Comments on: “Flat Rate” HVAC & Plumbing Companies

By: ProTech

ProTech — Thu, 07 Jan 2010 00:35:06 +0000

Hello Tom,

Thank you for your thoughts on HVAC business, in general. You are spot on with your comment that most contractors do not know what their costs are. Most plumbing and/or HVAC businesses are small shops and most are not good at the financial end.

I am starting a series of seminars on HVAC cost-of-doing-business this year. The fact that so little is known about the financial end of the business by the majority of those in it is a big problem for the trade as a whole. This dilemma suppresses the earning potential of everyone straight up the distribution ladder and creates a huge misunderstanding on the part of the consumer of what is a reasonable charge.

I have been in HVAC sales for 22 years and have developed a very easy to use job estimating system that accounts for all of the costs that you cited in your succinct definition of the costs that tradesmen do not have a good handle on. Soon, I will be selling this system on my web site. This system will show estimated gross profit at the bottom, then allows the job to be costed out at completion so deviation between the actual numbers and the estimated ones will be easily demonstrated.

There are honest and dishonest people in business, no matter what method is used to account for charges for service.

Thanks again for commenting on my blog, and feel free to return anytime.

Best,
John Rocheleau

By: Tom Vincent

Tom Vincent — Wed, 06 Jan 2010 21:40:42 +0000

I agree with Eddie. Flat rate works well if set up honestly. It is, as a rule no more profitable than T&M if you include your true cost of doing business. The fact is most contractors do not know what the “true cost of doing business” is. Most of the hundreds of contractors I have worked with set their labor rate at “what everyone else charges.” They don’t really apply the overhead, to each hour of billable time. If you calculate your true over head, add the fully loaded labor cost, and things like profit, warranty reserves, return on investment, you can get a good idea where to start. You also need to look at typical parts sales as well. It makes no difference if you use flat rate, or T&M to recoup your cost, pay your labor, and make a profit.

There are great contractors and great marketers… there are just not many that do both well. When you have a shop that hires great techs, invests in keeping them trained, pays them what they are worth, and has integrity with the customers, T&M and flat rate works equally well. Keep in mind however that you could have lower flat rate prices (compared to T&M) because you are removing the overhead cost of doing the bills.

By: Eddie

Eddie — Fri, 18 Dec 2009 01:47:56 +0000

The problem is lack morals not Flat Rate, I know many companies that rip people off with (T&M) method as well. Used in a honest way, Flat rate is fair for the customer too. Consider, a average tech is only 50% productive. So 1/2 of his 8 hour day non-billable time. A company has to either deduct that from the tech or charge the customer. I personally think that a “book rate” between $125 to $175, should work in most areas in the US. Maybe a little more in large cities.
The commission on repair sells is the part that make a tech rip of the customer. That being said, it can even work if the owner of the company sets high standards of honesty. “FREE MARKET” means you can charge what ever someone will pay you. HVAC tech are smart people and deserve a high wage. We had a copier repair man come to the office the other day and he charged $120 hour, for a copier. He did the job and I paid it with out question. Anyone who has ever ran a business know, is a company fails to make a profit, you have no job.

I agree, you see many crooks in the HVAC and plumbing industry, feel the same way everytime I get my cars worked on, but the problem is not how they calculate the charge. It is a core moral fault.

Let’s just go out and prove, HVAC guys can be trusted!

By: Roger Kennard

Roger Kennard — Sat, 05 Dec 2009 23:23:36 +0000

John that was a great blog and it reminds me of myself. I dont have the years in that you have but i still agree with fair pricing. I tried working for a company doing service work and man i just couldnt do it. When I first started plumbing i learned from the ground up. You know ground works, roughin, finals, gas. I became good at troubleshooting problems with different problems. I thought this was good but when i was sent on a call back and the price that was charged I felt horrible. I then told the owner that i would not go on service calls any more because im to honest to do them. I didnt get fired but i guess it let them know what kinda guy I was. Since the economy is not so good im not plumbing anymore I have a chance to go to the flat rate companys but i just cant bring myself to do that. Like I said great article and hope you do well . Roger

By: Flat Rate Pricing Beware | ASKBOYD | HVAC Specialist | Heating & Air Conditioning Advice

Thu, 12 Jun 2008 06:32:10 +0000

[...] Below is a reprint of John’s article. Please make sure and visit John’s blog. [...]

By: Boyd

Boyd — Mon, 02 Jun 2008 18:29:06 +0000

John, I loved this article. At some point I would like to discuss using your article on my website, with whatever back-links you want. Your article on Flat Rate cuts right through the meat of the subject. I posted an article on http://www.askboyd.com that was actually a conversation taken from HVAC-TALK explaining how a homeowner had been charged about $500 for 6# of R-22. The final point was that this equated to about $400 an hour. I have a son who just became a nuerologist and he doesn’t make that kind of money. It’s crazy.

I have a similar background to you, except I came from wholesale distribution and have colected horror stories about less then honest HVAC contractors for years. It is frustrating when you are one of the good guys and then you see the scum with the big flashy ad in the paper or yellow pages taking advantage of homeowners who are in a crisis. Not unlike yourself, there was a day not too long ago that I just snapped, and had to let it all out.

I am going to write an article/review for http://www.askboyd.com complementing your site for it’s dead on advice and integrity.

Thanks again for what you do.

By: ProTech

ProTech — Sun, 11 May 2008 21:39:47 +0000

Dear CBPH Owner,

Thank you for posting a comment on my blog. Your question is a good one, and I would say, in short, you should charge your normal hourly rate for all time associated with a service call, as well as include it in your estimates, period. As I say on my blog about flat rate, the time you spend traveling to your customer is not time that you are spending on yourself, thus you must charge them for it. If they complain, then you have not convinced them (or yourself, or both) that you are worth it. The business that we are in is the “time business”, and you just happen to be able to fix plumbing and hvac equipment while you are expending time – time getting there and back, and time there – so that you can provide your customer with some comfort and peace of mind, which is why you need to market yourself a bit better…that is, if you feel you shouldn’t be charging them for “travel costs”. Remember, you are not doing your business for practice then someday charge more. There is no practice once you’ve decided to go into business – this is the main act! Start charging for all of your time, commencing with the very next call, or estimate, and be prepared to sell yourself, not defend yourself. Time should be an asset for you, not a liability! Time = $. Spray paint that on your dashboard, but don’t speed, as that costs $.

If you have any more questions, I’d be happy to answer them, anytime!

Peace and good fortune to you.

John Rocheleau
603-817-2754

By: Bill Hatter

Bill Hatter — Sat, 10 May 2008 17:32:54 +0000

Flat rate stinks but what do we do to cover cost to and from jobs