Service Department Pricing
Tips
As a contractor, you need to know that NOTHING will kill you
faster than labor – especially service department labor. You need to make
absolutely certain that your service department’s labor rate is appropriate for
your company.
You can purchase an excellent little software program to do
this for less than one hundred bucks. Visit http://www.easystreetinc.com/Products/Software/EasyLaborCalc/
for details. This program should have you pricing labor correctly in minutes.
Most contractors loose money on service. They can’t charge enough because society is unwilling (not unable) to pay them what they are worth. Our society is built on flat rate pricing. T&M is very rare; except for our industry.
When you advertise an hourly rate, you invite skepticism and criticism. How many of your customers actually make what you charge per hour? They think your hourly fee is a rip-off! You encourage the consumer to shop for a cheaper rate. Consumers do not understand our business and are not interested in us teaching them about it. They do not realize that there is more to service work than a cheap price.
When you flat rate your service work, you advertise a diagnostic fee, not an hourly rate. This small fee covers the cost to send a qualified technician to their home or business, determine the problem, and quote the exact cost of the repairs. Repair prices are thoroughly covered in our flat rate price books (sold in this catalog).
It is much easier to quote a diagnostic fee than the old time and material song-and-dance. Flat rate pricing is safer for the customer. With flat rate pricing the customer only risks the cost of the diagnostic process. The customer always knows the cost of the work before the work begins. With T&M, the customer finds out the final price after the work has been done. At that point, the technician gives them no choice but to pay up!
If the customer is comfortable with the technician, they will approve the work about 98% of the time. A flat rate price is mush easier to accept than the risk of a time and material job. How many installations have you sold for time and materials?
Flat rate pricing allows you to increase your prices (gross profit margins) while actually increasing customer satisfaction. That’s a fact! Imagine going to a restaurant and being quoted an hourly rate for a steak and potato dinner. One night you may be asked to pay a little more because the chief was having an off night or perhaps didn’t have the right tools with him. That would be ridiculous. Consumers will gladly pay more for a guaranteed price.
Easy Street Inc. (www.flatratesystems.com) is the nation’s number one supplier of flat rate pricing systems. Their systems are in use all over the country and used by company with a few employees to a few hundred. They offer easy-to-use software that allows you to pricing all of the books you want for a fixed cost. They also offer professionally designed customized flat rate books. They do all of the work for you.
Ø Do not charge drive time and not have service call fees.
Ø Charge more for the first 30 minutes.
Ø Always round your labor time up – not down.
Ø Charge labor in five-minute increments. Create a labor charges chart.
Ø Enter your “time out” only after you have finished all work including cleanup and paper work.
Ø Charge more for parts. Use a multilevel table with multipliers from 6.0 to 1.75. Your parts multiplier table should have no less that 20 multipliers.
Ø Be careful with discounts. If you do not have a 10% discount, do not offer senior citizens or preferred customers a 10% to 15% discount. Hint: Your net profit should be 30% prior to discounting.
Better
yet, quit using time and materials. It is inherently flawed. Contact Easy
Street, Inc. toll free at 877-232-7978 and invest in one of their flat rate
pricing solutions.