Flat Rate Tune-Up
Flat rate pricing is rapidly becoming the universal standard for pricing service and repair jobs. However, what I see happening in many businesses is complacency, a stagnant attitude toward this powerful business management tool.
It's not enough to simply switch to flat rate pricing, get a pricing manual, hand it out to the team of technicians and assume your troubles are over. It doesn't work that way. The pricing activities of a service and repair business are the key to its profitability, but there is more value from a flat rate pricing system than just the way job prices are set.
It seems so foolproof that we sometimes ignore it, adopting a “set it and forget it” attitude. All systems succeed better if they are continually improved and updated, particularly flat rate pricing.
There are many actions you can take to update and improve your flat rate pricing. One of the first I recommend is called “Operation Cleanup.” What it consists of is a review of your flat rate manuals - a detailed review.
Begin by looking at every task in the book and apply the following criteria to see if your book is what you need to serve you in today's market, in your community and with the current economy.
The first action is to look for jobs that are never or rarely performed. If your technicians don't complete jobs that are in your book over a couple years, take them out. Some jobs may never have been used or, with changing technology, they have become obsolete.
Keep the pricing manual current and streamlined for technicians. The manual should be viewed as critical in the technician's array of tools and equipment to complete the job.
The customers need an up-to-date book as much as the technician. They want to see their job in the book. If it's not there, your technician is back in the dark ages of pricing, fighting the old battles that test the customer's patience and trust. Back to time and materials pricing.
Often the jobs your technicians perform frequently may take longer or less time to complete than your original calculations produced. The time computations, including difficulty and learning curve for some new jobs, directly affect your profitability. So it's important to make certain the computations that are the basis for your flat rate manual are both accurate and realistic.
Your computer system should be able to give you the details of each job: time, costs, actual materials used, difficulty of completion, etc. Don't leave money on the table.
At the same time, if you have jobs that have been routinely completed faster and with fewer problems than expected, it is only fair that those jobs still accurately reflect the time and costs associated with them.
The specific items you need to look at may include materials. If the price increases, add the new prices in your flat rate computations. Another area worth reviewing is the markup system itself. We help people all the time with this sort of question. For example, you may want to get to a sliding scale instead of a fixed percentage markup, as in a standard retail business.
Of course, the labor involved may be an issue to look at more closely, too. Carefully scrutinize all the elements that make up your final price to the consumer. And do it often. Every time a pricing factor changes or every financial quarter, as you accumulate data on jobs, update your calculations.
Analyze Add-OnsTasks are related to other tasks. What may be a separate task today may work as an add-on task tomorrow, and what is an add-on can be a main task also. Review the combinations of tasks and make sure the add-ons are appropriate and up-to-date. Customer needs and desires change.
Sometimes, the text explaining the job or the add-on tasks needs to be rewritten. The descriptions can be clearer and more detailed, or more definitive so the customer understands them better.
I have seen inadequate task descriptions that fail to convey a good description of the job the customer needs. Job descriptions, combinations of tasks and add-ons are significant because they can make a difference in the customer's probability of accepting the job.
In other words, their willingness to do business with your company could be based on how the jobs are presented, both by the technician and by the flat rate manual.
You have absolute control over that manual, so you can make the adjustments necessary to make it work for you.