Imagine going to your local grocery store to purchase some groceries, but nothing on the shelves is priced. When you go to check out, the cashier has to call the manager and ask him the cost of every single item in your cart. Sounds like a nightmare, right? This type of system wouldn’t last very long because of the lengthy wait time for the customer and the potential for mistakes. We all know that in retail stores, everything is priced to cover the material, labor, and overhead to produce it.
To run a successful electrical service and repair business, it’s imperative that you price all your tasks. In other words, create a flat-rate pricing program for your business. It’s the best thing you’ll ever do for your service and repair division. In addition, your electricians will find it to be the best system to work with.
In my experience, the customer, the employee, and the service company should all be 100% satisfied with each and every project. If all of these three groups are completely happy, then you have a successful electrical company.
Let’s break this concept down further to see what effect a flat-rate pricing model has on these three groups.
Customer — Our society is accustomed to paying a set price for almost everything. Whether we’re purchasing groceries, a new golf club, a fishing rod, or even a flat-screen TV, we all pay a predetermined price. Therefore, your customers are already used to paying a flat rate for items they either want or need. Electrical work should be no different. For some reason, however, we have been trained for years to bill our customers on a time and material pricing model. If we charge the customer an hourly rate, the final price depends on the speed of the employees. Speed the technician up, and the company loses. Slow the technician down, and the customer loses. This is the fallacy of the time and material system. Someone will always lose. The best situation for the customer is set or flat-rate pricing because, regardless of how much time is spent on the electrical task, the cost is always the same.
Technician — If the technician already has everything priced, he or she can give the customer a projected total immediately for a service and repair task. No call to the office to get pricing is required. The technician can start the work immediately without the customer waiting on a quote from the office. The technician doesn’t have to guess the number of hours or turn in the paperwork after the fact. Technicians are less stressed because the pricing is already set by the office. Moreover, technicians who work for companies that use flat-rate pricing tend to make more money, because these companies are generally more efficiently operated and can offer more pay to their technicians through hourly or performance-based pay structures.
Company — Extensive thought, time, and effort needs to be put into the pricing for this type of system to work effectively. Each task the company performs in the field needs to be put into book form — either print or electronically. Next, you need to assign material and labor costs to each task. Each company has different costs associated with electrical service and repair, so there are no exact rules when it comes to pricing. However, once pricing is set, you can monitor the results and tweak items if necessary.
I recommend reviewing pricing every three months and updating pricing at least once a year. Ask for feedback from your technicians regarding labor times and materials used. These people have great insight on what really happens in the field. A bonus factor is the company gets paid when services are provided, which is possible because the technician can charge and collect payment while still on site.
I cannot stress enough how important it is to pre-price your electrical tasks. As a business owner, I find it extremely beneficial. We run thousands of calls each year, and if we did not flat-rate price our tasks, our call volume back to the office would be astronomical and time-consuming. Give this approach a try. I bet that once you do, you’ll never go back to time and material pricing again.
Wise holds an A.S. degree in Electrical Engineering and is licensed in N.C., S.C., and Va. In addition to being a college electrical instructor, N.C.-licensed real estate broker and former NASCAR race car driver, Wise owns and operates Mister Sparky in Charlotte and Cherryville, N.C. He can be reached at [email protected].
