaints that I have heard when charging hourly.
When working on a flat rate I believe it works out to be fair for everyone. As an example we come out to replace a fan motor in a refrigerator. Tech A is new to the trade and has never done this job and takes longer, on hourly charges the consumer will over pay. Tech B has 10-20 years experience and does the job the job quickly, on hourly charges the company loses out on profit. Tech C comes out and has 40 years experience and has the most expertise but, moves a lot slower than he used to, and the hourly charges will be more. Did the same job get done at all three jobs? Yes but, we have three different bills for the same job. What does that do for your company’s reputation when your customers compares the bills for the work done? How do you explain that to the consumer? Not an issue on flat rate.
The original poster stated that he knows what it should cost to replace a part or appliance. I beg to differ, unless you have owned a service company or been a technician you do not understand all the hidden cost of doing field work. What it sounds like to me is, you don’t have a problem with flat rates as much as you have a problem with what people charge, and don’t appreciate the years of training it takes to be a competent technician.
An other large factor that goes in to the charges is the technicians salary. While some might think we are overpaid grease monkeys, what you don’t realize is that (at least in Washington state) we can’t find qualified people to do the work, and that drives up the demand which in turn drives up the salaries.
Good luck on your search for a service company that doesn’t appreciate their value. They are out there and they usually don’t last long.
Dean,
I think we just need to agree to disagree on this one. I started my business in my house years ago yes, but now I have two trucks, two trailer, tools for both, I have a 1200 square foot office on a very busy highway with great visibility. I designed and built our sign, we trade the local radio station services for air time, we have a meager budget for advertising but we run and occasional ad, pay rent but will be purchasing the building soon and will thus turn wasted rent into equity. I have all the tools need for HVACR and small appliance repair & installation, I have parts and some equipment inventory, I have $2,000,000 worth of insurance, licensed, certified, qualified, and up to date on all necessary training in my field. We provide 24 hour emergency service (answered by a person day or night) I have a full time parts manager who tracks down and orders parts. As far as latest technology, i am so far beyond my competitors its not even fair. Our computer network links two truck computers, iPads, phone system, security, GPS routing, through a custom built work order and billing system. From any of the iPads, phones, truck computers, or office computers we use to operate the business, we can locate/order parts, access all of our PDF training manuals, service manuals, and any other data available via the web, to ensue the customer is taken care of promptly, efficiently and with enough value for their dollar that they don’t call anyone else once they do business with us. As far as sustainability, our first years sales was 15k. Second 40k. Every year since we’ve had an average 23% increase in sales. My salery is now in excess of 60k annually, and I see no reason for that to go anywhere but up. I have a high school education ONLY. I taught myself excel spreadsheets and built our work and billing system from the ground up. Why? because I wasn’t going to pay for someone else to do it, that would force me to raise prices, I taught myself how to build web pages, because I wasn’t going to pay someone else to build it, that would force me to raise prices. I don’t know if your getting my point so here it is. I make an honest living, and flat rate (in many cases) = customer paying more than what is fair. This is not honest, this is called SAFE. Safe for all the companies that don’t have quality techs. I make a smaller profit than those who use THE BOOK because i don’t charge a customer the worst case scenario for a repair, I charge what is fair, and in turn they reword me with more and more and more business. I have built a successful company from nothing by charging FAIR prices for ever repair. And the customers call me back. We have more than 400 customers in our system and at least 50% are repeats. The rest will eventually be there too when they have another service need. We have more than 100 planned service customers, and if you know the business, you know that’s very good for a young company. We’ve been in business going on 5 years and are growing in the worst economy in decades. The reason why no one can agree here on what’s best is, it comes back to my original point, Find a competent repair company with competent technicians and repairs will be done right at a great value. Flat rate doesn’t make a company sustainable by increasing efficiency or making technicians smarter. Flat rate brings in more of the customers money for a repair which would cost less when compared to time and materials. Not even CARL’S reason for using flat rate makes a company sustainable. quoting Carl; ” From my experience the customer appreciates getting an accurate estimate before the repair starts and can make an educated decision if they want the unit repaired,”
Me again, As we all know, being given the flat rate cost before the repair starts is no guaranty what the final price will be. If something else is found to be a problem, the deals off. So-gone is any assurance that the customer made the correct decision to repair vs replace, all based on a flat rate price which was incorrect because the tech was either inexperience or incompetent. Still I’m not seeing the great advantage to the CUSTOMER when all techs are equal. See, i don’t have a problem with flat rate. Its nice within a set of normal circumstances, but the prices are hiked up to protect the companies from bad techs, it doesn’t protect the customer. Back to my point. Provide a quality reliable tech, and the “flat rate” vs “time and materials” argument is over. They WON’T CARE. They will pay anything to know it’s right. What’s wrong with that.
By the way Dean, and this comes from a tech who, after 24 years still likes my job and my customers, sustainability was achievable long before flat rate came along, it was made possible with hard work, long hours, and dedication, and customers recognized it. its the free market. Provide a quality product i.e., Honeywell, Copeland, etc. and you will probably be around for a long time. pick flat rate if you want, my customers just look for quality.
Something else Dean. Don’t think some of the motivation for pushing flat rate programs has been lost on me. I like to make money too. There is so much money being made selling the flat rate systems you have mentioned. And guys like me are called low ballers and sell outs because we are the reason the flat rate companies can’t ramp up prices to the moon. I hear it at every dealer meeting I attend from my competitors. Instead of relying on their own abilities and those of there techs, they count on a priced controlled system that drives consumer costs higher and higher across the industry. Guys like me won’t prevent this, but we sure do annoy those owners who want a bigger house or more water toys. Customer choice in service companies has become so trivial they pick the company out of the yellow pages with no more conviction that when they pick one banana over another. . Not my customers. Hundreds of my customers came from flat rate companies no more than 10 miles from my office. I have removed a quarter of a million dollars in sales from them, from one city in less than 5 years with my little old time and materials company.
Certainly you have realized repair costs are so high in this age of recycling that most of the time it makes more sense to throw something out than pay to prepaid it. That’s because of greed.
Its no secret to anyone reading this post that I prefer T&M, but it’s a little irritating to see so many people justify flat rate because “the customer knows the cost before you do the work” So do my customers. I give my customers a QUOTE. I tell them what it will cost before I do the work and they decide what to do next. And 9 out of 10 times I’m cheaper.
Hi Mike,
You covered it well. Since originally writing this article, I have in fact found a good appliance guy. Another husband/wife team. She dispatches and does the books, he stays in the field doing the work. I pay a service call plus time and labor for any repairs beyond a quick service call repair. He has the ok, in advance to make any needed repair within pre-established cost parameters which are pretty flexible. This works well for the vendor because he doesn’t have to call me on every job. Just fix it and bill me. You’re the expert. If he recommends replacement instead, he calls to let me know.
If we think of the flat rate system in terms of risk, all of the risk, 100%, is shifted to the customer, as well as the inflated costs. None of these guys absorb their cost overruns if the job becomes harder or takes longer. I don’t dispute that this is good for the company charging the flat rates. But, as Mike pointed out, charging fair prices and making a profit are not mutually exclusive. I think flat rate system mainly allow inefficient and poorly run companies to remain in business instead of failing like they should. It’s the “union wage” mentality of home services.
For professional customers such as property managers, who send a constant stream of business to our vendors, flat rate is a rip off. I have a good stable of all trades and they all work on service call plus labor/materials. Over the course of a year, I save my owners and clients a tremendous amount in “overcharge avoidance” by using hourly vendors. And since they are all competent professionals, and we have a relationship based on trust, I’m an extremely profitable client to have because of the stream of work and quick turnaround on paying invoices.
Steve
Steve,
I may have covered it well but you my friend found a way to say it far better and in much less space. I am a bit long winded and VERY passionate about my relationship with my customers, so I have taken this whole subject a bit more personally than maybe I should have. However, your response has made it worth my time.
Thank you for confirming there are still, I guess I would call them “hand shake” type of people out there. If that makes any sense?
I now rest my case!
Best to you,
Mike…
Dear Steve and Mike and all others,
Thanks for the back and forth on this issue. I’ve enjoyed the discussion.
Mike,
As you have suggested we are going to disagree on this issue. I can show you, as I have previously offered, using your own P&L info how you are undercharging for your services.
I read your comments regarding flat rate companies as somewhat disparaging. Charging flat rate or hourly is not a barometer of whether a company is operating in an honest and forthright manner.I can introduce you to many hundreds of extremely well run, successful companies that employee master technicians while operating with the highest degree of ethical standards who charge flat rates. From what you’ve said they are very similar to your own company in most ways! I suspect the only difference we would discover under close scrutiny is that they have placed a higher value on the service they provide.
I am curious what you consider to be a reasonable pay for a fully trained master technician. Would you share that number with me?
Steve,
I am glad you have finally found a small company that meets the needs of your property management clients. As I’ve stated earlier, there are many quality mom and pop companies out there, with many still charging T & M. In fact they still make up the majority of the independent appliance service industry, although that is rapidly changing.
I trust everyone will enjoy the remainer of the summer!
I was looking for more info on flat rate pricing after I had a bad service call that wasted my time and here is how it went I diagnosed it on the phone and needed to pick up the pressure switch that was the problem. I got there and replaced the switch and while checking the operation of the water level switch I noticed that the water flow was especially bad on hot. I called the customer up and showed them here is your additional problem. It needs an inlet valve. Customer says if it needs it then change it. The valve was full of mineral deposits on both hot and cold. He asked that I take a look at the dryer because there was lint every where in the laundry room and when I was done with that he had a question about his dishwasher. So I investigate the dryer and it was full of lint and also the vent tube going out side was very clogged. The dishwasher was full of deposits also and I gave them two bottles of dishwasher magic and told them how to use the stuff I also looked at the fridge, and sampled hot water heater water because the theme seemed to be mineral deposits. I charged 78 for pressure switch 95 for the valve 10 for dishwasher magic and 125 for labor plus tax. 2 hours on a Saturday and you would have thought I brought a gun. These people should never call for help. I went through all their Appliances and gave the best service as usual. They called back and said my master plumber only charges 95 an hour. And you “basically said are Appliances are shit” (I was sorry they bought Frigidaire) but really. Had to cut their bill in half cause I insulted her appliances that all needed maintenance?? Had I know I would have never gone and really putting a stop payment on a check is so wrong after work is done. I will stay home for that. I lost money. No wondrous I can’t retire. That’s it I’m getting the book. Its a great tool and I wont have to deal with tools.
Get ready for some more wind from Mike…
Welcome to the conversation Matt. As you’ve probably noticed we’ve been hashing this subject over for a few years now. I seem to be the one tech, turned owner here that still agrees that Time and Materials is the fair way to make money, and what customers would prefer 10 out of 10 if they had both completed bills side by side. Since I am to the be the reigning champion of the T&M fight, I feel it necessary that I respond to your experience, despite my plan to take the high road and bow out as the winner of this topic. (Steve’s probably the only one who will think that’s funny) Anyway, before I digress.
I will start by saying; I think your particular problem was not based in the time and materials method of charging for work. Complete and thorough communication of your charges to the customer before you even run the call has to be priority one. Now, I wasn’t there but I’ve been running service long enough to know you could have walked into a no-win situation, and some trouble was inevitable. The key is there are only two ways to handle the no-win scenario when it comes to the customer.
Your gonna lose money either way… Pick your way…
#1 You can graciously apologize for not explaining the charges properly (even if you did), and you give them a discount that makes them happy. (Even if it hurts really bad). You will lose money, but you have to remember the good part: THEY TELL TEN FRIENDS ABOUT YOUR INTEGRITY!
#2 You can grumble and complain and argue with them about the charges, then they cancel the check or cause you to give in over a threat of lawsuit or something of that nature, forcing you to let the bill slide. You will lose money from the work you did PLUS referral work because don’t forget the really BAD part: NOW THEY TELL THIRTY FRIENDS!!!
Which way do YOU choose to lose money? I know which way I would pick.
In my humble, yet experience opinion, your mistakes started on the phone. As I conceited before, I wasn’t there, but I too would have tried to diagnose the trouble as you did. I may have even given them an example of how much a pressure switch installation CAN cost, “IF THAT IS ALL I FIND” but would immediately and firmly excuse myself from any grantee of any phone estimate even being close to a final price without having my eyes on the job…
Something else I rarely find in all the verity of equipment I work on (HVAC+R) is “two problems at the same time”. Either of those components should have caused a big enough problem which would have caused the customer to call for service. How did the machine develop both problems at the same time? This is how it looks to the customer when you have replaced a part you diagnosed on the phone, without even seeing the appliance, and then tell them they now need a second part to fix it. Of course when I said RARELY find two bad parts at the same time, I don’t mean NEVER, but the customer’s perception is all that matters here. Period… If you would have reserved final diagnosis until you had eyes on the appliance, you could have figured out the total cost of the actual repair and then given that to the customer.
Let me play the customer for a second. “Are you sure the other part was needed Mr. Maguire?”
I DON’T KNOW ABOUT YOU, BUT I’M NOT PRETTY ENOUGH TO GET A GOOD CUSTOMER REFERRAL IF THAT HAPPENED TO ME… Too much doubt for the average person. If I ever heard that, my answer would be, “You know Mrs.’ Johnson, although I’m very certain my diagnosis of the first part was correct, if YOU have any doubt, I will remove that parts cost from the bill. That way you will know I have not overcharged you by installing a part you did not need.” She’s probably going to agree to pay the whole bill, but even if she takes you up on your offer, how many times is this situation going to occur. And that’s some cheap advertising right there when she has coffee with her friends tomorrow…
Another thing: Phone diagnosis is a technician’s TOOL to be prepared for as many inevitabilities as possible, in hopes of making the first trip the COMPLETION trip. Not to give the customer a QUOTE for the repair. Furthermore, I really don’t see how Flat Rate would have helped at all here either. With either method of charging you had to UP the charges when the second problem was found. The customer pays more either way. How would flat rate have helped?
One other thing I don’t get. If you told them your hourly rate for a Saturday call was $62.50 per hour, and they piled on one appliance after another for you to look at. My question would have to be “Exactly what is your issue with making $62.50 per hour.”
Here’s ME at $62.50 per hour, a home owner with both the desire to utilize my professional service, and is throwing financial caution to the wind with multiple appliance service needs…… “Well Mrs. Johnson, I have finished looking at you range, refrigerator, water heater, dryer, furnace, toilet, coffee maker, microwave, blender, George Foreman, humidifier, denture cleaner, and the malfunctioning little bell on your grandchild’s tricycle handlebar, Will there be anything else ma’am?”
I don’t care if she gives me ten more things to check; I’m callin’ home and canceling my nooner with the wife. (Yes, hypothetically I completed all that stuff before noon, AND had a nooner planned) It’s good to me Mike…
The point is, if the customer need more work done while I am there, I will do it. They will get quality work on everything I am qualified to repair, and I will decline work where I am not, but why wouldn’t I provide service to a customer that requests it simply because it’s on a different appliance. With regards to their shock at the size of the bill you left YOUR customer, it seems to me they weren’t clear you were charging $62.50 an hour for whole time you were there.
I routinely clean up after my work and have more than once had a customer tell me, “Go ahead and leave that, I can take care of that so you can get off the clock”… They know how much I charge and don’t want me running up the bill with a remedial task which they can complete just fine by themselves. (Between you and me, I’m off the clock when the job is done, not after I’ve cleaned up and have completed the paper work.) When the appliance is fixed, I’m off the clock. This allows me to have a nice conversation with, and get to know my customers without them worrying about money.
Also, If you didn’t want to stay and work, why not tell them, “Ma’am, I would love to schedule a return visit when I have ample time to spend on all of your non emergency appliance maintenance. Then we can discuss proper routines for each, and maybe even schedule seasonal checkups, but I need to attend to the rest of my emergency calls requiring immediate attention today. Would you be available on Xday” etc… That way you can complete the bill, collect, and break up what would otherwise be a large bill with less perceived value because it’s harder for customers to compartmentalize the different services you actually performed as well as we can. (Hope that makes sense) Not to mention, YOU might make it home for YOUR nooner. (One has to decide one’s own priorities…)
By the way, what’s the difference if you work on one appliance for an hour or four for 15 min. each? It seems you think four per hour make you worth more than you stated hourly rate? That would be price per appliance. This is how a flat rate book works. The logic is simple. (Example) Flat rate proponents think the customer having four appliances broken at the same time cheats the service company out of charging four trip charges and diagnosis fees. That is called GREED. After all, if they happened on different days you could justify those charges couldn’t you. Heaven forbid the customer might have a little luck to go with her misfortune and have more than one fail at the same time.
Instead of switching to flat rate, why don’t you decide how much pay your time and skills are worth, then go out and EARN it? If you think your worth more than $62.50 per hour, than charge more. (You will discover quickly if the customer agrees with you.) I think this customer has already told you they don’t… You need to evaluate that fact, and fix whatever the issue is. Flat rate will not solve your problem.
The charging of separate flat rates for multiple “same trip” appliance repairs is only one of the many points that expose Flat Rate for the greed driven enterprise it had become.
>BECOME!< Not what it was originally designed to be. It was designed for the ease of conveying the repair cost to a customer and ensuring the same fair price, for the same job, was given to everyone. It speeds up the entire repair process and efficiency means profit. Unfortunately its existence has become an enterprise onto itself, which probably nets millions in revenue for its current producers and maintainers.
I have started my own flat rate manual several times with these customer bilking properties omitted, but every time I see the same thing. The more codes you have to develop to cover the growing range of possibilities one might find on a repair, the more and more it starts to looks like Time and Materials. So why not charge $95 per hour like the pro plumber your customer seems to love so much, and let the customer decide. After all, $95 per hour is about what the flat rate charges for your work on that call would have probably worked out to.
I’m still not sure why I have taken up the T&M torch like I have, because flat rate reeks of corporate gluttony. It only makes me look better by comparison. I guess I’m just saddened at how few techs seem to even like their job, let alone be satisfied with a fair wage for their time and efforts. If we all wanted to be rich, we should have all majored in marketing and joint the scores of those achieving wealth by selling Flat Rate programs to anyone who will buy into it, regardless of proper application…
Uh oh, that came out a little bitter… Sorry… They just need to stop trying to sell it as “good for the customer.”
Next, and Reluctantly, I have to make a personal observation or I would be ignoring one of the most important parts of the repair process. "YOU". How you handle yourself, speak, look, etc. has a very large bearing on your success in this and many customer relation businesses. I have a good friend whom I know is a great tech. I trust him completely to do his best for the customer. After the customers get to know him, they love him. But he maintained a very long rock star hair due and customers couldn’t help but wonder about his abilities. (Sad but true, perception is king) He has personal skills that rival the best PR guys, but customers have to see him at work and get to know him before they are confident with him. And he loves his job as I do, and would stay all day to help Mrs. Johnson if she needed. As for you; I don’t know you, but your writing skills are not great (which isn't a crime) But it does reflect on your abilities. It has little to do with first impressions since they don't see your writing until they get the bill. However if you present yourself in the same manor, you could have a problem with representation, and not billing. I’m not Michael Crichton, but if you don’t present yourself as intelligent and capable to the customer, how can they ever perceive a good value for the work you performed. I don’t mean to presume anything about you, because all I know of you is from a short letter. HOWEVER, I can’t help but feel you are very intolerant of your job. IF you don't like your job, you should quit. Customers are uncomfortable enough having strangers in their home (who will eventually be asking for their money) for you to also throw off a bad vibe.
Another observation: I have looked up the average flat rate for all the work you mentioned and I was right, it’s scary. It’s almost double what you actually charged them at T&M. For some reason you think that having a flat rate book would have convinced them to happily turn over almost double what they already complained about. There’s a disconnect here that I can’t understand, and I fail to see what part of this equation doubles the customers perceived value of your work. Flat rate will not bring you a quicker retirement. You will… If you communicate clearly ALL possible charges and assure them you will competently and efficiently repair their appliance, and at the best possible value, cost will almost become unimportant to them. The customer already KNOWS they have to spend money for a repair. Where they have DOUBT is if it will be fixed competently and at a good value for their money.
My customers know I will fix their appliance properly, as efficiently as possible and I will warranty my work for an amount of time that will ensure the work was complete correctly. Why? Because I tell them with a great amount of conviction and confidence. Then I make sure, come hell or high water, I deliver every time. If you’ve read this blog you already know how much I charge per hour, but I will remind you. $25 diagnosis fee within the city limits and up to $65 at our 100 mile service radius limit, Repair cost is $45 per hour, Materials slightly above standard mark-up. My calendar is full and my bills are paid… I’m 41 years old and I plan on a timely retirement.
Finally a conclusion
I only speak from my own experiences and don’t claim to be a genius, but I’ve been in this business more than 24 years and I feel that affords me very solid insight into the customer and at least a little credit in the wisdom department. That being said, my personal observation of your experience would be; there is no evidence that either flat rate or T&M would have benefited either party involved any more than the other. This seems to be a simple case of miscommunication which always brings with it the possibility you’ll lose money!
MOTO : Charge a competitive price for diagnosis and parts, charge what you think you’re time and expertise is worth, and make damn sure you leave your customer thinking you’re worth more!
I wish you luck…
Mike (ThermoDyne)
The customer is always RIGHT.
The customer is ALWAYS right.
Hi Mike and everyone else who has contributed to this discussion.
I can’t remember if you have answered this in the past but are you a one man operation?
There are at least three very distinct reasons you as a business owner (especially with multiple technicians) cannot fairly or honestly charge by the hour. You will either cheat the customer or cheat yourself. I have already written extensively in this forum on this subject. I will not continue to make the argument here in this setting . I’ve recorded a webinar challenging the “by the hour” charging method. Feel free to call or e-mail me and I’ll direct you to the webinar.
Dean Landers, President, CSM, CAT
Landers Appliance
DLanders@LandersAppliance.com or 410 682-3232 ext 101
Dear Mr. Landers,
With all due respect, I don’t feel you have “made the argument in this setting” at all. And this is the setting you need to make it in… Not the money hungry, oversize management that drools at the sales projections presented in your seminars. I appreciate your invitation to you webinar, and will happily attend as my schedule will permit, but I’ve already heard you argue this perspective in several different venues. In fact I am quite certain we have talked face to face. I doubt the argument will be any different. I am a capitalist and I think you have a great product to sell, when it isn’t abused. However, it will never be for EVERYONE. Bad techs, for example, cost SOMEONE money. And the flat rate hvac company won’t let it be them. Who do you think pays for bad techs? The flat rate customer does.
By the way – The way I ensure my hourly rates are fair to every customer is to lean the “unfair” towards me. I will not allow any customer to feel they have been charged unfairly. Isn’t that what it’s all about? The perception of the customer determines what they think is fair. Not your book… You book is about a service monopoly so EVERY hvac company can be profitable, have a retirement plan, fully stocked new trucks, dental insurance, etc. If anyone got in this business thinking they would live in a mansion and wear white collars, they need to wake up and smell the Freon. Your book prevents the process of natural selection. The contortion of the flat rate process, which has its place, allows crappy companies to exist alongside good ones because the customer gets the same price no matter who they call. No greater value in a service stands out. It’s a crap shoot, LITERALLY. “What crappy tech will I get this time?” Instead of putting money into training, or ride along programs, they happily send it to you so the extra cost of having crappy techs goes onto the customer’s bill.
Quote: “There are at least three very distinct reasons you as a business owner (especially with multiple technicians) cannot fairly or honestly charge by the hour. You will either cheat the customer or cheat yourself.”
Response: WHAT?
I can state my reason why T&M is fair to everyone in one sentence. “I make sure the customer perceives a good value for their money by charging them only for the time I am on the job (which includes all operating expenses, etc), a fair mark up on parts (which covers stocking, procuring, etc), and they reward me with work and subsequent financial security for the rest of my families existence.
Fair for everyone!
If you have three reasons why you statesmen is true, I have missed them in this forum completely. Why don’t you restate them one more time in simple terms here? Don’t try to drag your opposition to a webinar designed to wow people. Persuade here.
Just, don’t suggest you made your case HERE.
If you really want to convince ME, start by trying to explain (Q1) why flat rate was going to help “Matt Maguire, Appliance Repair Tech”.
Then explain again (Q2) why the customer knows the price of the repair before it starts with any more confidence than with T&M?
Is there, or isn’t there a flat rate code for unforeseen problems to be added at the techs discretion, even after the initial price has been accepted? (yes, there is) And that is where the contortion of flat rate begins. Mis-diagnosis = “I’ll need more money Mrs. Johnson.”
Try to answer those two questions if you want to convince me. It might be good practice for your next seminar, because I know from experience I’m not the only guy you’ve run into that feels flat rate is unfair to the customer.
And don’t tell me the answers are in the webinar.
That would be the salesman’s answer…
Regards
Michael Yates
ThermoDyne
HVAC+R
Heating and Air Specialist
Office/24hr Emergencies 260-701-1623
Cell 574-340-9326
email – ThermoDyne@live.com
Web – ThermoDyne.US
Dear Mike,
Sorry for the long delay in responding to your challenge. I disagree with your assessment that I have not addressed the issues you raised. If reading from the beginning of this blog starting several years ago I think I have made my case very clearly. But to your points/challenges/questions I will do my best to give my perspective one more time.
First, let me say that I don’t care what system of charging a company uses, if a company is unethical they will rip the customer off regardless. Neither flat rates or hourly rates will protect the customer from dishonesty!
I would also state that ethical, well run, professional companies all give the customer the benefit of the doubt regardless of what charging method they employ. Customers want value, which you have identified or “perceived” as you put it that customer value is the price you charge. I would strongly disagree. Look at any statistical survey in the market place about what customers are looking for from any service related industry and price is usually listed fourth or fifth. Customers want you to at all times be professional, show up when you say you will, fix it right, and treat them and their property with dignity and respect. The perception of value is based far more on this criteria than price alone.
I had stated earlier and you cut and pasted in your response:
” Quote: “There are at least three very distinct reasons you as a business owner (especially with multiple technicians) cannot fairly or honestly charge by the hour. You will either cheat the customer or cheat yourself.”
Response: WHAT? ”
Here are the three reasons:
1} Not all technicians work at the same speed. Some are slow and some are fast. I have four technicians who have worked for me for twenty plus years and there is a significant difference in the speed with which they work. And these same technicians have specific gifts, in that some are much faster at certain repair jobs than the others. Hourly charging methods fail to address this for the sake of the customer or the company!
2) Using the hourly method of charging for your services means that inexperienced technicians are entitled to charge more since it takes them longer to do repairs than a seasoned, experienced technician. Customers definitely would prefer experience over price!
3) There are a number of jobs that take the exact same amount of time to complete but have a tremendously different amount of exposure. Here is an example: A Whirlpool dryer support package Vs a Whirlpool refrigerator relay start kit. Make a list of potential exposure related to these two jobs, from recall rates, potential food loss, water line damage, leakage, floor damage, compressor failure, etc. Charging by the hour means that you have to average these costs across all your jobs so that in the end the dryer customer will pay more than they should and the refrigerator customer will pay less. Flat rates price each specific repair according to their costs. Customers are protected from being overcharged and companies are protected from undercharging.
I will stand by the argument that flat rate pricing is the only fair way to account for all the variations that go into the appliance repair business.
Bt the way, check out our web site http://www.LandersAppliance.com and read about the specific ways we as a company provide the added value that customers are looking for. Have a great and wonderful New Year!
If you get it you “get it”. Many times customers don’t understand the expenses of being a service provider. They think there is no value in an experienced Tech until they get the other kind. Hidden costs and time for example. The drive to and from, to parts store, vehicle, employment taxes, phones, ads, inventory, insurance just to name a few. Profit is why we do what we do. If you install a 15 dollar part and charge 150 bucks that is not a rip off. Although many customers would disagree. If that’s the case then I suggest you learn to fix stuff yourself. Flat rate is the only way to survive without making customers have the perception that their not being ripped off.
Oh yeah I have a lot of repeat and referral business. I just didn’t have the flat rate book. However I know what my competition charges and the market Ares what the market bares.
Matt,
As a consumer I understand that you have “overhead” costs that you need to cover as part of the services that you provide. We are in agreement that $150 to diagnose and change out a $15 part is not a rip off. My assertion is that the “Blue Book” crooks that came out to repair my appliance wanted over $300 to do a 20 minute job to replace a $20 part. When the tech was asked to show me the “book” he refused and dropped the price down to $262.
If I could find a repair service like Mike (Thermodyne) runs, they would get my business every time. As for the “Blue Book” crooks out there, I will buy a new appliance before I give any of you another penny of my hard earned money.
No one is saying that you shouldn’t be able to make a profit, but if in fact the “Blue Book” showed a price of more than $300 to diagnose and repair a $20.00 part, this is reason enough for me NOT to use “Blue Book” companies in the future.
Terry,
To generalize as you have is your perogative but in my opinion it would be wise to consider all the other variables a company has to offer as well as the price AND to have the company actually show the blue book to you in order to varify the price.
There are crooks in every industry. I’m sorry you happened to run into one in ours.
As the owner of an appliance repair company, I find this thread very interesting, and would like to throw in my 2 cents. This discussion is not really about repair servicers, its about economics, and economics teaches us new lessons on a regular basis.
Flat rate pricing isn’t going anywhere. We use it, and I can’t really imagine a business savvy service person not using it. The reason is simple. “I need my guy to show up, fix the problem, and bill me a FAIR RATE for time plus materials”. This is a quote from the original post, and it says it all. What is a fair rate? That’s a good question. The answer is the market determines the fair rate, and the market is not just homeowners and property managers, it’s repair companies, technicians, retailers, the overall economy, the season, …you name it, it has some effect on the price.
Go to your local high school and ask what they are doing to help the career path of future service technicians. They’ll look at you funny, “What career path?” your either going to college with aspirations of a high paying white collar career, or your going nowhere. “Sounds better than fixing dishwashers and refrigerators I must admit”, another quote from the original post. Very few people want to do this work, and even fewer actually can. So your left with an industry full of hacks, knuckleheads, and guys trying to rip you off. Which means when you finally find someone who is professional and knows what they’re doing, expect to pay for it. The people and companies in this industry who know they have something to offer don’t need to work cheap, and that trend will likely continue.
> What is a fair rate?
I agree that the market should determine rates. But that supports my position that Book Rate Vendors are simply operating as a price fixing function. It protects the weak operators and provides additional enrichment to operators who would be competitive even without the book.
Different operators can achieve different advantages based on many factors. For example, in Round Rock TX just north of Austin, they have a free brush disposal service, for both home owners and commercial users. You just have to prove residency or business address. So, a tree trimming business based in Round Rock has a competitive advantage over the guys in Austin who have to pay dump fees to dispose of trees and brush. The tax payers of Round Rock fund the free brush disposal, so they justly benefit from the lower prices that the tree vendors can charge by not having a “dump fee” as part of the bid.
If there was a bookrate pricing guide for tree vendors, should the ones in Round Rock charge those customers the full book price, or should they adjust based on the external factor of no brush dumping fees? I think they should, and they do.
It is the factors that differentiate competitors from one another that should determine pricing, not a book that tells vendors how much to charge. Bookrate pricing to me seems like a copout. It’s closer to communism than Capitalism. It cheats customers.
Steve
You bring up some good points. Allow me to clarify. A “blue book” is nothing more than a guideline. Telling a customer, “This book says I just HAVE to charge you $350″ , is a cop out and definately bad business, and I wouldn’t advise anyone to to that. If I were to deal with a property manager who was great to work with, I would give them some sort of volume discount, depending on the circumstances.
As far as the brush removal example, my cost of doing business is not the customer’s concern. Their concern is how my price compares with the competition, and how my service compares with the competition. If everyone in my area has the same cost advantage, it will likely reflect in lower prices for that area. They may be less than “blue book” for another part of the country. However, if only my company has the cost advantage, than it is up to me as a business person to decide how to use it. If that seems greedy, picture a service person setting his prices by how much money you have in your checking account.
In my opinion, flat rate pricing can be fair, just like an inflated hourly rate can be unfair. Yes, it does put more control in the hands of the service company, which I guess is the whole point. Why should I not benefit from my own expertise and efficiency? This is how the rest of the business world operates, and now even the lowly repair man is beginning to realize that the market sets the price, rather than the price being what a bargain hunting customer thinks is an acceptable “blue collar wage”.
My customers enjoy my service and don’t mind paying for good service.
If you are running a one man shop I do believe you have some legitimate points for charging by the hour. I think that the argument for charging by a flat rate is a stronger one but, you have a leg to stand on in the discussion. If you are running a company with multiple technicians the only FAIR way to charge your customers is with a flat rate system. When you have multiple techs on the road you are going to have too many variables (speed, experience, age, etc) to charge all your customers fairly and consistently.
The argument that I have against charging by time even when a one man shop is this. For example you need to replace the compressor in the refrigerator, as all techs know sometimes this can be a breeze for us (trained technicians with years of experience) and the job goes smoothly and quickly. Other times you run in to problems with the tubing, soldering of a joint, installation problems, and the unit just fights you the whole way through the job. When charging by time you give the quote a head of time and when the job goes faster than expected you will most likely have the tendency to knock some money off of the bill, you are charging just for your time right? When the job runs longer than expected you more than likely will stick to your original estimate because you feel this is the fair thing to do, and you also know when telling the customer the bill come out to more than expected you may have just lost your customer in the future. I believe that it is fair to yourself and the customer to charge both customers the same rate.
The argument that charging a flat rate is unethical or some how wrong just doesn’t hold water. We are an authorized service company for numerous manufactures and guess what? They all pay us on a flat rate system. When you go to your dentist or doctor does he charge you by the hour? No, they charge by the job just like the auto body industry, contractors bidding a job, and most all other trades performing similar work that requires a high degree of skill.
What is not known very well by the general public is, that our trade is in desperate need of good quality technicians. It seems that very few people are willing or capable to do repair work anymore. To become a quality technician takes years of training and experience.
Matt Maguire – I still get a vibe you hate your job AND your customers, but I’m still waiting on Dean to answer my question about you benefitting from the Flat rate book on that call. And obviously not all your customers enjoy your service. Hope Dean can help.
Mr. Wright – Thank you for the supportive comments you left. Hope you are well…
Steve – 1st and 4th paragraph: Amen brother.
BWG – Welcome to the conversation, but I hope Dean Landers didn’t hear you say the flat rate book is a guideline! It is most certainly NOT a guideline. It’s no more intended as a guideline than the price on your local gas pump is merely the recommended amount you’re to pay the attendant.
Speaking as a recovering flat rate technician working for a large HVAC company, try and tell your boss it’s just a guideline when you don’t charge exactly what the book says! A company that brings in the flat rate book is likely tired of techs not charging what management think should be charged and is using flat rate to halt the judgment calls made onsite by the techs who are staring down the angry customer holding their bill. A pissed off customer likely isn’t calling you back. Management thinking is, get the money now since we won’t be coming back. Tech thinking is, a happy customer will give us more money later. (Serves to say, there are those customers that will only be happy with free, and no one wins here) Obviously any of this only applies to sane customers.
If you ever see one of those motivational posters in a tech break room that says “ASSERTIVE”, they don’t mean for you to take it seriously! The last thing management wants is for you to mess with their yearend bonus. They can blame the economy or price increases for loss of revenue, but they themselves will be held responsible for out of control, bill discounting technicians. Flat rate removes the tech from the decision making process, and the customers are to be told they will need to call the office to discuss the bill. Most will pay the overinflated bill, and not ring your bell ever again.
Flat rate is to be followed to the number. You defeat its intended purpose if you don’t. Why not just charge time and materials and make sure your charging what your worth???
By the way: If all companies in one given market place used the flat rate book, there would BE no difference between you and your competitors in that market. How do you grow in a market where you look the same as everyone else?
Carl – Your compressor example is a great one, with the many possible variables. (I’ve tangled with some I thought would put me over the edge). Handled with the flat rate book, the price is set to consider ALL those possible variables. The customer pays that worst case price. On T&M, I give the customer the best and worst case repair cost, and if approve the repair will not exceed the worst case cost given”. Most of the time, the customer is surprised when I’m closer to the low end price.
AND: If you are an experience tech, and a job takes you say five hours. Then have the confidence to tell the customer so. (Lemons into lemonade) “Mrs. Johnson, despite every obstacle I’ve encountered during this repair, my experience with the many variables that can become a factor in such an involved task has lead to a record repair time, all things considered.” Pat yourself on the back sometimes; you probably have earned it…
In either case I’m confident enough to say, if I had trouble, then most techs out there would too. And like I tell Dean down below, isn’t risk part of the business. Win some – lose some, just do your best and make sure to keep all the customers happy.
Flat rate can’t take the risk out of the jobs, it just makes the customer pay for it. Since when was that an excepted philosophy? What happened to “Do a good job, because you have to pay the price for mistakes”. NOT ANYMORE! Now the Flat rate book says, We can screw up as often as we want because screw ups are already factored into every bill, just in case we do…
PS – If flat rate WAS used as a guideline, or a “Not to Exceed” price, I could see it being useful to quote a job you haven’t done in awhile. But it’s not intended for that at all. Terry Wright’s tech who knocked $38 bucks off his thermostat install probably got an earful back at the hive. I was never popular with my boss in the subject of “Bill Adjustments” either, but I saved and brought in many many new customers by reading and responding to the signs from a customer’s disapproving scowl when quoted ridicules charges, and he knew it! I put in a lot of light bulbs at no charge, programmed a few thermostats at no charge, took salt bags from an elderly ladies trunk down to her softener and filled it AT NO EXTRA CHARGE! I know, it’s madness as well as theft from the company. No fooling. I’ve been straight faced accused of theft by my employer for not charging for a thermostat programming…
Anyway Carl, in a perfect world, and used as a “guideline”, I agree it’s not a bad AID to pricing. But it’s not a perfect world.
Dean
Don’t worry about the time delay; I played a three year long on-line game of chess once.
Two specific questions posed to you Dean:
(Q1) Why flat rate was going to help “Matt Maguire, Appliance Repair Tech”.
(Q2) Why the customer knows the price of the repair before it starts with any more confidence than with T&M?
I’ve read through your response several times and can’t find specific answers to these questions. I just got a recap of your well practiced point of view. (No offence intended, you know the material and that’s good.)
You: Customers are protected from being overcharged and companies are protected from undercharging.
Me: How is this statement anything but contradictory?
Your argument has been consistent from the start. You are obviously well practiced at dispensing the information, but have you ever really sat down and thought about its contradiction. One FACT you hold among the highest, is the superior financial security and required assets assured the Service Company that uses the flat rate program. In addition you insist lettered trucks, parts inventory, insurance, phones, retirement packages etc, are all benefits secured by the implementation of the flat rate book. However…
When reduced to a simple common sense observation, you can’t deny the following statement.
Flat rate customer’s pay more money for the same services as a T&M customer.
What other conclusion can you come to? 1 and 1 does not equal 3. I don’t see any third party benefactor in your equation, putting extra money into my bank account to pay for my employee benefits package. In fact the only third party involved happens to be YOU, who would cost me a percentage of my profits to pay for your flat rate book, its updates, and certainly its annual renewals.
More money comes from more work, or greater efficiency, and there is no solid argument for flat rate being any more efficient. It will have its days, and so will T&M. I don’t even recall you pushing efficiency as a big flat rate benefit. If flat rate companies make more money, IT’S COMING FROM THEIR CUSTOMERS.
Don’t get me wrong, Sell it to everyone you can. This is still (for now) a capitalist America and I would be no less motivated to sell something I believed in too. And as you said (paraphrasing) a bad company is a bad company, and it doesn’t matter how they charge. But monopolizing the field with a master pricing structure just eliminates the customers control over what service company should succeeds and which one should fail.
It comes back to this: All things equal (or as equal as humanly possible) no customer would choose to pay MORE, if they could pay LESS.( I am however considering putting a check box near the line total on my work orders that allows the customer to donate $20.00 to the technician’s retirement fund, but I am not hopeful this will do well.)
Now I’m still waiting for your response on the last two questions I posed, but here’s at least one more in response to this statement:
YOU: 1} Not all technicians work at the same speed. Some are slow and some are fast. I have four technicians who have worked for me for twenty plus years and there is a significant difference in the speed with which they work. And these same technicians have specific gifts, in that some are much faster at certain repair jobs than the others. Hourly charging methods fail to address this for the sake of the customer or the company!
Me: You have chosen this example as a reason to use flat rate. Try not to take this the wrong way but, I’m shocked, considering your overwhelming concern for company profits, that you have failed to either train, mentor or replaced the slow guys you have representing your company. And you’ve put up with them costing the company significant profit for decades. Why would you tolerate them being so inefficient? I’m making no assumptions here. Your words were “significant difference in the speed with which they work”. Why would you do this?
Now I don’t want to get off the track here, because I don’t disagree with you. If these guys are reliable and generally competent techs, I know how hard it is to replace them. I just find it hard to believe you can’t get the slower guys up to speed to save you some money. Maybe if they were more efficient, you wouldn’t have to use the flat rate book.
UH OH!? Did I just stumble back onto my original point?
July 29th, 2011 – “Find a competent repair company with competent technicians and repairs will be done right at a great value. Flat rate doesn’t make a company sustainable by increasing efficiency or making technicians smarter. Flat rate brings in more of the customers money for a repair which would cost less when compared to time and materials.”
On that note I should again rest my case, but considering my persistent talkative nature and recent dose of some pretty strong cough suppressant (I’m quite ill today) I will press on…
YOU: 2) Using the hourly method of charging for your services means that inexperienced technicians are entitled to charge more since it takes them longer to do repairs than a seasoned, experienced technician. Customers definitely would prefer experience over price!
ME: Customers prefer value & reliability! These attributes are not guaranteed by the flat rate book. The only guarantee I see the customer getting from the flat rate book is, no matter what flat rate company they call, or technician sent to their home, they are assured to pay the worst case cost for the needed repair identified by that technician. (Who may or may not be correct on the diagnosis)
YOU: 3) There are a number of jobs that take the exact same amount of time to complete but have a tremendously different amount of exposure. Here is an example: A Whirlpool dryer support package Vs a Whirlpool refrigerator relay start kit. Make a list of potential exposure related to these two jobs, from recall rates, potential food loss, water line damage, leakage, floor damage, compressor failure, etc. Charging by the hour means that you have to average these costs across all your jobs so that in the end the dryer customer will pay more than they should and the refrigerator customer will pay less. Flat rates price each specific repair according to their costs. Customers are protected from being overcharged and companies are protected from undercharging.
Here you have stated several points that affect the company’s financial bottom line. Compounding that reality, they are not so obvious to the customer, but must be considered by the service company to remain profitable. The problem is, if you are going to make customer “A” who just needed a light bulb replaced in their freezer, pay for the POSSIBILITY that customer “B” experiences a leak after your guys installed the water line to the ice maker; you probably should ever mention that to Customer “A”.
Who are we kidding?! Based on the bill Customer “A” received for the replacement of a freezer bulb, they already suspect their paying for something other than a light bulb replacement.
FYI – I called a Local Flat Rate Company here in Berne and they quoted me charges of $129.00 to come out and change a light bulb in a residential freezer, if the tech didn’t run into any obstacles. (Of course that’s not including the price of the bulb.) Obstacles were another $40. I assume they didn’t mean frozen pizzas.
Your 3rd statement also outlines the unknown unfortunates which you believe flat rate protects the service company from. Aren’t they a part of any business? This is why you need competent techs on your team. When good techs make mistakes that cost the company money you chalk it up as inevitable human error, and do your best to make sure they don’t make the same mistake twice. Everyone I work with has earned the right to a bad day once in a while. If these are normal occupational hazards, that come with the job, (the ones you mentioned are) Personally I think your nit picking with the “exposure” of different jobs. I assume I understand you correctly; you’re talking about greater potential liability on select appliances. This is also part of the job. Buck up and take the good with the bad. Besides the big mistakes are why we have insurance. The small ones we learn, absorb and move on.
I too factor most of the same things into my hourly rates as you do into the flat rate book. This is what determines the hourly rate. That being said: Still looking for a clear advantage for the customer in flat rate pricing.
My still unwavering conclusion is: flat rate is a product marketed to service companies, at a reoccurring service charge which generates a living wage for those who created and maintain it. God Bless America! I wish I would have thought of it. But let’s not kid ourselves. The customer’s well being is not the driving force here…
No I actually love what I do and o have done many things. I don’t like when people who have no idea what it costs to have someone in their home to male a repair decides that a labor rate is to high. Its a very small percentage of people though. At that point its nice to pull a book out to show the Value of the service they just received.
@ Dean
I read half of you rather long but extremely well thought argument and I am just not swayed. I have 14 yrs exp as a tech. I am a new start up 1-17-12. I don’t want to be know as the cheep guy. There are already a couple of those and they lack luster. I know you claim a high degree of craftsmanship but you don’t in my opinion value you work enouph. Quality in anything comes at a more premium price. I want to offer the highest quality service but guess what I want ppl to pay for It. No I’m not looking to gouge or stick It’s good to be King to anyone. Far from It. I want to be independent and help others when I can. I like flat rate pricing. It allows me to be efficient and consistent. Again I will read the rest of your side but I think maybe there is two good ways to do things depending on the contractor and his market and so forth good luck
Matt,
Pulling out a book with the same price as the one you just gave them (which they already argued was too high) isn’t going to change anything. The customer doesn’t care what your book says. If you charge someone $129.00 to change a light bulb in a freezer, Or $300.00 to install a $20 thermostat, they’re going to feel robbed no matter what you show them.
If you think they don’t understand why a particular appliance cost so much to repair, try explaining it to them. But If you can justify either of those repair examples (actual charges from the flat rate book) and you’d have no trouble charging someone those prices I mentioned, then you and I (and the average customer) wont ever see eye to eye. Not only that, but when they call me next time because you overcharged them, you will never get them back… I PUT IN LIGHT BULBS FOR FREE and pick up five to ten more customers for that small gesture.
Unless you have a nice little pool of rich return customers who have too much money to care about VALUE, Flat rate will eventually piss off everyone you use it with. If your just looking for a quick one time sale, then show them the book and keep up the “shut up and pay up” attitude. However, If you want return customers, you better darn well start listening to the customer who tells you their point of view on VALUE.
Sure we have to make money, but once you have alienated yourself from your local market, what then? you gonna move?
No more money to be made where you live, cause there will be no more calls!
> Flat rate will eventually piss off everyone you use it with
I think this is an important point to consider, given we’ve entered the age of Yelp Reviews and Angies List, etc. A small gesture such as waiving a small item such as a light bulb might just tip a customer to feeling like they want to provide a positive online review.
I can’t imagine any flat rate book customer feeling so delighted by the final bill that they go online to write a glowing Yelp review.
Steve
Troy,
I agree with you. There are market places for both charging methods. However, the arguments in this forum, I think I can fairly summarize, are:
1) Is Flat rate the only way to charge fair prices without cheating the customer or yourself?
(There are many in this forum who agree the answer is NO. You and I are two of them.)
2) Is Flat rate really designed with the customer’s well being in mind?
(I say No Way, as do others here.)
Dean Landers feels he has made his case for Flat rate being the only fair way to provide service as a sustainable service company. I say he is just pushing the Flat rate product into our industry to make money, like any smart entrepreneur should do.. More power to him, I’m also suggesting he’s ABSOLUTELY incorrect to suggest you’ll not survive without it… Sounds a little desperate to me…
I will say one more time. When you get it you get it. Your not open to the point of view so why beat the dead horse? Your way works best for you so do it that way. Are you a liberal? Is there only one way to do something? You talk about Dean knowing his product and Mike you know your objection well. I’d say it would not be benefic for you to change anything. Ask your four workers if I can help you guys 10 more k per year would you guys want
this? I’m sure they would say no we want to be the low price leader. Everything is perception. And if my customers called and I told them that they were going to pay 62 an hour they will look for a 20 an ok ok this is dumb. O quit the thread. hour Guy. What do you charge? NothingWell how much per hour? No hourlyper hour.
MATT,
YOU: I will say one more time. When you get it you get it. Your not open to the point of view so why beat the dead horse?
ME: If you are referring to Dean’s point of view – No, I don’t agree that Flat rate is the only way to run a successful business… And PS, I think the DEAD HORSE is the one who believes in THEIR WAY OR THE HIGHWAY!
YOU: Your way works best for you so do it that way.
ME: I absolutely will, Thank you…
YOU: Are you a liberal?
ME: Ouch, that’s mean! Besides, have ya seen a lot of Liberal Capitalist lately???? (The answer is no by the way…)
YOU: Is there only one way to do something?
ME: No, this is my point. If you read this thread completely you would know this…
YOU: You talk about Dean knowing his product and Mike you know your objection well. I’d say it would not be benefic for you to change anything.
ME: My point exactly. I see I’ve gotten through to you. My long winded tendencies have finally paid off. I have bored you into seeing my side.
YOU: Ask your four workers if I can help you guys 10 more k per year would you guys want this? I’m sure they would say no we want to be the low price leader.
ME: I can’t be positive, but I think your suggesting my guys wouldn’t mind making another $10,000 annually. While you’re at it Matt, why don’t we agree they would like $20,000 more annually. Problem is still the same. “The extra money comes from the customers who feel over charged by the Flat rate companies” Me and the boys will just live within our means, be content with our current wages and the security of consistent employment, all due to our highly competitive prices in our market.
YOU: Everything is perception.
ME: Yup…
YOU: And if my customers called and I told them that they were going to pay 62 an hour they will look for a 20 an ok ok this is dumb.
ME: ??? Are you suggesting you don’t tell them your rates? I’m confused?
YOU: O quit the thread. hour Guy.
Me:???
YOU: What do you charge? NothingWell how much per hour? No hourlyper hour.
ME: If you asking my rates: Trip charges depends on distance to call. $25 to $65 from 0-100 mile radius. Hourly residential $45.00 / Hourly Commercial $55.00 / Thermal imaging hour $125.00 per hour on site / Thermal office reporting $75.00 per hour. I charge for time on site only, and only while I am expediting a repair. Clean-up, unless part of an install, is free and off the clock.
A local residential one hour repair minus parts will cost you $25+$45=$70.00 (I know! That’s a great price!) Would you like to schedule service for tomorrow, or would you prefer yet tonight.( Same price after hours.)
I run several of these call a day and make my money with volume instead of high prices. For example: One guy only 5 calls per day brings in $7000 a month in sales. And it’s more if there not all local. Are you suggesting 3 or 4 guys bringing in that much a month can’t support a viable, sustainable service company?
And just in case the IRS is reading this, those numbers are Hypothetical ONLY! 8o)
Have a nice day!
Mike,
You frustrate me with your assumptive statements. Let me correct some of your misunderstanding. I haven’t made any money on selling the flat rate guide in over four years. Not one penny! All of the writing I do and most of the speaking engagements are not paid. I do them at my own expense because I believe in the core of my being that it is the best for our industry. When I did make money on selling the guide it did not cover my expenses spent in promoting it. Again, I do it because it is good for our industry. There are a few people out there such as yourself that are determined to stick with what you think is a better way to run yoiur business. You are certainly entitled to do that. This is America and that one of the things that makes this country great.
I did make my case for flat rates and you have not been able to counter my points nor have you tried. You only state that I know my product well. Make your own defense of your practices and stop taking shots at flat rate pricing using inaccurate information. Go through the specific examples I raised and tell me how you handle those situations.
By the way check with your doctor, dentist. physical therapist, hospital, nursing home, auto mechanic, body shop, etc, etc, and see how they charge. Even lawyers are now developing flat rate charges for various services. Why? Because it makes sense all around!
Sadly you have made my point more clearly than I ever could have by providing the info on your hourtly charges – I can tell by the rates you have listed above that you can not be giving yourself or your staff any reasonable benefits such as health care or a retirement plan, nor can you pay competitive wages for your technical staff. . You can’t afford to! As I stated in an earlier blog with a review of your financial statements I could prove to you very specifically that you are cheating youirself AND your staff by undercharging for your services.
Steve,
Reality check – People want good service and are willig to pay fair prices for it.
Case in point:
My company has been honored with Angie’s List Super Service Award 3 out of the last four years. We’ve won Baltimore Magazines “Best of Baltimore” 14 times over the last 20 + years.
Dean,
Sorry, I’ve been very busy lately and haven’t had time to respond…
Congratulations on your many honors and awards. Obviously your customers perceive your service as a good value. Additionally I completely agree with your comment to Steve, as he will likely too. Who wouldn’t agree with that statement? However, the issue is flat rate over T&M not whether or not we all agree the customer wants a good deal?… This is a little obvious.
I feel like a broken record here but your original point, which has been the core of the debate for me, was (I’m paraphrasing) you can’t sustain a viable business charging by the hour, and you are cheating yourself, employees and the customer by doing so. Flat rate is the only way.
Forgive me if I seem increasingly irritated by your arrogance but GIVE IT A REST ALREADY! The job is done without flat rate all across the country every day. And yes, by successful companies. Besides, I never said flat rate didn’t have its market. As a matter of written record above, I give an example of where it would work quite well.
Matt Maguire Appliance Repair Tech suggests I quit kicking a dead horse… I have been waiting to see if either of you were going stop trying to bulldoze flat rate opponents or actually address the particular points made to both of you. YOU MOSTLY. (I think Matt has some problems flat rate can’t solve, and probably doesn’t like me much either for MY assumptive statements.) I tried to be candid yet tactful, but after he got offensive, I am no longer concerned with tact… I have little choice but to assume certain things about his situation because he too won’t answer specific points I pose to him. I’m done wishing him good luck on his retirement and instead wishing his customers good luck with his service.
Anyway Dean, your augments have only been designed to convinced others: to have more money in my pocket, and those of my employees, I have to charge more…
Excuse me for more candor but, NO KIDDING! Like I suggested to Matt, HOW MUCH IS ENOUGH? Wouldn’t we all like an extra 10 or 20,000 a year? The problem is getting the customer to provide it…
You will NEVER convince me that flat rate is the only way to do this. If times call for it, I can legitimately raise my rates and achieve the same increase to my bottom line you have with flat rate. The difference is; I can still maintain our promise to every customer that the repair price WE give them will be for their particular repair situation ONLY, and not the worst case scenario for all who might have that same problem. And a light bulb replacement won’t ever cost $129.00. (Just one more of many COUNTER POINTS I posted that you and Matt both choose to ignore).
There’s no difference than if I went to a customer’s house and said, “This job should only take 60 minutes, but it COULD take up to 90 so I will be charging you 90 regardless of how much time it ACTUALLY takes.” Explain that part of flat rate to a customer and see if they still prefer it.
Time and materials requires the customer pay ONLY for their job and not someone else’s. Let’s face it, when a competent technician is dispatched, most of the time-consuming variables in a repair are directly related to the individual customer. Appliance age and condition, location, proper or improper use, etc. If bolts are rusty, it’s likely due to one of those circumstances. Why shouldn’t that customer pay for the extra time it takes to get that hardware loose? The customer who takes care of their appliance, uses it correctly, replaces it when it gets old and decaying, should reap the benefits of a less expensive repair where those conditions don’t slow down a tech.
If I run into a 20 year old rusted refrigerator, buried in the corner of a mudroom, with duct tape holding the door closed, it’s likely going to take me longer to diagnose and repair it. Why shouldn’t they pay for whatever extra time it takes? They have chosen this location and detrimental environment. They are the worst case scenario the flat rate charges are based on. And if it takes even longer than allowed by that code, the tech is required to apply an addition code to cover the extra time.
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I spent 15 years billing from a flat rate book. I know how it works and what employers require, and regardless of how you describe the book’s INTENDED use, I don’t know a single company that would VOLUNTARILY stick to the original flat rate quoted if significant extra time was needed to complete a job.
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By the way: What is the reason you won’t directly respond to any of my points? I have posed specific questions and situations like those above which are real world and likely events, yet you insist on responding, on the offensive, with large generalities about me and suggest my company is DOOMED! (My word)
YOU POSTED: I did make my case for flat rates and you have not been able to counter my points nor have you tried.
IF YOU’RE GOING TO PERSUADE, YOU HAVE TO ALSO LISTEN.
My past comments to you, those on the 17th of this month in particular, are loaded with counter points. I’ve apologized for being long winded, but you should probably go back and absorb them completely instead of making statements that are inaccurate. It’s almost like your speaking to “THE ROOM”, instead of trying to change MY mind with answers to MY concerns. (I’m sure in your mind I’m a lost cause, so your still trying to convince anyone who might read this that I am wrong and have made your case). Repeating the same thing over and over again doesn’t constitute “you making your case”. I HAVE countered your points. You choose to ignore them. Specifically your two main claims of fairness to the customer and company sustainability…
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(RECAP FROM A RECENT POST TO YOU): “One FACT you hold among the highest, is the superior financial security and required assets assured the Service Company that uses the flat rate program. In addition you insist lettered trucks, parts inventory, insurance, phones, retirement packages etc, are all benefits secured by the implementation of the flat rate book. However…When reduced to a simple common sense observation, you can’t deny the following statement.
Flat rate customer’s pay more money for the same services as a T&M customer.
What other conclusion can you come to? 1 and 1 does not equal 3. I don’t see any third party benefactor in your equation, putting extra money into my bank account to pay for my employee benefits package. In fact the only third party involved happens to be YOU, who would cost me a percentage of my profits to pay for your flat rate book, its updates, and certainly its annual renewals. (END QUOTE)
———————————————————————————————–
What do you call that, if not a counter point, regardless of whether you personally still make money from it? Instead of answering that point, you correct my assumption that you profit from selling flat rate! (Which you admit you did, but don’t anymore) Thanks for responding to my point. Wait, NOPE I guess you eluded it again…
Q: WHY DO YOU INSIST THAT FLAT RATE IS THE ONLY VIABLE METHOD? Thousands of us make money without it every day! Stop suggesting I get rich at the hands of a flat rate monopoly. As I mentioned before, My Company is made sustainable by hard work, dedication, unbeatable rates, and by running a greater number of calls at those rates.
(Sidebar)
There was a Hamburger chain started in the Midwest called Hot & Now Hamburgers. My brother and I installed the equipment for more than 15 of these locations. Their business model was to base profit on quantity sold over price per unit. They sold a double cheese burger for 30% under what the big three sold them for. They had lines into the streets during lunch and dinner hours. They grew to 150 locations in less than two years on that Philosophy. It was so profitable that PepsiCo bought them out less than three years later. Unfortunately, PepsiCo wasted no time changing the business model to match the “KNOWN” burger joint model, and they eventually filed for bankruptcy. They looked like everyone else! (And don’t try to use a fast food menu as a successful example of flat rate cause that would look a little desperate)
I have partially integrated this into my business philosophy because of the success it brought the original owners. So far it is working. And I don’t look like my competition. I stand out among some pretty big boys around here. Again, YES I WORK HARDER FOR MY MONEY.
(Back to HVACR)
Whatever formula you used to conclude my rates are too low, obviously doesn’t apply to my market. If the sales numbers I suggested to Matt above say “unsustainable” to you, maybe you should consider trimming a little fat off your company.
Quality and fair prices increase business, Efficiency further increases revenue. (Increasing revenue by charging unfair prices, in my opinion, is the unsustainable practice)
I’m still waiting for you to justify the $129.00 light bulb, or how about $245.00 to replace a $15.00 hot surface igniter which takes less than 10 minutes to install. (My local charge for this repair is around $124.00) Cheap? No, we call it economical. Putting me out of business? Nope…
Now if you still want to debate me on my prices being too low, I will agree they are defiantly on the rock bottom side of the scale. Just quit telling me I can’t raise them without flat rate. I can, and would raise them if/when needed. Right now it’s the smart and compassionate thing to do in our current market and economy, and people will remember that when things are good. But the debate for me is not about my rates, it’s about your belief in ONLY flat rate.
And as far as YOU being frustrated with ME, Your “Assumptive statements” about MY Company and its sustainability would have caused many to get nasty with personal insults (like Matt calling me a liberal.) I’ll refrain from that kind of commentary. What I CAN’T let you get away with is ignoring the points made by those who oppose you all the while proclaiming you’ve HEARD no counter points. I’ve been to so many dealer conventions, seminars, training classes; all either interweaved with sales pitches and persuasive proponents of flat rate, or filled ENTIRELY with the subject. It’s pushed hard. And I’m always the guy with questions that never find direct answers. Seems oddly similar YOU also choose to not answer my direct questions and then suggest I never posed them?
You also suggest that I’ve misunderstood the point on “fortunes made” by those who created, maintain and sell the flat rate book. You DID make money on flat rate programs. And if you no longer do, I can only assume your version failed, or you sold the product rights to another party in the last four years. The point I was trying to restate was, flat rate proponents aren’t out to protect customers from unfair charges. They are out to make money selling their product.
Incidentally, if you choose to do something for free because you have conviction to do so, then I have all the respect in the world for people like you who try to pay it forward. But a large amount of money is being made providing flat rate programs. And they don’t have my customer’s best interest in mind! This is one of your original claims that set me off… The customer is not charged more fairly.
If I am mistaken about you profiting, than why aren’t you making money anymore? Is there a problem with the product? And if it’s now free, where can people get it? Whether I misunderstand the specifics of your financial position or not is irrelevant Dean. The point is big money is being made by those who sell flat rate programs. I can’t find a single program that STARTS under $2000.00, not including add-on data bases, multiple techs, support, updates, excel compatibility, etc. etc. etc. “Flat Rate Plus” starts at $2500.00 and goes way up from there. You know how much training can be done with the kind of money it takes to outfit a medium size service department with flat rate? Probably enough to school your “SIGNIFICANTLY SLOWER TECHS” and bring them up to speed!
If you don’t have any direct answers to my questions, or refuse to respond to my counter points, that’s your choice. But don’t pretend they don’t exist. They are legitimate concerns of the customer and should be legitimate concern of yours, if you truly care about fairness to them.
Maybe you should reconsidering your obtuse and narrow minded point of view, or take Matt’s advice and just drop it. I can at least concede that flat rate has its place. You seem unwilling or just incapable of accepting the reality that plenty of service companies will continue to operate successfully without it…
Mike,
I have tried to answer your questions and believe I have. I am sure you believe you have answered mine even though I don’t believe you have. It is quite obvious that neither of us is going to change the mind of the other so I am content to let the discussion between us rest.
Best wishes to you and your business.
That’s good Dean
Enjoy your rest… I will then respond to the “ROOM”.
DEAN’S FIRST QUESTION TO ME: I am curious what you consider to be a reasonable pay for a fully trained master technician. Would you share that number with me?
MY ANSWER: For me to answer this question (which I felt was barely relevant to the subject) Dean would have needed to give me his definition of MASTER TECHNICIAN. If he was referring to someone fresh out of school with a diploma that reads “Master Technician” on it, they wouldn’t stand a chance against most unaccredited guys in the field. And he knows that as well as I do… Furthermore, he will be expecting too much money and I wouldn’t hire him due to lack of on the job experience. However, If he was referring to a technician with about 8 to 10 years experience who can prove himself capable of handling the tasks he’s given; he should earn anywhere from $18 to $24 depending on the business’s location. $18 is closer to around here (Berne), and $24 is more what you might see 50 miles north of here in Fort Wayne.
DEAN’S SECOND QUESTION TO ME: … are you a one man operation?
MY ANSWER: No.
Those are the ONLY two questions Dean asked me in the entire post. My neglect in answer them shouldn’t have prevented him from answering mine. And one of them I thought was pretty well answered within the context of the conversation.
Dean may have forgotten, he came here to this post almost three years ago to defend flat rate. Steve Crossland was merely saying he was done with book rate venders because of the way they charge. Dean has since been confronted with questions about inherent problems with flat rate that are not so easy to brush off in a forum such as this. He is probably use to a verbal public forum where he can side step the hard questions and move on to the easy ones. Here, Instead of answering the negative points, he has spent the whole of this post evading direct responses to specific legitimate questions about negative aspects of Flat Rate. Here are some again…
Q1. How is flat rate fair to the light bulb customer, HSI customer, Garbage disposal customer and Thermostat customer? (All real world examples given in the post)
Q2. Explain how so many companies still survive on T&M, if Flat Rate is the only way to be fair to both the customer and yourself?
Q3. How will Flat rate help Matt Maguire, Appliance Repair Tech
———————————————-
Here are some I will answer:
(Q) How is a service company assured sustainability using the flat rate book?
(A) We’ll it’s not assured, but you make a lot more money when you charge all your customers the worst case scenario for any given repair, when only a small fraction of them have circumstances that warrant it. The rest of the money you overcharged all the other customers (who’s appliances did not require extreme measures) you keep!!! (Some might call it an insurance policy on your “significantly slower techs”) No longer will you have to worry about how slow some of them are. With Flat Rate, the customer’s bill is already inflated to cover that.
NOTE: Dean has the whit to turn this principal negative aspect of Flat Rate into a selling point!
DEAN LANDERS May 6th 2009, QUOTE “the customer is protected from unforeseen issues such as problems that are hard to pinpoint, poor manufacturer electrical diagrams and schematics, poor or non-existent technical support from some manufacturers, products that are difficult to get apart due to rust, corrosion, installation complications, hidden screw locations, and a myriad of other potential time delays in completing a diagnosis or repair” END QUOTE.
(Q) WHAT ABOUT THE CUSTOMER WHO DOESN’T NEED THAT PROTECTION? Wouldn’t they choose the cheaper bill which accurately represents the time spent on THEIR appliance instead of the maximum time a tech could spend on someone else’s? Wouldn’t a customer feel unfairly charged if they knew the real reason her bill is so high. Why can’t Mrs. Johnson just pay for a diagnosis, then (if she chooses the repair) a fair price for the part and for the time it actually took to repair HER appliance.
(A) No Mrs. Johnson, you perception of value is IRRELEVANT says the flat rate guy! You must pay for it anyway. It says so in the book.
(Q) Won’t customers notice the T & M guys charge less for the same quality for service? How do you stay competitive in a market where there are T & M guys who charge more fairly?
(A) By relying on wealthy customers who have the means to ignore such differences, the loyalty of your existing customer base who won’t question your prices, telling half truths about Flat Rate to those who do question them, and hope the T & M guy in town is convinced by the flat rate guys to switch over to flat rate.
(Q) Why can’t a company survive using T & M?
(A) Sorry I can’t answer this one. But neither can Dean…
I think there are definitely advantages to book rate for the company that uses it but I have learned a lot about how it works from the customers view also. I am a stay at home mom and I make the repair calls when something breaks. It’s obvious to me the book rate is primarily for the benefit of the repair men. Only in the rare instance that things turn bad on a repair call does it protect the customer from huge over charges. In my mother’s case however this is not true.
My mother had a part replaced in the back of her freezer. The repair man gave her a price from his repair price book and said it will not go over that price no matter what. She didn’t know how he was so sure what the problem was without checking over the refrigerator, but trusted he knew what he was doing. He spent a long time trying to get the back panel out of the freezer and finally had to bend it to get it out saying it was a common problem with GE’s. After replacing the part, which he correctly diagnosed and had in his van, he told her they would order a new back panel at no charge to her. Her refrigerator was only a couple years old so she was upset but satisfied with the offer, understanding that sometimes things go wrong. A few days later he returned to remove the damaged panel and install the new panel. This time he had no trouble taking out the panel as if he had learned the right way to do it which suggested to her it wasn’t a design flaw at all. When he gave her the bill it was higher than he had promised. He explained to her that the extra time it took to get out the original panel was not part of the original price because it was a design flaw in the unit which he could not anticipate. Confused because he said it was a common problem, she reluctantly paid the bill and later called the repair companies office. My mother has never raised her voice in her life so I know she was polite with them. They were rude and told her there was no justification for a refund or credit because they were not responsible for the way GE made their products, and she should be happy they replaced the back panel for free and didn’t charge her for a return trip. They made no money on the call and couldn’t “lose” money on it. This doesn’t convince me that book rate is for customer protection at all. They used the book rate to justify the extra charges even after she was quoted a price. Mr. Landers obviously believe in his book rate concept, but after hearing all the arguments for and against it, I will find a trustworthy company that charges me fairly for my repair and not the worst it could be. My mother would have paid the same if the repair man had been hourly, and she would have been ok with that. Yes a corrupt company will be corrupt either way, but an hour will always be an hour and they can’t charge you more than the time they spend at the rate they tell you. For me I’ll take my chances with fair and hourly rates. Someone who goes by what’s fair and not what a book dictates they charge, even if sometimes I pay for extra time due to my type and brand of appliance. I haven’t paid much attention to which way repair companies charged. I know now to look for hourly. If I want appliance insurance, I’ll buy it.
Thank you Mr. Crosland,
Marti