Some of you are using the coronavirus chaos to work on business operations. If you weren’t, my email inbox wouldn’t be blowing up with questions about converting to flat-rate pricing.

But I don’t mind at all because it’s encouraging to see that spirit of endurance in our community. Here are some of the questions I’ve received:

Question 1: What flat-rate system did your company go with?

This is a very popular question. I get it more than any other. It’s also my least favorite because what works for my company may not work for yours.

When my company moved to flat rate, we were working with a field management software. This single factor influenced our decision. Materials management, task organization, description wording, billing details, and a ton of other nuances separate one flat-rate system from the next. You need to discover which system fits your company best.

Eventually we decided to build our own price book. I cannot emphasize enough that I do not recommend this method. Building your own price book is a huge undertaking. It took a full-time employee over six months to complete. Now we own it, which I consider an upside, but it requires ongoing maintenance.

Instead of being a control freak and over-complicating matters like me, I recommend doing your homework. Request demonstrations, ask lots of questions, and keep careful notes. Have your managers involved, so that you can get a few points of view. Take your time choosing a vendor. They will become an enormous part of your daily business. Changing price books will only bring more angst.

Question 2: No one on my team has any experience building or leading a flat-rate team. How do we transition?

You estimate certain projects ahead of time already. That’s what you are doing with flat rate except with standardized answers.

Here is the workflow for a flat-rate appointment:

Step 1. Diagnose the problem. 

Step 2. Find the corresponding price book item(s).

Step 3. Present those options to the customer.

Step 4. Do the work.

Changing the workflow of your appointments is key. Otherwise, it’s a very expensive and complicated solution for poor invoicing habits. 

If your actual problem is sloppy invoicing habits, flat rate will not fix that personnel issue. Those same technicians will abuse your flat-rate system. My team reports that flat-rate pricing isn’t necessarily easier invoicing than time and materials. It’s just different.

It is possible to take baby steps into flat rate. Before we committed to a full price book, we started with a price list for common and easy-to-diagnose items. This baby step allowed our team to build the habit of communication and see the benefits. They experienced first-hand how it improves customer relations and sets expectations on their performance.

You build a flat-rate price by taking the average repair time multiplied by your hourly rate and add in marked-up parts: 

(hourly rate X repair time) + (parts cost X markup) = flat-rate price

There are at least a handful of tasks that you could build flat-rate pricing for today. One example is a standard toilet rebuild:

• One hour labor
• Toilet rebuild kit
• Braided hose supply line
• Wing nuts
• Shop supplies

We also have a premium toilet rebuild task. This isn’t an upsell, but it is for odd fill valves and nonstock parts.

On jobs that need advanced diagnostics — say, opening up a wall — we give the customer a price to do the advanced diagnostic work first. Once we have a full diagnosis, we discuss further repair costs.

Question 3: How does a longstanding time and materials company switch to flat rate?

Flat rate is a mindset shift. Major company changes must start at the top. If you and your management team don’t trust the pricing, your team won’t either.

If only I could sky-write this sentence: Flat rate exists so you can discuss price options upfront. 

The key benefit of flat rate isn’t increasing your prices. It’s the powerful communication method used to manage customer appointments.

Customers don’t care how hard the job is, how much time it takes, or what the materials cost. They only want value for their money and confidence in the resolution. Upfront pricing naturally creates a conversation. It gives employees the chance to talk about options. The customer can ask questions and get comfortable with the repair. If you can get your team to understand and agree to this, it facilitates the transition to flat rate. 

One challenge for many time and materials companies is getting over the idea that you will charge “extra” for fast technicians and “undercharge” for slower technicians. Flat rate forces you to confront, schedule to, and train the strengths and weaknesses on your team. If jobs aren’t profitable, it means that either your base rate is too low or your technician isn’t using the price book.

If you need to go up on your rate to reach profitability, your customers don’t see the math, only the total. They are no longer standing over your shoulder with an eye on their watch. You are no longer discounting your fastest and more experienced guy while overcharging for the turtle.

Question 4: Should I charge a service or diagnostic fee and if so, how much?

Many call this a best practice, as it covers expenses such as traveling to the work site and the time to complete the diagnosis. Even if you don’t sell the customer a solution, you’ve covered the expenses of the first call.

Question 5: Is there somewhere I can send my managers for training or should I bring in a consultant?

Most plumbing industry conferences have at least one session on flat rate. There are webinars galore and this industry has no shortage of consultants. 

It isn’t necessary. Before you choose your vendor partner for flat rate, ask what support you should expect after the sale. Use the resources these teams have at their disposal.

There are three elements to implementing flat rate:

1. Getting the setup right.
2. Getting the training right.
3. Getting the culture shift right.

This starts with hiring the right product partner for your company. Don’t let anyone rush you through setup and implementation. The timeline should be yours. A plumbing price book often has thousands of items. It takes time to become familiar with the organization. Practice is ideal here. Use real appointment scenarios and encourage discussion.

Change is hard. No one appreciates their job being made more difficult. Implementation without training will lead to very frustrated employees. 

Don’t rush the transition, accept that you will need to repeat yourself, and stay positive. Keep a close eye on invoices early on, addressing concerns in a non-disciplinary way. You need time to wrap your mind around flat rate and how it will affect the company long term. Give your employees the same courtesy.

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About the Author: Anja Smith is managing partner for All Clear Plumbing in Greenville, South Carolina. She can be reached at anja@acpupstate.com.