More On Flat Rate DebateI read the letters in the September issue regarding the flat rate point/counterpoint. I have a unique background in plumbing as I have managed companies that have and have not used flat rate pricing.
Initially I thought it was ironic how both of you could be so right and yet so wrong in the same article. I have read Jim's articles over the years and feel I know his opinion pretty well on this topic.
Obviously, Jim is whole-heartedly in favor of a national movement to take the plumbing trade flat rate on the service side of our industry. I think deep down even he would admit it would be tough to flat rate new construction although some have been doing it successfully for years.
Ken, it seems, would like to portray flat rate pricing as some sort of boogey man and blame it for all the problems of our industry.
The problem I have with Jim's counterpoint is he doesn't concede the fact that there is greater room for price gouging in the flat rate system, as it isn't a system that can be easily deciphered by the public.
I also believe Jim places way too much emphasis on flat rate as the ultimate problem-solver financially for any company when he should be focusing on cost analysis and tracking. Once a company realizes its cost of doing business, picking a pricing structure is no different than choosing a tool from your toolbox. The flat rate system is a wonderful tool, which is easily taught, but it is only a tool.
On the other hand, Ken believes flat rate is a major downfall of the plumbing industry in general. I am sorry to tell Ken that flat rate pricing already has established itself as a part of our way of life. Isn't it ironic how when you go to the grocery store you have trouble finding two steaks that cost the same, yet every time you go to your favorite steakhouse it costs $19.95 for a steak? Is that fair? In my opinion it's absolutely fair if you sit down and buy a steak.
I would put Ken in the same category as the plumber 30 years ago who felt the industry was going straight down the tubes due to this new fangled PVC crap, or the plumber 20 years ago who thought drain cleaning was "beneath them" and wouldn't touch a drain machine. Trades evolve, sometimes painfully, and some of the biggest critics of change are people who don't want to change or don't understand the new technology.
The flat rate system is not dishonest in any way. The problem is the dishonest people who use it.
As misguided as Ken is in some respects, I do agree with him in others. I think he is right in his belief that flat rate pricing is not the salvation of the plumbing industry. Companies are succeeding every day, 90 percent of them are still using the tried-and-true T&M method by Jim's own admission. Why? Because they understand their costs.
How they dress up and present their prices to the public is incidental to what the prices actually are. If a company is losing money because they haven't grasped their cost of doing business under the T&M method of pricing, I will guarantee you they will go broke going to flat rate. Any responsible salesman of a flat rate system will tell you this.
So what do we as an industry do? In my opinion we spend a lot more time figuring out what we should responsibly charge, and a lot less time dissecting how we charge it.
Bryan L. Flessner
The unlearned, and those who refuse to learn, are not satisfied with following their own paths. They insist on threatening others. I am so tired of the term "flat rape."
Competent contractors are trying to make a decent living while serving the public. When was the last time you got a haircut using T&M? How about a filling from your dentist? Ask the kid at McDonalds to give you a T&M bill on your burger ("I want a breakdown, and how much for that pickle!!!").
Our customers know in advance what it will cost.
If we have contractors who still want to use T&M, fine. I do not condemn them. I wish they would not condemn us.
Richard E. Fertel
Bornstein Sons Inc.
In rebuttal to the pro-T&M letters you printed in your November issue, let's say your hourly rate is $50 an hour. It takes you 15 minutes labor to change a wax ring and 29 cents for bowl wax. If I divide 4 into $50, I come up with $12.50 and 29 cents for material and tax. Now let's say you get "proficient" and you can do the task in half the time. This means you get $6.25 labor and 29 cents for material and tax.
Now, factor in a "call back." The bowl is cracked and the homeowner is complaining that you worked on it last. To me, this is like shooting myself in the foot. Would you lift someone's toilet for $6.54? Bologna!
Only a nut would work in a trade for years and make that kind of money. T&M is unconscionable. As for Massachusetts outlawing "flate rate," the next time my toilet leaks, I'll call the judge. Contractors believe in contracting. This is what we do.
R. Butler Plumbing
Chino Valley, Ariz.
Why is charging the correct hourly rate and telling the customer up front about it a crime? Why drag industry names along with it claiming they promote flat "rape?" Maybe they're just upset that the flat rate companies are making more money than they are! In most cases they are.
What is so wrong with charging a uniform price, no matter which technician performs the work? The auto industry does it proudly. Every industry has a dishonest company among them. Does that mean the entire flat rate pricing concept is corrupt?
If contractors would just take a few hours out of their busy, busy, busy day and evaluate their break-even per hour, they might realize that most owners are working for less than average wages.
After traveling more than 100,000 miles a year helping contractors with their businesses, you wonder why some contractors even wake up to come to work. Isn't it about time that our industry elevates itself professionally along with charging the correct hourly rate?
Whether you stick to the old T&M method of pricing or step up to flat rate, charge the proper price for your services. Don't use flat rate to disguise your correct hourly rate. Use it to tell the client up front what they're about to spend and get their approval.
Maio Success Systems Inc.
San Diego, Calif.
Value YourselfI find Frank Blau's columns very interesting and informative. My company was very skeptical about flat rate pricing. We thought it seemed way over priced. Although we still do service using T&M, many of us in the company would like to switch to flat rate. Unfortunately, we are a family business and change does not come easily.
We do, however, realize that we have to make money and are the highest-priced company in the area. But plumbers are their own worst enemies. The business is cutthroat. We have been in business for 43 years, many of our licensed plumbers and HVAC techs have been with us for 15 years or more, but potential customers can't understand why our labor rates are higher than the guy up the street who just started up on his own.
Our technicians don't have to go very far to substantially increase their wages so we compensate them as highly as we can. Some customers have a hard time understanding what benefits an experienced tech can bring to their job.
I don't begrudge any person the chance to start his or her own business. What I don't understand is why they don't value themselves more highly? Why don't they realize if they charge more, they can work less? Customers don't think plumbers should earn high wages in spite of the school and training they need to become licensed. This is a lesson my father, who founded our business, never seemed to understand.
We live in a small community, and he felt we should do all the work at whatever price it took to get the job. We don't feel that way any more. Now, we will do any job at our price - as long as it's legal.
Name withheld upon request