Why Use Flat Rate Pricing: The Benefits You Need to Know

If your home services business is considering making the switch to flat rate pricing, you should know the cold, hard facts before you make any concrete decisions, starting with what flat rate pricing actually is.

Flat rate pricing means offering your customers a set price for a specific job, regardless of the number of hours it took to complete. When priced correctly, a single, fixed price will cover the direct costs for time and materials and the indirect costs of overhead expenses, while still giving you a healthy profit.

The key is to price your service labor rate correctly, and if you need help with this, we recommend downloading our Pricing for Profit eBook where we help you understand your business financials and show you how to calculate your breakeven point.

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Several Industries Can Benefit from Flat Rate

Multiple industries can benefit from a flat rate pricing model, especially those across the plumbing, HVAC, and electrical industries. And while making the move away from time and materials (T&M) pricing can be scary, you should consider following about flat rate pricing:

It’s Fair to Your Customers AND Your Company

It may come as a surprise, but 92% of homeowners actually prefer upfront flat rate pricing, yet less than 30% of home services contractors offer it! Just think about it; consumers are used to flat rate.

Whether it’s getting their car washed, going to the movies, or ordering a pizza, the average consumer sees upfront flat rate pricing every day! But with T&M pricing, your customer’s total bill is always surprise to them, with the tech’s productivity having a direct effect on what the customer pays. 

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For example: a slower, less experienced technician will likely take more time to complete a job than would a speedy, seasoned tech. And because T&M pricing has your customer paying an hourly labor rate, their bill gets higher for every extra minute your techs spend on the job!  So, your company will certainly get paid more when a job takes more hours, but it’s not so fair to your customer, is it?

On the other hand, your company probably pays less skilled techs a lower wage than those that are more experienced. This means that when send your faster techs out on a service call, you end up with less profit because your efficient tech costs more and bills less. This is not so fair to your company.

It’s a fact that customers don’t like surprises. Instead of waiting until the job is complete to disclose the price, you can leverage flat rate pricing to offer homeowners an all-inclusive price before you start any work. This way, they’ll know what to expect and won’t have to anxiously watch the clock when a tech visits their home or guess what the final price will be.

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It Puts You in the Driver’s Seat

Flat rate pricing will give you the control you need to ensure you’re covering costs while still remaining profitable. And since your customer agrees to the price up front with flat rate pricing, you’ll see fewer payment disputes arise when it’s time to collect payment at the end of a job. That’s right! You can skip the banter over whether you spent 20 minutes or 30 minutes on the job and get straight to being paid. 

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Another bonus: that time you’d normally spend disputing pricing with homeowners can now be spent moving onto your next service call, allowing you to support more customers.

It’s Easy to Maintain

Maintaining a flat rate price book isn’t a chore when you leave it to the professionals. In fact, Profit Rhino merged with Callahan Roach, a flat rate staple with over 30 years of industry experience creating accurate price books, to bring contractors the best possible guides for flat rate pricing.

With a company like Profit Rhino, you’ll gain access to a digital flat rate price book that updates pricing quarterly, ensuring you always have up to date part cost and you are maintaining your margins. Plus, you can easily customize tasks and terminology in your price book to tailor the system to your unique home services business.

Whether you’re in the HVAC, plumbing or electrical industry, you can rest assured that your price book is in the hands of those with the experience and knowledge to successfully maintain it.

Finally, transitioning to a flat rate model is easier than you may think. With Service Fusion, you have a suite of products to choose from to meet your specific business needs-one of which can get you up and running with flat rate pricing in just a day!

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