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How Can it Increase Profit While Keeping Me Competitive?

If your company is like most, your current hourly rate is based on what other companies in your area are charging.  For example, if company A charges $75 an hour and company B charges $85 an hour, you might decide to charge $80 an hour.  This sort of pricing is nothing more than a guess, and in the majority of cases, the contractor is not charging enough to pay expenses and still generate the profit that the company requires.  When confronted with this fact, most contractors defend their action, saying that if they raise their rates, the company will lose customers because their hourly rate will be the highest around.  This is a valid point, but the fact of the matter is that the company will continue to struggle if it continues to bill its customers the same way. 

Flat rate pricing takes a different approach.  It places value on completed repairs rather than the time it takes to complete them.  Flat rate repairs are assigned a set price based on what your company requires to meet planned financial goals.  This allows you to more accurately bill for your time in order to place sales where your company needs them to be.  By shifting value away from hourly billing, you are no longer competing with other local companies in the hourly rate arena.  In fact, you can charge more per call, but by presenting the price as a completed repair, customers will be much more receptive to your prices.

Arguably the most important aspect of Advantage Comfort Pricing is its ability to unleash your technician’s sales potential—your largest asset.  With an hourly rate system, your technicians are limited not by their ability but by the number of hours in each day.  Your technicians are only able to bill one hour of labor for every hour they are working.  On a flat rate system, technicians have the potential to bill for more hours than they actually work.  In fact, to match a $75 flat rate technician working at 120% efficiency, an hourly technician would have to charge $90 per hour.  With flat rate pricing, the customer gets the same deal on their repairs while your company is rewarded for its performance.  Advantage Comfort Pricing provides an incentive for your company and your technicians to perform at the top of their ability.

By performing repairs in less than the average time that they are based on but still billing the same repair cost, technicians can effectively raise their hourly rate and, consequently, their total billing.  A slightly above average technician can perform a task rated for 60 minutes in only 50 minutes (120% working efficiency).  Because of warranty work, and the occasional call-back, technicians will not be able to bill 100% of the time that they are working.  A more realistic billing efficiency is 80%.  Assuming a standard 40 hour work week, this means that, on average, a technician will bill for 32 hours.

In one week, a technician billing $75 per hour for 32 hours will bill $2,400 ($75).  The same technician billing $85 per hour will bill $2,720.   Obviously, there is a sales increase as a result of this hourly rate increase.  Now, using $75 flat rate billing, the above average technician (120% working efficiency) can now bill for 38.4 hours in 32 hours of actual work, for a weekly billing of $2,880—that’s even more than the $85 hourly technician!