Why Flat Rate Doesn’t Work
The premise of flat rate is the notion that the price of a job can be quoted before a job is started. I believe you cannot know what the problem is — nor the solution — until frequently lengthy and substantial diagnostic routines and test dynamics and data are completed and gathered.
Since the time and effort required to find the problem of most service calls can vary wildly — and frequently is more time consuming than changing the offending part(s) — the suggestion of charging diagnostic fees is, in fact, guesswork.
No two jobs are ever alike. “One size fits all” is the basis of the flat-rate price books. Each job is unique and should be billed based upon the actual labor involved.
The Arguments Against Flat RateIn a nutshell, here are my viewpoints on flat-rate pricing:
The “Evolution” Of Flat RateImplementing flat-rate pricing frequently results in the following evolution:
Flat-rate advocates suggest time and material pricing are old-fashioned and that flat rate is new and modern. Flat rate has been around since the five-cent ferry ride to New York City came into being a century ago, making it neither new nor modern.
The method of pricing is what is suspect. T&M is based on the notion that the client has the right to know what he is paying for. Flat rate is based on the notion that if the customer knew what the labor rate actually was, he would not accept it.
The point now is — and has always been — that customers have the right to know what the labor and the materials charges are, as well as all the details in between. And the consumer protection laws of many states demand that they do.
Ken Secor is CEO of Palmer Heating LLC, a design-build wet heat service and installation contractor in Rahway, N.J.
What Do You Think?
Is flat rate the way to go, or is time and materials the best way to price a repair? Let us know which method your company uses. Drop us a line at The News, P.O. Box 2600, Troy, MI 48007. Letters may be sent to LetterstoTheNews@bnp.com or faxed to 248-362-0317.
Publication date: 03/24/2003