46 BUSINESS AND TRAINING
Do you charge by the job , or by the hour ?
Plumbing Africa found this online article by Plumber in Wisconsin , US , interesting , as this debate still rages in South Africa , though not quite as publicly as this one !
Flat rate and hourly billing each have their proponents , but only you can decide what ’ s right for your business .
Want to see a fight among plumbers ? Start a rhetorical cage match that pits flat rate billing against charging by the hour .
Some contractors swear by flat rate pricing : it ’ s predictable , it lets you tell the customer upfront what the job will cost , and it gives you and your crews an incentive to work efficiently .
Others insist that by the hour ( or some other time increment ) is the only way to bill . It fairly recoups your real costs and it ensures consistent profits ( assuming a rationally structured rate , of course ).
And each approach has supporters only too happy to tell you why their method is fairer to everyone .
“ Flat rate pricing is better for the company and for the customer ,” says Brandon Simpson , owner of Simpson Plumbing in Tracy , California .
Jeff Paquet , owner / operator of Gas Man , an HVAC contractor in Ottawa , Canada , disagrees , “ While flat fee pricing seems ideal on the surface , it can actually lead to sloppy work from the contractor to get the job done as quickly as possible ,” he says .
Hourly billing boosters “ In the service business , pricing comes from years of experience and hard lessons learnt ,” says Mark Vice , coowner of Fayette Drain and Sewer in Fayette , Alabama . “ From my experience , 80 – 90 % of people want to know , ‘ What is this going to cost me when you are finished ?’”
That doesn ’ t automatically dictate flat rate pricing , though . “ I like to quote jobs by the day or half a day , and if equipment is needed or not ,” Vice says — in short , an hourly system , although in four- or eight-hour increments .
That ’ s the best way to capture fixed costs , he contends , especially for labour . “ At the end of the day , my employees need eight hours , and I have to pay them .”
Adds Paquet , “ As long as you have confidence in the ethics of the contractor , the hourly rate is generally the best option to ensure the work is done properly with attention to detail .”
Jason Roberts represents My Handyman Services , a broker for home improvement trades , including plumbing , in London , England . It bills all its work by the half-hour — a one-hour minimum and then half-hour increments after that — and posts its rates on its website .
“ The issue with charging per job is that sometimes even if the job is complicated , the handyman may complete the task , let ’ s say , in one hour ,” says Roberts . “ Some clients might say , ‘ He charged me so much and he was here only one hour !’”
Customers billed by the job “ believe that they have done you a favour by giving you some work ,” he finds , “ so they ’ ll push for return favours in the form of free add-ons : ‘ While you are here could you please fix this pipe as well ?’”
Flat rate supporters Bill Sanders has some pretty strong words on the other side of the debate .
“ Hourly billing is fundamentally unethical ,” argues Sanders , a San Francisco business consultant whose clients include plumbing contractors . “ It puts the customer and the contractor at odds even before the job starts ,” he says , because an hourly paid contractor “ is incentivised to stay longer .” Flat rates allow customers to decide on their investment upfront and “ realigns the interest of both parties .”
One Sanders client , a plumber , scored higher profitability and market penetration after implementing flat rate pricing ( before Sanders began working with the firm ).
March 2017 Volume 23 I Number 1 www . plumbingafrica . co . za